How Fender Guitar Struck a New Chord
Fender, the iconic guitar manufacturer, was treading water 10 years ago.
Despite its well-established brand – and rock star customers like Edge, Eric Clapton, and Sheryl Crow – Fender was in a rut, its business model basically unchanged for decades.
Sales were flat. The company struggled with debt.
In 2012 Fender had to abandon its idea of raising capital through an IPO, citing “unfavorable market conditions.”
A new CEO, Andy Mooney, took the reins in 2015. His marching orders from the two private equity firms that owned the company were clear: Bring the Fender brand into the digital age with new products and services.
Mooney went on a binge of data collecting. His team gathered market information. They began a comprehensive survey of musical instrument consumers.
The results of these studies changed the course of the company’s future. This just goes to show – until you do some research, you don’t even know what you don’t know.
Fender executives were surprised to learn that:
Half of new guitar players were women.
Women preferred acoustic guitars over electric models.
New players accounted for almost half of the company’s sales.
90% of new players abandoned the instrument within the first year.
New players spent four times more money on lessons than they did on their instrument.
CEO Mooney was quoted in a recent Fortune magazine article stating:
“If we reduce the abandonment rate by just 10% and get more of the salmon through the dam, the whole industry will grow. So that set us on the path to do digital online lessons.”
Fender’s Digital GM Ethan Kaplan added, “We sell guitars and amps, that’s the physical part of it. But there’s a tool belt you need to become a player: a tuner, tabs, tuition, and tracks – stuff to play along to.”
Fender is now growing its profits with several new income streams – all of which support its core business of making great guitars and amps.
In 2015 Fender purchased Riffstation, a website that lets users download an app to get chords for their favorite songs on iPhone or iPad.
Users can also see the chords for guitar, ukulele and piano scrolling in sync with the music on YouTube videos. They can even play at their own pace with built-in tempo, metronome and drum machine tools.
Fender Play, the company’s main thrust into digital, is a $20 per month subscription service for music lesson videos.
Fender Tune, a guitar tuner app, is a popular free service with over half a million downloads that draws fledgling musicians into the world of Fender.
And of course Fender offers a free subscription to their (ahem) monthly newsletter to build more rapport with their customers.
Fender uses all of these auxiliary services to encourage brand loyalty and promote new products and services. (And of course, make money!)
But more importantly, these outreaches to consumers provide an avenue for feedback. With a simple click any customer can ask a question or make a suggestion.
In short, Fender has wisely utilized research and data to discover new ways to add value to its brand by creating useful new services that retain existing customers while attracting new ones.
So how is all of this working out? Here's an excerpt from a June 2017 post on the Quartz website:
Update, June 27: Fender CEO Andy Mooney told Quartz via email that Fender currently has under $100 million in debt, less than half the amount it had in 2012. “Sales of fretted instruments are in great shape and Fender’s electric guitar and amp revenues have been steadily rising for several years,” he said, adding that electric sales are holding steady, acoustic sales are on the rise, and “ukulele sales are exploding.”
Fender’s content marketing and attention to customer feedback creates a virtuous (and profitable) cycle. More input from customers leads to innovative new products and services which lead to more input from customers…
Therein lays the true value of content marketing – establishing a relationship with customers and keeping them informed about your services.
Also, by providing a convenient avenue for feedback, you are able to begin building your own virtuous cycle of knowing your customers so you can profit by meeting their needs.