Market Analysis for the E-Guitar Market

Market Analysis and Low-Price-Segments
The global market for music instruments covers about $16,8 billion. As there are no reliable sources on worldwide sales data for guitars, the U. S. market shall be examined exemplarily. Table 1 shows the development of units sold, retails, and average prices over the last ten years. It can be observed that there is a growth of nearly 275% in units sold, and about 160% in retail, whereas the average price decreased by 57%. According to this, there is a strong tendency for low price products.

Year
Units Sold
Average
Price

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2010
2,991,260
$1,151,290,000
$372

2009
3,302,670
$1,158,592,050
$350

2008
3,201,220
$1,022,861,000
$309

2007
2,341,551
$903,261,000
$386

2006
1,942,625
$921,057,000
$529

2005
1,742,498
$922,280,000
$529

2004
1,648,595
$923,522,000
$560

2003
1,337,347
$762,185,000
$569

2002
1,153,915
$694,883,000
$579

2001
1,090,329
$710,769,000
$652

 
In table 2 this tendency appears very obviously. In the low price segment, that is prices below $500, are about two-third of the whole market volume. Comparing acoustic and electric guitars it can be observed that there is a stronger request for high prize electrics than acoustics.

Type
Acoustics
Electrics

Units Sold
Units Sold

Under $100
390,028
256,354

$101 to $200
410,03
561,537

$201 to $350
110,008
195,317

$351 to $500
40,003
97,659

$501 to $1,000
40,003
61,037

$1,001 to $1,500
10,001
24,415

Over $1,5o1
20,001
36,621

Total
1,490,260
1,501,000

 
Also, it turns out that high-quality guitars as Gibson’s or Paul Reed Smith’s, which are presented in this paper, are prestige goods with an inverse price-demand relationship. That is higher prices are associated with higher quality.
The strategy of focusing on the high-quality segment
Gibson’s former attempt to join the low price segment in order to compete with rivals such as Yamaha and Ibanez, which are both producers of cheap guitars, did not turn out to be successful as it did not match with their “century-old tradition of creating investment-quality instruments that represent the highest standards of imaginative design and masterful craftsmanship” (Kotler et al. 2010, p. 327). The strategy of focusing on the high-quality segment, at a time when most guitar manufacturers entered the low price segment, has proven very successful. Gibson’s chief executive noted: “We had an inverse [price-demand relationship].
The more we charged, the more product we sold. ” Kotler et al. 2010 (Principles of Marketing, Thirteenth Edition, Philip Kotler, Gary Armstrong, Pearson Education Inc., Upper Saddle River, New Jersey, 2010) In case of prestige goods, the demand curve sometimes slopes upward. Consumers think that higher prices mean more quality. For example, Gibson Guitar Corporation once toyed with the idea of lowering its prices to compete more effectively with rivals such as Yamaha and Ibanez that make cheaper guitars. To its surprise, Gibson found that its instruments didn’t sell as well at lower prices. We had an inverse [price-demand relationship],” noted Gibson’s chief executive. “The more we charged, the more product we sold. ”
At a time when other guitar manufacturers have chosen to build their instruments more quickly, cheaply, and in greater numbers, Gibson still promises guitars that “are made one-at-a-time, by hand. No shortcuts. No substitutes. ” It turns out that low prices simply aren’t consistent with “Gibson’s century-old tradition of creating investment-quality instruments that represent the highest standards of imaginative design and masterful craftsmanship.

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