Pricing for dealers?

[Craig Bumgarner]

My guess is this has been discussed, but I wonder what the current thinking is on pricing for dealers. I usually sell direct, but my production is increasing and I'm "acquiring inventory". I sent one of my guitars to a dealer I've used before and asked to net the same as I do when I sell direct. But this makes a pretty big difference between the two.

I know I can't have it both ways, but what is the best strategy: Sell for $3,000 (to pick a number) direct and $2,400 to the dealer (20% discount), who in turn will sell it for $3,000, my "going price". Or ask the dealer to sell for $3,750 so that I net $3,000 (my going price). Or split the difference somehow? I hate to give up much on my "standard price", not getting rich at this.

Thoughts?

[Bob Gramann]

Why would the dealer display your instrument and try to sell it if someone could see it and then come straight to you for a better price? The dealer is doing some of the work that you had to do to sell that instrument. When you count the time and effort you would have to put into marketing that instrument, the 20% might be a good deal if you believe your time is worth something. If you can't stomach giving up that much for the dealer's effort, raise your price just a bit so that on the average you make is about the same on each instrument (less on the one's sold by the dealer but more on the direct sales). When I count up the time and fees spent going to shows and the time spent dealing with customers directly, the 20% I give to the stores that work for me doesn't seem like a lot.

[Craig Bumgarner]

Good points. Do the dealers you deal with buy outright, or commission? Is 20% the going commission/discount you run into?

[Bob Gramann]

The ones I have dealt with so far have 20% consignment deals. I won't place one where the dealer wants more. Were the dealer to buy it outright, I would expect a much bigger cut for the dealer ( think normal retail margins). After all, sometimes it can be quite a while before the right buyer walks into his store. His money could be tied up for a long time.

[Michael Lewis]

You cannot undersell your dealers or you won't have any. You CAN charge more to your direct customers, but if you charge too much you won't have any of them either.

This is a good time to "run the numbers" and figure out what your costs are and what you need for income. Years ago I went to the local office of the Small Business Development Center, which is our Federal tax dollars at work. They can help you understand how to run a business, especially the aspects you don't normally think of.

[Craig Bumgarner]

Thanks Bob & Michael for your thoughts.

After all, sometimes it can be quite a while before the right buyer walks into his store. His money could be tied up for a long time.

I guess the same could be said for me when I send instruments out on consignment. My "money" is tied up too. I tend to think my money is more important than the dealers money, but that is not too unexpected. None the less, the point is well made that one should not undersell the dealer.

I have been running the numbers, or at least the direct numbers. Materials and labor hours. My shop costs are pretty small at the moment, but may go up when I move next year. Interestingly, when I look at the "cost" of commissions over say ten guitars in a year, this comes to $7-8000. I could certainly mount some kind of marketing campaign for that kind of money. Not that it would necessarily be all that effective, I'm incurably bad at self promotion. But it does give one pause.

[Craig Bumgarner]

It really comes down to how good the dealer is, doesn't it. If he can move the guitars quickly and get a good price for them, he is worth his commission. If not and they are going to just sit there, well, they could just as well sit around in my shop for 20% less.

[Perry Ormsby]

Or you could learn the things you dont know, and sell them yourself without a discount...

If you invested that 'annual commission' into the right marketing, you'd sell more than twice as much without the dealers.

My last run of ten guitars (I set the specs for what I feel like building, announce it, and then build them) sold out in 16 minutes. Actually, I couldnt turn off the 'buy' button fast enough, and 14 orders came through. $4700 average price. $68k. The run prior to that was 30 x $4500 in 36 hours (with six extra sales being refunded because it over sold). The one before that was 10 x $7800 in two days. No phone calls. No dealers. No commissions. No endless quotes and requotes.

Yet 'they' say the economy is terrible, no one buys guitars, etc etc... sounds like a great excuse to not try huh?

Marketing for luthiers is simple. But you have to know and understand it. Most dont even have the slightest clue what they are doing, and just end up throwing money away. They assume that 'if i build it, it will sell... eventually'. I'd rather have a sales tap, that I can turn on whenever I want to sell stuff

[Craig Bumgarner]

Marketing for luthiers is simple. But you have to know and understand it.

Congratulations on your success. Care to elaborate on "Marketing for luthiers is simple"?

[Simon Magennis]

I would have guessed that dealers would be looking at more like 40% of the final price. i.e. 60/40 split. At 20% they might hang it on the wall but they won't really be interested.

@ Craig. Perry has posted quite a bit here and over on anzlf ( http://www.anzlf.com/viewtopic.php?t=5490) about marketing for luthiers. All good reading. He made a few posts here on this thread http://www.mimf.com/phpbb/viewtopic.php?f=16&t=2405

[Perry Ormsby]

Thanks Simon.

Craig, it's like building instruments. In the beginning, you procrastinate because it's scary. Then you get into it and make a heap of mistakes. But reviewing the results leads towards improvements. Sometimes you also just need a push. Hell, sometimes we don't even know we are making mistakes...

If you understand your niche, the rest flows from there. Of course, there are the little tricks that do make a big difference... mindset, copy, pricing, and a bunch of others. For example, I have certain things I do only at certain times, with a certain style of copy, that speaks to a certain type of client. Knowing how, why, when, and for who, makes it easy.

Marketing is not sales. Exposure is not sales. Reputation is not sales. These things do LEAD towards sales, but they are not sales. All the marketing in the world could lead to no sales if you are doing it wrong, or for the wrong niche. Or it could lead to people beating a path to your door with a fist full of cash ready for you to sell and upsell them.