Everyone knows Gibson; from Eric Clapton to Slash, The Gibson Les Paul launched ten thousand bands and it’s literally the guitar that’s ‘crying’ in the Beatle’s famous tune While My Guitar Gently Weeps.
But what will it take to keep this 100 year old organization alive and well for another 100 years?
Gibson’s financial challenges are all over the news and it’s widely reported that they could face bankruptcy as early as summer (Gibson actually filed for bankruptcy May 1st, 2018- two days after this article originally posted). However as important as it is, bankruptcy isn't the purpose of this article.
As usual, we’re focusing on Business Transformation opportunities that help small and mid-sized organizations compete with the big guys.
And if you happen to be a musician, this article provides more than Business Transformation best practices; as consumers we have an excellent opportunity to help shape the future of the industry.
Let’s start with the challenges from Gibson’s perspective:
1. They believe that the market for electric guitars is shrinking for many reasons
Baby boomers, who defined electric guitar in rock, country and blues, are aging out.
Modern music styles place less emphasis on electric guitars and beat producers regularly replace live guitars with guitar samples.
Ukuleles, the easy to use, cheaper, younger cousins of the guitar, are ubiquitous.
2. Gibson CEO, Henry Juszkiewicz also blames dealers “retailers are fearful as can be, they're all afraid of e-commerce” Billboard 2/23/2018
3. Gibson has had challenges obtaining quality tone woods and the associated loss of quality and increased costs.
Although the challenges are real, these issues are industry wide and many manufacturers have developed innovative workarounds.
Deforestation is a great example. Loss of old forest wood has greatly impacted the industry, but successful guitar makers are finding wonderful alternative tone wood sources; creating innovative designs around available woods and focusing on lesser known tone woods like Korina and Basswood.
Yamaha has even turned this challenge into a marketing opportunity, pitching their Acoustic Resonance Enhancement process as a “unique patented process… causes physical changes at the cellular level, most directly affecting the wood’s cellulose and hemicellulose.”
Understanding and responding to customer needs is a much bigger challenge. This used to be one of Gibson’s strongest suits. Moving forward, they definitely need to develop a 360 degree view of the customer; focusing on well defined segments and the product, messaging and business development opportunities that are strongest for those segments.
(Want a taste of the old days? Check out a beautiful 76 Les Paul Deluxe at https://tinyurl.com/76LesPaul)
However, as with most business transformation stories, it’s incredibly easy to get stuck in the past- we all know the Blockbuster story. It’s also easy to fixate on technology as the primary disrupter. But the first question is always the same ‘What do future prospects really want to purchase?’
So what can Gibson do? The opportunities (and challenges) are relatively clear:
First Priority- Restructure Debt
Gibson guitars still provide a significant revenue stream. Their immediate, short-term financial challenges could provide the impetus to refocus the business on core strengths and markets outlined below.
Second Priority- Competitive Review
Gibson needs to take a deep look at the competition to better understand which segments they can differentiate and own.
Suhr, Anderson and Lowden are examples of high end, value-added guitars. Buyers are willing to pay over $2,000 for electrics and over $5,000 for acoustics because quality, tone and differentiation are assured.
Historically, this has been one of Gibson’s strongest markets.
Quality, Midrange Market
PRS has redefined quality working guitars with innovative designs and sounds at clearly defined value and price points. Reverend is a great example of a brand that is intentionally limited, easily produced, innovative and affordable. Taylor is the PRS of the acoustic world; covering a wide range of innovative designs that working musicians can afford.
Gibson and Epiphone have always competed in this space.
PRS, Reverend, Taylor Guitars
Schecter, ESP, Jackson, Charvel are good examples of Small/Medium manufacturers who target a niche (in this case metal) and slowly expand into traditional markets.
Gibson has had little success with niched (especially metal focused) products.
Big and Broad Market – Economies of scale
While Ibanez is a major metal competitor, they also have a wide selection of hollow bodies and classic designs and support a large dealer network with significant economies of scale.
Yamaha and Fender provide an incredibly wide variety of instruments, including Fender’s Custom shop and popular sub-brands (Squire, Gretsch, Jackson and Charvel).
But Yamaha and Fender aren’t limited to guitars- They have large, successful, pro-audio and recording lines that provide significant brand reinforcement, cross-selling and dealer incentives.
Gibson attempted to move into consumer and pro-audio markets with a number of acquisitions (described below). However, they never achieved the segment-crossing synergy, economies of scale or dealer support that are the foundation of the Fender and Yamaha business models.
Entry Level Market
Gibson, Fender and Yamaha all provide entry level acoustics, electric and amp packages. This is a great opportunity for visibility, loyalty and brand expansion. However as discussed, Gibson would benefit from a much cleaner product strategy with distinct value adds at clear price points.
Third Priority- Choose a Direction and Balance the Portfolio
Gibson has an excellent opportunity to reduce the confusion and the cost of a complex portfolio by refocusing their story on a few, well defined, markets.
Gibson’s Custom Shop exists to meet boutique segment needs, however, competitive quality and pricing is required. Boutique builders also require top of the line processes and talent that will be discussed later in this series.
Gibson and Epiphone brands need much clearer focus to provide an integrated, compelling story across mid and entry level price points.
Disinvesting consumer and pro-audio ancillary brands might provide the capital required to refocus on guitars.
Digging a bit deeper into acquisitions, Gibson’s non-guitar brands are probably more of a risk than a benefit at this point. KRK and Cerwin-Vega provide pro-audio speakers, Onkyo provides home electronics, Teac/ Tascam provides pro and consumer audio and there’s nothing wrong with these brands in general.
However these offerings are rarely managed, marketed or sold together and they miss the synergy and economies of scale that make large, balanced portfolios profitable.
A great example is Cakewalk, one of the first sequencer and audio production platforms (Digital Audio Workstations). Gibson acquired Cakewalk in 2013, sold them in February of 2018 and the product was never tightly positioned or integrated with other Gibson brands.
An even less compelling story is KRK’s Gibson Les Paul 8 Reference Monitor; a nearfield studio monitor that displays a typical Les Paul sunburst finish. It’s one of Gibson’s few attempts at cross-branding, yet it’s really hard to imagine a hypothetical product manager making the case on behalf of the customer:
“Yes studio and home engineers are not concerned about sound quality or affordability… they want flashy speakers that look like a Les Paul to spark conversations and appear cool.”
KRK Les Paul Reference Monitor
Considering that Gibson’s financial challenges are likely to lead to reorganization, this is an excellent time for Gibson to seriously consider selling off ancillary investments to free up capital that can be used to reinforce core offerings.
That leaves Gibson and Epiphone, strong crossover brands that have plenty of synergy and brand power. However current guitar offerings, targeting, positioning and pathing is often complex and unclear.
There are so many Les Paul models that it takes a pro to sort them out. Consider the range from the Epiphone Les Paul SL at $120 to the Gibson Custom Les Paul Standard Flame Top Brazilian Burst at $10,500.
Certainly, the name is iconic, but the quality, woods, hardware and even the purpose of this massive catalog of models is unclear. The story seems stuck in the past “Famous People in the 60s and 70s loved Les Pauls” and descriptions tend to be extremely general; neither differentiating between themselves or the competition.
On the other side of this coin, it’s been a long time since Gibson has opened new, innovative doors for consumers. Locking tuners, innovative body designs, locking vibrato/tremolos, alternative controls or tone woods; Gibson has followed the leader when it comes to added value and industry standards for decades.
However, Gibson has invested heavily in technology that consumers aren’t craving.Probably the best example was the major investment into G FORCE™ Robo tuners- a complex feature that has received lackluster acceptance at best.
Gibson’s wide range of classic designs, from the ES335 to Explorer (electric guitars) or J200 to Hummingbird (acoustic guitars), are easily overlooked amongst all the noise. Next time, let’s look at the positioning and processes that could revitalize these classic guitars.
Gibson ES335, Explorer, J200, Hummingbird Guitars
So at the end of Part 1, we’ve established that Gibson has an opportunity to offload questionable investments and rebuild their story around traditional brands and value.
But How Will They Do It?
Process and change management is painful but necessary when small and medium sized businesses compete in global markets. Considering there is a good chance that Gibson will be forced to make changes from an economic perspective, next time, let’s talk about the potential for a 360 view of the customer to focus products, messages, sales and dealers on efficient, high ROI offerings.
And let’s consider the guitarist’s perspective; how can practically any musician help Gibson refocus and GROW the industry?
So what do you think? What’s your perspective on Gibson and the guitars market? Looking forward to your input because we learn from you!
Michael Stierhoff is the Chief Customer Officer at Lighthouse Marketing and Business Solutions; helping every Lighthouse customer better understand their customer’s needs.
Perhaps more important for this article, Michael is the Chief Cook and Bottle Washer for the GuitarYouDreamAbout.com where we help guitarists “Find Their Perfect Sound’.
(This article was originally published at LinkedIn)