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Fender: Can They Strike A Chord With Beginners?
The Fender brand of electric guitar became a household name soon after Leo Fender invented it. You've probably heard of its famous Stratocaster and Telecaster models, powering your favourite rock bangers from the 60s to today.
But by 2015, the company faced stiff competition from its archrival Gibson and a sea of cheaper-but-quite-good brands like Japan's Yamaha.
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To deal with this, Fender hired a hotshot CEO from Disney and set about all sorts of ways to boost their fortunes - including some not so legal methods...
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Today's Strategy Standoff is a great example of how a simple bit of consumer research can create powerful new strategies.
Can you guess which they chose?
After being busted for price fixing in the UK in 2015, Fender were handed the largest ever competition fine in the UK. They needed a better - legal - plan for growth.​
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The Strategic Challenge.
Fender went back to basics and did some market research. They found:
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45% of Fender buyers are beginners (and half of these were women).
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90% of beginners gave up learning guitar in under 12 months
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Because a Fender customer's lifetime value is around $10,000 (from its range of guitars, amps and accessories), Mooney knew slashing that 90% churn rate was his key to billions in revenue.
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But how could Fender keep stop beginners from giving up?
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This week’s Strategy Standoff:
To boost their sales in a competitive market, should Fender focus on better products for the female market? Or nurture all their beginners to keep playing for longer?
The Strategy Standoff
Strategy A: Create a Women's Range
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Develop a new range of guitars designed with the female beginner in mind.
Fender would build more female oriented products to cater for a huge part of the guitar market that has been previously underserved.
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This would be costly to implement and would require extensive new shelf space and listings through distribution partners such as retailers and online stores. It could also cannibalise existing range, leading to limited incremental growth.
Strategy B: Become the Teacher
Fender would start offering guitar lessons to its customers to help nurture beginners.
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This would address the drop off in beginners by keeping them involved in playing and learning a skill.
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However, it would be a costly activity and might divert management's focus away from Fender's core business of producing sweet-sounding guitars and competing with arch-rivals like Gibson.
So, Which Did They Choose?
Cast your vote to find out!
Better luck next time, Strategy B was chosen!
Good Job, Strategy B was chosen!
But how will this work out for Fender...
Expert Facilitator Commentary By Matt
Matt Braithwaite-Young
Managing Partner
t +61 2 9002 3100
Yep! Fender decided to get into the business of teaching through an online platform called Fender Play.
They already had the instruments pretty sorted with top end and entry models covering all major categories. So they decided doubling retention and creating multiple purchase opportunities was where it wanted to win.
Their new CEO, Andy Mooney, was always going to lean this way. His great achievement in Disney was another example of complementary business development. He introduced new consumer revenue streams using Disney film characters, an approach that added billions of value much to the delight of Disney shareholders.
Fender Play is fantastic. It lets beginners learn to play using video lessons over different music styles, so you can learn using songs you like. It also tracks your progress so you can see how you're improving.
This was a major effort from Fender because they had to not only carefully script and curate lessons but also secure the rights to the songs people might actually want to play.
It costs about $75 a year and they give it away free for a year when you buy a Fender guitar.
That's clever, but - believe it or not - they also have an offer the other way around - you get a guitar when you sign up for a year of lessons! No, it's not a particularly good guitar.
Although going online and making a huge play for the online lessons market may seem like a major jump for Fender, the brand itself has been very innovative since its birth.
After all, it invented the electric guitar in 1948.
We've had many clients over the years who have made a discovery that the highest value they can provide customers is not through their fine products, but through complementary services.
Experience is everything.