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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Introduction

Gibson and Fender are the two most renowned guitar brands in the world. Their presence is across the globe. Their instruments are used by most of the iconic musicians of all times. Both offer wide varieties of guitar instruments for players ranging from intermediate to guitar exponents.

The Guitar Industry

Guitar industry is monopolistically competitive with many firms that produce comparable commodities or services but have and maintain some independent control over their pricing of the goods. With the leading business's concentration ratio being less than 75% of the overall market. Without the many small business competitors, the leading 50 compose about 45% of the market. Due to fragmentation of the market, the combined market share of the best firms usually ranges from 20% to 45%, where a few companies definitely stand above others.

Excluding private players and small time businesses, there are over 4,500 main music dealers in the

United States, which has a competitive advantage in the market ("50 Largest Companies," 2008). The companies together make combined annual revenue of close to $5 billion. Gibson, Fender, Martin, Alvarez, Marshall, and many more companies are included in the overall guitar market. The vendors for these guitar manufacturers include Guitar Center, Best Buy, Sam Ash Music, and Sweetwater Sound. However, the small vendors are able to continue to flourish as guitar makers because of the quality work and the personalization of their product.

The guitar market approximately takes up about twenty-five percent of the overall music market; and, with specialty stores, big band names, customization, and the overwhelming popularity of the guitar as an instrument, the guitar market creates a thrilling world of its own.

The key element that sets a firm stand out from the rest is the brand image and product differentiation. One good example of product differentiation is seen in the timeline of Guitar Center, which originally sold only organs. Initially, The Organ Center made remarkable market headway as it diversified its product portfolio and became the first store to sell Vox's electric guitars and amplifiers.

Market Segments:

The guitar industry is broadly divided into three types of instruments; the acoustic guitars, the electric guitar and the bass guitars. The  retail value market share of the acoustic guitar is about 8% higher than the electric guitars. This can be attributed to the fact that most beginners start with the acoustic guitars.

The customer segments can be broadly divided into segments i.e. the beginners, the intermediate and finally the professional guitar players. The beginners are customers who are the first time users of the instrument hence they do not seek very high quality guitars as they do not have any expertise in judging the instrument while buying. They are mostly influenced by the brand name, advertisements, referrals and importantly the price of the guitars. They usually prefer to buy the base model with low to moderate performance instruments. The next group, intermediate guitar players are the most anxious of the lot. They have played the instrument for past couple of years but now want to enhance the quality of playing using better equipment. The experiment a lot have a fair idea of the sound they want from their guitar. For this segment, it is important to have a good sounding instrument backed by a brand name. The last segment, the professional player, is very important to the industry as they influence the other segments below them who follow their icons and gurus. The customers of this segment look for perfection in the instrument, which can help them to emote their feelings through the sound of the guitar. They prefer highly customized products and services, hence look for the best instruments in the industry.

Customer needs

The target consumers, though varied, can be approached in very much the same manner. Their most important market needs are:

• Selection

• Value

• Service

• Lessons

Most musicians need support and service. Most of the times instruments that are sell can be difficult or impossible for end users to service. Potential customers tend to seek stores that can fulfill these needs through word-of-mouth referrals and/or direct shopping. These customers come back time after time if they feel they are getting a fair deal.

Industry Analysis & Industry Trends

The Market share of the top four companies within the Acoustic and Electric Guitar Manufacturing industry is high, with an estimated 82.5% of industry revenue (2014). Among these four, Fender Musical Instruments Corporation and Gibson Guitar Corporation lead the US manufacturing scenario, with almost all of their upmarket product lines assembled in the United States. When combined, the brands account for more than half of industry revenue. Moreover, Taylor Guitars and C.F. Martin and Company command a big share of the acoustic manufacturing landscape.

The Acoustic and Electric Guitar Manufacturing industry has seen phenomenal growth over the 5 years to 2014. The clear consumer sway, was shown by the increasing levels of per capita disposable income, has underpinned demand for industry products. Guitars are considered optional purchase and are therefore extremely sensitive to fluctuations in overall economic environments. Over the 5 years to 2019, the guitar manufacturing industry is expected to continue growing, but at a slower rate than the previous 5 year period. The growth in revenue is expected to be driven by rises in per capita disposable income, which in turn will lead to more discretionary purchases, such as guitars and other related accessories.

Why these Firms?

The need for a bigger and louder sound lead to the invention of the electric guitars, which otherwise became inaudible when played alongside the brass instruments. In the beginning, Rickenbacker, with the "Frying Pan" model, was the first to commercially manufacture an electric guitar; however, the most successful firms are Fender and Gibson. The fierce rivalry between the two companies is apparent from the constant effort of each of these firms to capture market shares of the opponent repeatedly.

Around 1950, by the time Fender entered the guitar business, Gibson already had been building guitar instruments for over a period of 40 years. Gibson had a well-established workshop where the highly skilled craftsmen used traditional lutherie procedures to create a comparatively low number of very well made instruments. On the other hand, Fender an upstart used the latest in assembly line methods and technology to manufacture a much higher volume of guitars.

The manpower intensive method used by Gibson is not to be assumed to be “better” than Fender guitars. The process of assembly line, used by Fender minimized the deviations between individual instruments, giving a very uniform output. Leo Fender, the pioneer based his designs on readily available lumber that were of standard sizes, the individual wooden parts were cut by machine using a specific form of specific shapes and sizes. This resulted in a faster production with fewer discrepancies. This meant that Fender's instruments could be sold at price much lower price than Gibson models.

The perspectives of these two companies is contradictory in nearly every way—Gibson relied on handcrafted exquisite guitars with hollow bodies and sell them to the established musicians who could afford to pay top dollar for a playable work of art, whereas Fender had an assembly line to roll out a huge volume of solid guitars that were consequently purchased by cowboys and rock 'n' rollers. There are many differences in materials used and techniques applied to build a guitar while targeting the same segment of customers.

Fender

Fender Musical Instruments Corporation is one of the world's leading manufacturer's of guitars, electric basses, amplifiers and associated equipment.

The history of the company dates back to 1946, from thence on Fender has revolutionized and transformed music worldwide and in about every genre i.e. blues, jazz, rock & roll, country and western etc. Everyone, starting from amateurs from and hobbyists to the world's most celebrated artists and performers have used the Fender instruments, and legendary Fender guitars such as the Telecaster and Stratocaster guitars and Precision and Jazz bass guitars are universally acclaimed as design classics.

In 1940s, southern California inventor  & founder Leo Fender devised a new method to improve and amplify the sound of the existing hollow body guitar instruments. He achieved this by using a an innovative solid body electric guitar design. This was paradigm shift in guitar making methods. He soon realized that the process could be streamlined too achieve greater degree of uniformity and larger volume.

In 1951, Fender introduced the first model, a solid-body guitar that would later be called the Telecaster guitar. The Tele, as it was often referred to then and still in vogue today, was the first ever solid-body Spanish-style electric guitar that became commercially successful and mass-produced.

That next revolutionary invention was released the same year; Fender for the first time introduced a bass guitar whose sound could be amplified - the Precision Bass guitar. It was played similar to a guitar with frets so that it could be played with “precision,” and the best thing was its ability to amplify the soft touch on the strings, which otherwise made such instruments difficult to be heard when played alongside other instruments. It was liberation for the bassists.

These two historic inventions proved to be the turning point for the musicians. Now they could form small groups as opposed to the “big orchestra” of the time. These amplified instruments from Fender gave the ability to the musicians to be heard and improvise on their music.

The next big launch was the Stratocaster, which first appeared in 1954. The Stratocaster is amongst the most celebrated guitars of all time. It was based on the insights taken from professional musicians along with Leo Fender himself. Its new age design and the sleek contoured body provided access to the upper notes on the guitar neck and made guitar playing comfortable. The significant invention was the third single-coil pickup. This offered more tonal possibilities with its distinctive clear tone.

However the most important innovation was the addition of the new Fender vibrato (or “tremolo”) bridge, this was introduced to help the guitarist bring versatility in their sound i.e. to give extra vibrato and sometimes used as a pedal steel bending.

As the Telecaster and Stratocaster guitars are high priced, Fender sells guitars which are priced mush lower under the brand name Squier, to cater to the need of huge number of guitar player who want quality sound but cannot afford to buy the original Fenders.

Gibson

Gibson Brands, Inc. is an American maker of guitars and other related instruments, now based in Nashville, Tennessee. Erstwhile known as Gibson Guitar Corp. and rechristened to Gibson Brands, Inc. on June 11, 2013.

The guitar company was founded by Orville Gibson founded the company in 1902 as The Gibson Mandolin-Guitar Mfg. Co., Ltd. in Kalamazoo, Michigan to manufacture mandolin-family instruments. Gibson invented the arch top guitars by constructing the similar type of carved, arched tops used on violins. By the 1930s, the company was also began manufacturing flattop acoustic guitars, which went on to be one of the first commercially available hollow body electric guitars, used and popularized by celebrated artist such as Charlie Christian.

Apart from original Gibson guitars, Gibson sells guitars under a range of brand names and produces one of the world's most iconic guitars, the Gibson Les Paul. Many of Gibson instruments are highly sought after by music aficionados as collectible. Gibson was at the forerunner of innovation in acoustic guitars segment, especially during the “big band” era of the 1930's. Gibson introduced its first ever solid-body electric guitar in 1952, the Les Paul, which later went to become its most popular guitar till date, designed by Ted McCarty and Les Paul himself.

The current Gibson electric guitars characterize the blend of history as well as the future of the electric guitar. Spanning more than four decades, the models especially Les Pauls are a witness to Gibson's wide appeal across the globe.

Like Fender, Gibson also sells lower range product under the brand name Epiphone. These guitars have high resemblance in quality and performance when compared to their original counterparts, but are priced much lower.

Comparison:

They are most reputed global brands when it comes to guitars, they have been successful and they have become the exemplary icons of pop music. Since the inception of rock ‘n' roll 60 years ago, the esteemed products of Fender and the Gibson continue to dominate a market entranced by rock music and rock personalities. From aspiring pickers to professionals, Gibson and Fender are as close to inspirational as a brand can be.

Marketing

Continuous success in the competitive consumer products business is usually attributed to superior business strategies and outstanding marketing. However in contrast, the marketing efforts in Gibson and Fender is woefully lacking.

Below mentioned is a quick checklist of a market leader's strategic “musts” and the corresponding assessment of Fender and Gibson performance against those criteria.

• Relevant/consistent brand positioning:  Hardly any Positioning for either brand on the website or in social media

• Captivating slogan to communicate the positioning: almost none

• Strategic product portfolio:  Unclear and over-proliferated. Fender offers 312 models of which there are 56 Stratocasters and 47 Telecasters. Gibson offers 343 sku's (stock keeping units)

• Prudent pricing strategy:  Both companies market ‘cheap' entries. Fender Bullet sells for only $199.00 and the Gibson Les Paul Jr. is priced at $215.00. As a rule, low-priced entries generally tarnish the image of premium brands

• Websites and social media: Fender and Gibson websites are “sales-oriented' with plenty of dealer information and price lists. I found no strategic messaging anywhere on the sites. Ditto their Twitter and Facebook pages. However, the irony is that Gibson has a sensational video on YouTube depicting the painstaking ways of guitar-making process

• Powerful advertising, heavy media weights:  These brands are virtually unadvertised

So with all that going against them, what is it that makes these brands so successful? Is it unrivaled product quality?  Perhaps.  But there's also a morgue of quality products that are six feet under because of awful marketing. Despite themselves, the success factor for Gibson and Fender is the usage of their products by rock stars. In other words, they benefit from indirect celebrity endorsement. Buddy Holly, Stevie Ray Vaughn, Roy Orbison and Chet Atkins are all gone but Bruce Springsteen, Eric Clapton, Carlos Santana and B.B. King live on.

Recently, the CEO of Fender, Scott Gilbertson has announced that the company will be revamping its supply chain and marketing operation by introducing the option of “selling directly” to the end consumers by passing the dealers. This can be seen as an effort from Fender to reach out to the mass of guitar players and creating an emotional engagement with its customers. While, no such effort from Gibson has been seen as of now.

Operations:

1. Production

Initially, Fender imported guitars from offshore manufacturers with reliable ability. But the steady increase in quality control led to establishment of Fender's U.S. factory in Corona in 1985, California followed by a facility in Ensenada in 1987, Mexico.

Gibson manufacturing plants are located in Nashville, it approximately rolls out 2,500 Les Pauls and other solid body electric guitars made by hand each week. The guitar making process is highly labor intensive. Though it the guitar body cutting process is automated it still requires about 500 dedicated workers to keep the process run smoothly. Whereas, in Fender, most of the process is automated and 3D design software is used to design and cut out the solid body of the guitar. The primary difference is the body of the guitar. Gibson uses two types of wood to build the body of its trademark hollow body Les Paul guitars. The front part is made of maple wood while the back is maghony, these two parts are then glued and bound for over 24 hours. In contrast, Fender produces solid body guitar, which is made up of alder, ash or basswood.  Its processes are simple when compared to that of Gibson's. In Parallel, other components such as the neck (fret board), and the pickup assembly are prepared.  

The automated process along with assembly line method, help Fender to achieve a higher production of guitars when compared to that of Gibson.

The other key difference in the guitars manufactured by both the firms lies in the tonality of the instrument. The hum-bucker pickups of Gibson yield a mellower tone, Fender's Single coil pickups give bright tones.

Many of the differences in materials illustrated below arise from the opposing methods of construction. (Refer exhibit xx)

• Pickups: While Gibson invented the humbucker, Fender concentrated on single coil.

• Body styles: Fender concentrated on solid bodies, Gibson also developed the semi-acoustic based on their existing archtops.

• Body woods: Most Fenders have alder, ash or basswood bodies, while Gibsons favour mahogany (sometimes with a maple top) on solid body instruments and maple laminates on hollow bodies.

• Neck woods: Fenders have maple necks with maple or rosewood fingerboards. Gibsons have mahogany necks with rosewood or ebony fingerboards.

• Fretboard inlays: Fender uses dot inlays, Gibson uses isosceles trapezoids on the Les Paul's and SG's, but dot inlays on other models.

• Neck joint: Gibsons use traditional set necks, which are glued to the body using a dovetail joint. Fender pioneered the bolt-on neck—a misnomer since it actually uses large wood screws, not bolts.

• Scale length: Fender's standard scale lengths are 25.5" for guitars and 34" for basses, while Gibson tends to the shorter 24.75" and 30.5", respectively. The longer Fender scale yields a bright attack and long sustain, while Gibson's shorter scale gives a rounder, more mellow tone. The short scale also gives an advantage to players who play more complex chords because the frets are closer together and the strings require a lighter touch due to their lower tension.

• Tremolo arm: Fender developed integrated mechanisms routed deep into the body of the guitar and an essential part of the design, while Gibson concentrated on optional tailpieces with mechanisms mainly above the belly.

• Head style: Gibson tended to retain the three-a-side head, Fender standardised on six-in-line.

• These each define a prototype of each marque's more successful models, represented for example by the Gibson Les Paul and Fender Stratocaster, and provide talking points for enthusiasts on both sides. However both marques have long also offered a range of models in the opposing traditions, including variants of these prototypical models.

Operations Strategy

Cost:

The guitar manufacturers usually charge around 20% profit on their product, however it is the dealer who go on to inflate the price, sometimes up to 300%. This clearly indicates the power the dealers wield on the sale of guitars.

While both Gibson and Fender belong to upper echelons of guitar fraternity, Gibson guitar prices ($800-$6000) still much higher when compared a Fender guitar ($500-$4000). This can be attributed to the fact that Fender is able to price less than its rival as it operates on assembly line method thus achieving economies of scale.

To target the masses, both have deployed their subsidiary brands i.e. Epiphone-Gibson & Squier-Fender.  While Fender copycat Squier is manufactured in Southeast Asian countries, the Gibson counterpart is made in house in Nashville, TN. This is one key reason of the price differential between the two alternate brands.

Quality:

Both these brands are the epitome of guitar manufacturing competencies and capabilities. This is why even with almost meager advertisement to sales ratio; these two firms have been able to stay atop in the industry.

While Gibson still continues to thrive with its very skilled and large number of work force, Fender on the other had has undergone gradual change over the years from manual to automated processes of manufacturing. The quality control of Gibson has more checks and balances, as most of the work is done manually. While for Fender, most of the system is automated and only the assembly and finishing is done by hand. This helps Fender to achieve the desired uniformity across its guitars, having equally good design, weight, tonality and the finishing. Fender also took into account the ergonomics while designing its guitar, while in contrast; the Gibson designs were aimed only to look modern. For example, the Gibson Flying-V guitar looked futuristic but cannot be played easily at seated position.

Flexibility:

A look at Gibson's manufacturing process clearly indicates the labor-intensive nature of its production process, thus inherently the lead-time (from order to delivery) to produce a Les Paul guitar is much higher(about 6 months) when compared to production of Fender's Stratocaster ( up to 3 months). The higher lead-time can also be attributed to the higher number of components used in manufacturing Gibson guitars. While Gibson used two types of wood i.e. maple (front) and maghony (back) for its guitar body, Fender uses only a single variety for its solid body. Gibson's processing time is further increased owing to the binding of the hollow components and curing them for 24 hours.

In terms of capacity Fender has a higher flexibility to churn out the numbers of guitar on demand owing to its assembly line production. While on the other hand Gibson's reaction to sudden change in volume demand is very slow due to its inherent processes. However, when it comes to variety, Gibson has an upper hand as it can play around with minor changes to give a custom look and feel to its guitars. Thus the flexibility on variety is almost null in case of Fender as its production is based on consistency and uniformity of the guitars that roll out from its plant across all manufacturing units.

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