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Things Musician's Should Know About the Music Instrument Industry

Pay no attention to the man behind the curtain...

 

 

by Chris Loeffler

 

 

This is the first in a series of three articles about pricing and value in the music instrument industry (the last two, focused on retailers and manufacturers, will be published over the next month).

 

Visit any website or retailer of music instruments and you’ll likely come across at least two prices listed on new gear. The higher price is typically written as “MSRP” or “Originally” and the lower price is given any number of variations of “Sale” or “Only” (in Harmony Central Reviews, we use the term “Street”). I’ve read many explanations (some informed, many not) about what these mean, and I’d like to clear the air and give some insight into how and why this pricing structure exists.

 

MSRP stands for Manufacturer’s Suggested Retail Price and is the price they believe is inline for the market/category of their product. This is the price seen in many mom-and-pop shops and, prior to the internet, MSRP was typically the sticker price of an instrument.

 

The other price (“Sale”, “Street”) is accurately called, if rarely published as, MAP, or Minimum Advertised Price. MAP is the typical “sale” price found through most online retailers and is defined in the dealer contract as an agreement to not advertise the instrument for less than a set price.

 

Let’s set MSRP aside for a moment to jump straight to what MAP is and isn’t.

 

MAP came about to provide some control over pricing and protect retailers as the ability to promote pricing extended beyond in-store signage to catalogs and eventually online. It is a way of ensuring an unscrupulous retailer doesn’t decide to blow out inventory to make their numbers for the month, drag the price down for all retailers, and stops everyone from racing to the bottom. This does several things; it ensures small shops can pass the same price advantage to consumers as big box retailers, it rewards retailers who are knowledgeable and have excellent customer service with a higher likelihood of sale, and it leaves enough margin in the product to educate, promote, and advertise within the store.

 

MAP is not price fixing. Price fixing is an agreement between competing sellers to set and maintain certain prices. MAP is an agreement between the manufacturer and retailer that the retailer will not publicly broadcast a price lower than what is listed in the terms. If they break MAP (i.e. advertise below that price) they have violated their agreement, just the same as not making payments, and the manufacturer has the right to dissolve the agreement (and accompanying benefits and protections).

 

So… advertise below MAP, risk losing permission to carry the brand.

 

MAP does NOT mean a retailer cannot sell a product below that price, nor does it mean they can’t have a piece of gear tagged lower than that price in the store. A retailer can sell anything for any price that they want, even if they lose money on it.

 

Back to MSRP…

 

MSRP is often referred to in forums as a “fake” price, and many (even retailers) question whether it even has a place anymore. There are several reasons MSRP still exists; some of them carryovers from a pre-internet time and some of them very much still relevant. The least relevant to the consumer, but important to retailers, is MSRP is the point from which dealer price is created (i.e. Dealer price is 40% of MSRP) and ensures a common starting point to applied tiered discounts. A retailer who only carries a dozen products may quality for 30% off MSRP, whereas a whole-line dealer who sells thousands of units a month may qualify for 50% off MSRP.  

 

Another reason that MSRP exists is many smaller shops charge those prices (or use them as a starting point for negotiation). When demand exceeds supply, there is no reason to sell at MAP; in fact, it could be more detrimental to be perpetually out of stock than to lose the 5% of sales that don’t happen because the price wasn’t rock bottom.

 

Mom and pop shops in expensive real-estate areas may need to charge MSRP to keep their doors open to service and support their customers, so the retailer can go to MSRP without stepping beyond what the manufacturer has deemed fair-market value. A good example of this is consumables. Yes, strings and sticks can be bought online at MAP, but if you need them for a gig that night MSRP helps cover the expense incurred by a low volume local store so that they are conveniently able to meet your immediate need.

 

I will dive deeper into the retailer side of pricing in my next article, and my point is there is a reason both MSRP and MAP exist, and it isn’t an anti-consumer reason.   -HC-

 

____________________________________________ 

 

Chris Loeffler is a multi-instrumentalist and the Content Strategist of Harmony Central. In addition to his ten years experience as an online guitar merchandiser, marketing strategist, and community director he has worked as an international exporter, website consultant and brand manager. When he’s not working he can be found playing music, geeking out on guitar pedals and amps, and brewing tasty beer. 

 

 

 

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moed61@hotmail.com  |  June 27, 2019 at 6:24 pm
Thanks for this article, it's informative and sobering. I won't mince words, I really don't like MSRP and really don't like MAP, period. This may be a "novel concept" (sarcastic here for a reason) but there are MANY of us who really dream of that Les Paul Standard or Martin D-28 that will NEVER be able to or justify the expense of buying one. Bottom line, manufacturers like these (and others) have dashed the dreams of many, many people by their exorbitant pricing... but hey, what do they care right? I just want to end by saying  that if these were more fairly priced (yes, I know that statement is big time subjective), say a Les Paul Standard for $1700, then not only would things be more "balanced" (once again, subjective), but also more attainable generally speaking.  Don't sacrifice quality however... in fact, improve the QC! You know what, prices at the levels I stated would allow more of us to achieve our "dream" - and these said companies would probably sell more of them to a certain degree - and make more money in the long run!!
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karimc  |  June 24, 2019 at 4:29 pm
You raise some fair points, but I will be glad to see this disappear.  Gibson advertises the cost of a Les Paul Modern (to pick an example) at $2799.  The retailer then advertises this at the same $2799, but says that is a $1847 discount off MSRP, which is very confusing (and feels disingenuous) since is it a $0 discount off the price listed by the manufacturer (nowhere does the manufacturer list this - to the consumer - fictional MSRP)...and $0 off the real price you can get anywhere.
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