MSRP -- what's the point?

[00-28]

Originally Posted by Larry Pattis

Sadly, the music retail industry has always been rife with all kinds of discounting from any published-pricing, which makes for an unsavory flavor overall.

I don't know, all of my guitar dealings have been more on the savory side. ....................Mike

[Silly Moustache]

Again, another radical difference between USA and UK.

For US retailers to offer 40% off list or MSRP (whatever) they must be getting the sort of radical margins that haven't been seen in the UK for decades.

I'd really like a British retailer to come in here, but my understanding is that their margins on instruments are now about 10-15%.
I think that back in the '60s & 70s it might have been more like 40-50%

Of course in the USA you don't pay much in purchase taxes (but you don't include them in the prices - so an item costing $1000 will actually cost $1080 - a strange arrangement to me), whereas in the UK the prices shown include 20% VAT, and this is much the same in other EU countries.

Further the 20% VAT is charged on the cost of importing (shipping + excise + distributor's cut + VAT etc., ), and so we typically pay about 150% (in real terms) of what your dealers show as list or MSRP.

[MikeD]

Originally Posted by Ted @ LA Guitar Sales

Yes, list/MSRP is ridiculous, should have been dropped years ago. Manufacturers just need to set the street price, and let the most qualified dealers represent their brand. When folks are happy with the dealer experience, they will be happier with the brand. Working like a charm for Lowden, Collings, Santa Crux and others.

Yep, that way the bad dealers would quickly be weeded out, leaving the cream-of-the-crop of dealers, which would be a win/win for everyone involved... except for maybe the crappy dealers that close up shop.

[RustyAxe]

MSRP is one thing, and MAP is another. Granted MSRP means little to the savvy consumer. MAP is a means to allow smaller dealers to compete, at least with advertising. No authorized mega-dealer (GC, MF, AMS, Sweetwater, etc) can advertise "we beat any advertised price" .. because THAT is advertising a lower than MAP price. It doesn't preclude dealers from selling at less than MAP, just from advertising that they do. It's also the reason than many "xx% off any purchase" sales at the big retailers often exclude items from manufacturers with MAP policies. That doesn't mean you can't get the discount if you ask and press a little, they just can't advertise it.

It's a Boasting Price! It's a price we guitar pickers can quote when people say "Wow, that's a nice guitar! How much is she worth??"

For example, my Gibson new at GC was about $2100. Used, in good condition, they're going for around $1700. But at the Gibson website they're a cool $3000! So when someone asks, guess which figure gets quoted to them?

Yeah, the purpose of MSRP is to give us some boasting privileges.

[watchingfool]

I'm the reason. Made two mistakes. First one, walked into a Guitar Center, paid full price for my Martin GPCP4A. Second mistake, joined the Acoustic Guitar Forum AFTER I bought my GPCP4A and learned that I could have gotten it for less. Live and learn. Had I joined the AGF before, wouldn't have done that.

And then I bought my OM-28V used from a forum member six months later, so -- happy ending!!

[Ted @ LA Guitar Sales]

Originally Posted by Larry Pattis

Sadly, the music retail industry has always been rife with all kinds of discounting from any published-pricing, which makes for an unsavory flavor overall.

Spoken like a man who has served behind the counter.

Originally Posted by Silly Moustache

...For US retailers to offer 40% off list or MSRP (whatever) they must be getting the sort of radical margins that haven't been seen in the UK for decades...

Actually, we do not, in fact most US retailers can't offer such discounts and survive. I spent some time with a half dozen dealers at NAMM, and the frustration level is at a boiling point.

[patrickgm60]

Originally Posted by billder99

Pretty simple... there are some people who pay the price on an item without even asking for a discount. When they order directly from Martin, online or by phone, they are paying full MSRP. On those happy bonus days, Martin Sales takes Manufacturing out for a beer.

Humor aside, I think that's the answer. There are some who pay sticker for a car, MSRP for a guitar, etc. A buddy recently visited me, while in town on a biz trip. He showed me the _[major company]__ Car Rental bill, for a 2-day mid-size car and I almost fell over. Has his employer not heard of Priceline, Hotwire, Expedia, coupons...?

[ewalling]

Originally Posted by PastorSteve

MAP (minimum advertised price) is the lowest an authorized dealer can advertise a product at. They can sell it for whatever they wish.

But this is meaningless, surely, since they all sell the same items for pretty much the same price, unless, as the OP said, you get a very special one-off offer somewhere. It's not a huge deal, but it does get a bit wearing to have dealer after dealer constantly pretending that they're offering some kind of discount when they're actually selling at standard street price.

[jim1960]

Originally Posted by Ted @ LA Guitar Sales

Y
Yes, list/MSRP is ridiculous, should have been dropped years ago. Manufacturers just need to set the street price, and let the most qualified dealers represent their brand. When folks are happy with the dealer experience, they will be happier with the brand. Working like a charm for Lowden, Collings, Santa Crux and others.

What works for some might not work so well for others. I don't think Martin's sales are hurting because they have an MSRP. In the end, it comes down to quality of the product vs. perceived value, and the latter is subjective and will change depending on the buyer.

But from Martin's perspective (and perhaps from the perspective of any other companies that set an MSRP), it may be that they feel their sales are better when they can create the perception for the buyer that he/she is getting a bargain. Much like buying a car, for many people the ability to negotiate a lower price makes them feel better about a purchase.

As I'm typing this, I can't help but be reminded of Saturn cars. They tried the no-negotiation thing and it doesn't appear that it worked out so well for them.

[Shoreline Music]

Originally Posted by jim1960

As I'm typing this, I can't help but be reminded of Saturn cars. They tried the no-negotiation thing and it doesn't appear that it worked out so well for them.

Actually, that was one of the main reasons my wife bought one, and it was for many of her friends. It was a truly fantastic car for the price....until it began burning through oil like crazy.

But I agree that the MSRP / List Price ruse is an odd artifact of a decades-old business model.

[HDRider]

MSRP is determined by the manufacturer and sets the price the dealer pays.

If a guitar has a list price of $1,000.00 and is what's known as an "A" mark, then the dealer pays $500.00 for the guitar. If it's a "B" mark the dealer cost is $600.00 and so forth.

The discounts you find at the dealer level have little to do with the list price the manufacturer assigns to it.

Now, if the dealer sets his price at 40% of the MSRP (which, for some reason, some people believe they're entitled to), the dealer is only making $100.00 gross profit on that guitar. He makes $100.00, and the dealer still has to pay for the shipping of the guitar to his store. He needs to pay the guy who received it when it arrived and entered it into inventory. He needs to pay the guy(s) who maintains the guitars at a level that is attractive to a potential customer and he has to pay the guy who actually sells it.

The $500.00 investment made to bring the guitar into the store could end up actually costing him money for selling at such a steep discount.

[Long Jon]

Originally Posted by Silly Moustache

Again, another radical difference between USA and UK.

,,,,,,,,yadda ,,,,,yadda,,,,,,,,,,,

Further the 20% VAT is charged on the cost of importing (shipping + excise + distributor's cut + VAT etc., ), and so we typically pay about 150% (in real terms) of what your dealers show as list or MSRP.

I agree they come up pricey over here Andy, but surely we don't have to pay VAT on the VAT !!!?

For our American friends, who may not know, VAT is "Value Added Tax", payable on all retail goods here with a couple of exceptions like food and childrens' shoes.

I know women who buy boys' trainers etc. cuz of the saving.

[Basalt Beach]

Originally Posted by jim1960

Much like buying a car, for many people the ability to negotiate a lower price makes them feel better about a purchase.

As I'm typing this, I can't help but be reminded of Saturn cars. They tried the no-negotiation thing and it doesn't appear that it worked out so well for them.

I do not believe the no negotiation strategy played a part in the demise of Saturn. GM shed several brands in 2009 including Pontiac, a brand you could negotiate the price at the dealer.

Today CarMax is the nations largest sellers of pre-owned automobiles and they have a no negotiation strategy.

It's not my cup of tea however for some, it appears to have a following.

Originally Posted by Shoreline Music

Actually, that was one of the main reasons my wife bought one, and it was for many of her friends. It was a truly fantastic car for the price....until it began burning through oil like crazy.

But I agree that the MSRP / List Price ruse is an odd artifact of a decades-old business model.

I had family and friends who really loved their Saturns they had a loyal following.

And yes, the MSRP/List price needs is an old retail model.

[amyFB]

Originally Posted by PastorSteve

MSRP is a "keystone" price that the industry accepts at a set percentage above dealer cost. Some industries it's 40%. In others like furniture and clothing it's much higher. A dealer has to make a profit of at least X % on each sale to stay in business. An MSRP gives dealers a target. From that a manufacturer sets a MAP and that's what you see in national advertising. MAP (minimum advertised price) is the lowest an authorized dealer can advertise a product at. They can sell it for whatever they wish. A seller's job is to make as much money as they can for their family. A buyer's job is to get it for the best price they can. Sales occur somewhere in the middle.

our company uses MSRP as a mechanism to illustrate the potential margin for a distributor partner who buys at the wholesale price.