New Lower Priced RainSongs???

[bsman]

Time will tell, but I think it was ill-considered for RS to discontinue the CH series. I'm betting they sold bunches of them, and yes - perhaps sales of their higher-priced guitars may have suffered - but unless they had problems scaling up production of the CH series to meet demand, I would think it was a winner for them, unless they set the margin too low. I believe that the ~ $1K-$1500 is more appealing to the person dipping a toe in the CF pool, and unless one of the mainline producers fills it, that market will be left to Chinese-produced guitars like Journey, Lava, etc.

[Captain Jim]

Originally Posted by kramster

Gee I wonder if this type of thing will catch on in other areas of consumerismness?

I hear about car dealers "stacking them deep, and selling 'em cheap!" Probably not quite the same.

As far as RainSong selling more guitars at a less expensive price: it may initially spark more sales, but it quickly becomes "more work for less profit." As a former business owner, I can say with no hesitation that there is a limit to how much you can produce without major capital investment. Just picking numbers at random here, so this is no reflection on how many guitars RainSong produces, but... which is better: 1,000 guitars with a profit of $100 per guitar, or 700 guitars at a profit of $200 per guitar?

You need a certain minimum of product sold to be profitable. And when you reach the maximum you can produce, you have the choice of expanding facilities (which isn't cheap) or simply making more $$ per item sold. The balancing act is something that many business owners don't get... unless you are a major producer (like Taylor or Martin), you can have a very good business, happy workers, satisfied customers by getting that balance right.

In the words of the philosopher Kramster: just sayin'.

[RP]

Originally Posted by Captain Jim

Which is better: 1,000 guitars with a profit of $100 per guitar, or 700 guitars at a profit of $200 per guitar?

You need a certain minimum of product sold to be profitable. And when you reach the maximum you can produce, you have the choice of expanding facilities (which isn't cheap) or simply making more $$ per item sold. The balancing act is something that many business owners don't get... unless you are a major producer (like Taylor or Martin), you can have a very good business, happy workers, satisfied customers by getting that balance right.

However, isn't selling so many units, even at less profit, important to maintaining a certain market share, especially in a relatively small niche like carbon fiber guitars? It seems that most (but clearly not all) guitar companies maintain a range of offerings from least expensive to more expensive. 50% of something is preferable to 0% of nothing...

[steelvibe]

RainSong now has a trusted name. By sticking to their roots they are also always able to cater to the traditional crowd, forward thinking but with a foot in the past. Lots of people like that.

My hypothesis is somewhat confirmed in the move toward a wooden veneer top. They know who their base is and are not afraid to attract them. Right around the price point of a new D-28 or Taylor 6-800 series, these are still within reach of that demographic; and a US made instrument that will never warp, shrink, crack or need a neck reset to sweeten the deal. I think Jim is onto something in that RainSong may need to focus on high dollar instruments for a while with a slightly higher profit margin and good work-to-life balance for their employees (not ever having owned a business I don't think of such things- but looks like business owners do and that makes total sense). CF is a niche market that has yet to catch on even in modern lutherie.

Twenty-four years of making CF guitars at RainSong has likely taught them this lesson. However, modern design will even push the greats to want a piece of the modern market share. Martin just released their first ever bolt on neck after being stubbornly steeped in tradition for 187 years. Things change. A combination of things can happen; a continuous push toward sustainability, a revolutionary way to mold/cast these CF guitars, a reduction in raw materials costs- all can inspire innovation and healthy competition. Maybe RainSong can introduce a budget line again as their business model allows- certainly wasn't a flop for them the first time around.

[Captain Jim]

Originally Posted by RP

However, isn't selling so many units, even at less profit, important to maintaining a certain market share, especially in a relatively small niche like carbon fiber guitars? It seems that most (but clearly not all) guitar companies maintain a range of offerings from least expensive to more expensive. 50% of something is preferable to 0% of nothing...

You can't eat market share. The only thing that gives any business owner is bragging rights. I've seen the "who makes the most CF guitars" discussions here, and always thought: it just doesn't matter. What does matter: is that maker selling enough guitars to stay profitable? In any market, the first order of business is to make a profit. Unless you have really deep pockets, you can't go on losing money on each item sold and hope to make it up with volume. That isn't greed talking, that is a fact. None of the CF manufacturers we recognize here are selling thousands and thousands of guitars.

I used to present seminars to professional photographers' organizations, the most popular ones being: Giving Good Customer Service and Working Smarter VS Working Harder. Who here doesn't receive e-mails daily from Guitar Center and Musician's Friend? How many wait for a sale there before they buy? According to my in-box, Guitar Center is always having a 15% off sale. Why does that matter? Thanks for asking - they have trained their potential customer to not pay full price for anything. There is a reason for those over-inflated MSRP prices vs MAP (Minimum Advertised Price) vs street price. People like to think they are getting "a deal."

For a limited-production quality manufacturer like RainSong, lowering their prices on their CH line, offering a bit less "bling" and a less labor-intensive finish, didn't justify those low prices. That's why they went away. I don't think there is a doubt in anyone's mind that those lower priced guitars cannibalized the sales of the more expensive, but similar offerings. I am not saying that RainSong lost money on the sale of each of those CH models... buy they certainly didn't make the same amount of profit as they would on the more expensive version.

Again, since CF guitars are made in moulds, there is a finite number that can be made in a given time. Unless you make more moulds, hire and train more people. Picking a number at random: let's say 50 guitars per week. That is how many of every model combined that they can manufacture, IF there are no production slow-downs. The ideal situation would be 50 or more anxious buyers each week. They would be selling everything they can possibly make. There is a break-even point - they have to sell X-number of guitars to pay the rent, pay employees, keep the lights on, provide insurance for their employees. This number also includes price of good sold - the cost of materials (CF weave, epoxy, fret wire, tuning keys, etc) for each guitar. Once the manufacturer gets beyond those costs, they will start making a profit on each guitar sold. If they have a great week and sell all 50 guitars, they are doing great. If they have a slow week and only sell 10 guitars, odds are pretty good they won't make that break-even point. If they lower their price to induce more sales, they now have to make MORE guitars to get to that same break even point. Less profit per guitar produced means the cost of good sold becomes a higher percentage of the cost.

See where I'm going with this? It quickly becomes a "race to the bottom," where everyone is working harder, but the business is making less and less. The number to get to the same dollar point of profit in most small businesses is scary: lower your price by 10%, and you have to sell 50% more to get to the same dollar point. (That 50% number will vary according to the product - it may be higher or lower... and why "50% of something is better than 0% of nothing" really isn't relative with a small manufacturer.)

I'm guessing that RainSong doesn't really care how many guitars Emerald or McPherson or CA is selling, as long as they are making enough guitars, AND enough per guitar, to stay profitable. IF that lower priced CH guitar line was adding to their bottom line, they would have kept it.

Frankly, I cringed when RainSong came out with those low priced offerings. My first thought was: "Maybe they weren't getting orders for enough regular priced guitars to meet that break even point." I was sincerely hoping that wasn't the case.

Compare the $2k RainSong Shorty vs the $1299 CHOM... does anyone think the extra bling, nicer finish, and a pickup costs RainSong an additional $700? If not, then it means they were (for some reason) willing to accept less profit per guitar.

Once you've lowered the price, it is hard for the consumer to swallow a price increase. At that point, it is better business to eliminate the less expensive line and offer only the better item at a better price (for profitability).

Sorry for the windy explanation. I've seen way too many good businesses put themselves out of business by the "If we lower our price we'll get a bigger market share" business model. This only works if you have a huge production capacity and you are selling enough of your product to be willing to gamble on lower price per unit vs profitability. This can work with some items (especially where it doesn't take skilled labor), but I've never seen it successfully happen with limited production that is already near full production.

This probably doesn't change any minds... unless you are considering putting your money into becoming a CF guitar manufacturer. I think the folks who are in this business have a burning desire to make quality instruments. It sure isn't like an individual wood-worker deciding to make a wood guitar... the initial start-up costs are not inexpensive. The costs per guitar produced vs the profit would scare off any major manufacturers like Martin or Taylor.

[RP]

Originally Posted by Captain Jim

This probably doesn't change any minds... unless you are considering putting your money into becoming a CF guitar manufacturer....

Originally Posted by Captain Jim

Sorry for the windy explanation...

Don't be. I found your thorough explanation to be very helpful. Thanks Captain Jim...

[jonfields45]

You need to move quickly if interested. Quite a few of the options of a few days ago are gone.

[RP]

Originally Posted by jonfields45

You need to move quickly if interested. Quite a few of the options of a few days ago are gone.

And MF/GC has initiated 15% for Presidents Day....