First Published In The Music & Sound Retailer’s March 2007 Issue
By Brian Berk & Michelle Loeb
NAMM blew away its attendance record set last year after 84,965 registrants walked through its doors in January in Anaheim. About 81,000 attended last year. Those who attended were treated to plenty of celebrity star power, new products, tons of parties, and loads of advice. There were too many stars to mention, but some of the highlights included Eddie Van Halen’s surprise appearance at Fender’s Dealer Appreciation Party, Earth, Wind & Fire at Yamaha’s Dealer Appreciation Party, and OK Go at the Sennheiser party.
The vibe of manufacturers was upbeat. Several suppliers we spoke to said traffic at their booths was busy at all times. And manufacturers added they felt the show was better than 2006, and they were pleased with that show.
Even dealers in the back corners and basement had zero complaints. “It’s been really strong,” said one manufacturer. “Even though we’re in the corner, people continue to stop by our booth. I’m really happy.”
Dealers we spoke to also seemed happy. The only negative was two dealers telling us they just didn’t find enough new products that “wowed” them and made them want to buy them right on the spot.
Talking About My Education
Perhaps the most informative of the NAMM morning sessions was “The Big Issues: Profitability,” taking place on Friday. The panel discussion was hosted by Bill Hinely and composed of Eric Matzat, president of Palen Music, Willis Music’s Kevin Cranley, Cranley, Skip Maggiora of Skip’s Music, George Hines of George’s Music, White House of Music’s Chris White, and Ron Papparella of Daddy’s Junky Music.
Cranley discussed the importance of turning other ideas into your own. “Even Thomas Edison once said he only had one original idea. He turned everyone else’s ideas into his own.”
Cranley added he always tends to worry about things he has no control over at his store, such as profitability. “So I say a ‘serenity prayer.’ I try to make sure I only worry about things I do have control over.”
Papparella stressed the importance of cutting costs. His best advice: “Zero-Based Budgeting,” which he said has reduced operating expenses.
“Try to reduce your operating expenses by 3 to 4 percent every year,” he said. “That adds a lot to your bottom line.”
But how do you decrease operating expenses? “Look at every line item in the budget month to month,” he recommended. “Everything must be open to renegotiation, re-examination.
“Look at your organizational structure,” he added. “Sales compensation is your biggest expense. Did you develop a plan that pays for performance, not results? And don’t just accept a 20 percent annual healthcare increase.”
Matzat focused on looking at ROI (return on investment), which he defined as gross profits divided by inventory. “I do it for the trailing 12 months at my business,” he said. “You must have an ROI of $1.30 at least. But you really need to have $1.50. For example, if your store had $15,000 in gross profits and $10,000 in inventory, your ROI would be $1.50.
“Our ROI increased 50 cents in the last few years. Order with your head, not just your gut.”
Maggiora told the audience to “promote the fun of playing music. That’s what I wanted to do when I started my Weekend Warriors program 16 years ago. One of the biggest concerns I had at the time was, I met people who used to be musicians. They had jobs. But with Weekend Warriors, they could have one rehearsal a week and later play in a hall in front of family and friends.”
Keeping with his innovation theme, Maggiora mentioned another idea he had: his Swap Meet. “I told customers to bring in your gear and we’ll sell it for you in an annual event. So many people have so much stuff sitting in their closets they don’t use. We gave store credit for the instruments, but those people often came in and spent more [than just the store credit] though.
“Focus on the new active customer,” he added. “Give them reasons to visit stores more often. We must grow the market itself.”
Randy Jackson
White had an idea of his own: charge a registration fee for lessons. It worked. “No one complains about it,” he said. “I charge $20 a month.” He also advised retailers to employ teachers as part-time employees. “Give them a 50 to 60 percent commission. You get the rest. Even though there are some FICA fees to pay [to the federal government], it’s worth it.”
White offered more ways to rake in additional cash, including charging a $3 or $4 monthly shop fee for repairs that “makes a big difference,” $3 to $6 maintenance fees, and extended warranties that offer “excellent margins.” Hines provided a way to sharpen your mental game with the “Law of Expectation.” “If you write something down, it becomes real. Is it OK to make an additional $20,000? If you write it down you work so hard to achieve that goal.” But Hines has a way to improve your physical game as well. “It’s always great to have a people counter in your store to know how many people walk in,” he said. “Se-Kure Controls (www.sekure.com) makes them.”
Hines also has a “Customer Satisfaction Index.” When you walk in, I have a rule you must be greeted in 10 seconds,” he said. “I’ve hired an outside company to be secret shoppers and they report back to me about how we did.”
Added Hines: “There’s nothing like profit to increase the fun factor.”
Editor’s note: For much more about this NAMM Breakfast Session, see Column of the Month, authored by George Hines, in the back of the magazine.
Favorite Mistakes
“The Breakfast of Champions: My Favorite Mistake” on the first day of the show, was packed and offered a panel featuring industry heavyweights Bill Everitt, Paul Reed Smith, Henry Steinway, and Bob Taylor. But before the event began, NAMM President and CEO Joe Lamond presented the prestigious Music For Life Award to former Arkansas Gov. Mike Huckabee, who has long championed our industry. “By the way, Mike Huckabee is also a great bass player,” said Lamond.
Huckabee sheepishly smiled at the comment. He has often made fun of himself for his bass playing. “Being governor was fun everyday because I got to play bass guitar in a band, Capitol Offense, every day,” said Huckabeee. “And when you are governor, you get better gigs. [Laughs] I pursue political opportunities for the gigs.”
When the breakfast session started, you’d think the tone would get serious. But Paul Reed Smith kept it light. “My biggest mistake? If I don’t talk to you, I won’t get my booth next year,” he jokingly said to Lamond.
Paul Stanly
Smith then got serious and said he always needed elders as a guide along the way. “The biggest mistake you can make is not teaching younger generations,” he said.
Taylor recalled how he began in the industry. “I couldn’t afford a guitar in the 11th grade for $175,” he said. “So I made one.”
Taylor added that one of the greatest reasons for his company’s success is he had a partner along the way. “The partnership is the secret,” he said. “I was 19 years old when we started this company. Kurt Lustig was 21. As for my favorite mistake, it has to be recent Internet forums. I almost became the enemy to many people there because of my strong opinions. You almost need to be standoffish on there.”
Lamond called Steinway, 91, “the busiest person in retirement I ever met.” He said his biggest mistakes were marketing gaffes and called the Hammond organ the “greatest invention of my lifetime.”
Steinway also said how difficult it was for the company to adjust for three years during World War II. The company couldn’t make pianos because they used copper.
As for what’s most important to him, Steinway said it’s the manufacturer-dealer relationship. “That is really important. Dealers do so much for us.”
Everitt had to carefully sidestep discussing anything involving Brook Mays’ bankruptcy due to legal reasons. However, he discussed the company’s massive growth during the final Internet boom years of 1999 and 2000. “We doubled our size overnight,” he said. “Our new management had just been our competitors.”
His biggest mistake is simple. “I don’t listen to my wife nearly enough.”
Pretty Good for a Girl
Day Three kicked off with a new idea for NAMM. A panel of successful women in the industry joined CPA Alan Friedman and special celebrity guest Lisa Loeb to discuss a woman’s place…no, it’s not in the kitchen, but rather at the forefront of MI’s untapped markets.
Stevie Wonder
The main message of Saturday’s breakfast session was it’s important to focus on sales and communications skills. Whether the customer is male or female, the rest will fall into place. As Antoinette Follett, editor-in-chief of Making Music and International Musician magazines noted, a survey of females said 80 percent want to buy in a local store, not online. What’s more, the women surveyed didn’t care if the salesperson was male or female, leaving it up to the store to make the sale on its own merits. “It’s important to make a connection…treat [your customers] fairly,” regardless of sex, she said.
Lisa Loeb added that salespeople “need to show empathy and compassion. Sometimes they’re too busy hanging out and playing [the instruments themselves]. You’ve got to reach out to the customers who are embarrassed.” To which Tish Ciravolo, founder of Daisy Rock Guitars, said, “Make females part of your community.”
The panel also touched upon qualities inherent in women that make them great employees in this industry. “Women are good listeners. They ask questions and learn,” said Susan Lipp, president of Full Compass, who added she’d be happy to hire an all-female sales force if she could.
As for the future of women in music, Zildjian CEO Craigie Zildjian noted the importance of mentoring in fostering growth among females in MI. “My grandfather always believed a woman could run the business,” she said. “He and my father mentored me…everyone needs mentors, but they’re harder for women to find. We’ve got to reach out to the next generation of women.”
Vox Anniversary:
Vox kicked off the show with a 50th anniversary celebration. The company took the opportunity to look back on its roots, when Tom Jennings, the founder of an organ company, came together with Dick Denney, an engineer in late-1950s Kent, England. Embracing the technology of its history, the company also looked forward, debuting its new line of handwired amps. Taking center stage was the AC15, part of the Heritage Series, which Vox calls “a virtual tour of Vox history in one amp.” A special anniversary hangtag and a Web site redesign also commemorated the milestone.
