SITUATION

The New York Times Article, April 19, 1995

And who purchased

This Legendary Piano Manufacturer?

Owners of this company were…

Dana Messina & Kyle Kirkland

Two 33 year-old investment bankers

Wait a minute…!!

Before we puzzle ourselves

into their problems,

Why shouldn’t we look

at the background of

Steinway & Sons

Rewind

Established in New York City by Henry Engelhard Steinway

Sold to Birmingham Brothers for $50 m

Bought by Selmer Company for $100 m

Purchased by CBS in $21 m

The Establishment

1853

Henry Engelhard Steinway

Established by

Build the best piano possible and

sell it at the lowest price

consistent with quality

Henry Engelhard Steinway

The Tradition

1853-1972

1 Attention to details

assembled by CRAFT METHODS

2 Value of employees

Many workers represent

2nd

or 3rd

generation

3 Exclusiveness

no two pianos would sound same

4 Social Responsibility

Award-winning sustainable forestry program

to establish forests through tree planting

and educational forest management projects

The CBS Years

1972-1985

• Financial reasons

• Ownership was spread

among many family

members.

• Some partners were

mostly interested in

income, but not in

investments for

improvements.

So, the company was sold to CBS

For $21m

• CBS did heavy

investment in capital

improvements.

• Increased production to

get return on

investments.

• Increased visibility in the

market to increase

sales.

BUT…!!!

Critics began to question

quality of the

Steinway pianos.

The Birmingham Years

1985-1995

In 1985

For $49m

And they brought

some improvements!

Despite having lack of industry experience

1 Back to Quality

Unboxed 740 pianos prior to shipment,

and re-tuned & re-voiced

Each One

2 Technology and Innovation

Upgraded and modernized

the manufacturing facilities

to eliminate any question on quality

3 Sense of Responsiveness

Visited dealers, heard concerns

and explained future plans

4 The dealer network

•Reduced dealers to improve sense of

exclusivity

•Developed “partnership program” with

dealers.

4 The dealer network contd…

within the dealer’s retail space

A separate “Steinway Showroom”

5 stretching product line

to induce upselling

to target more market

5 Increased product line contd…

Launched in 1992,

to cover Middle-priced market

Launched in 1993,

to encash the brand name of Steinway

Launched in 1994,

to offer something different

As a result

• Boston Pianos helped Steinway capture mid-priced market.

• They improved the sales and increased the revenue.

• “Limited Editions” and “Crown Jewel Collection” gave

Steinway

points of difference

to sell, and capture the market and helped it

increase its brand equity.

Global Appearance

And… in the US

Steinway’s top ten American Markets in 1994; source: Steinway Company Records

Purchase by Selmer

1995

Despite the positive changes

Financial constraints forced

Birmingham brothers

to sell the company

On April 18,1985

For $100m

The Piano Industry

Types of Pianos

Industry Trends

Piano sales in the US; Source: Piano Manufacturers Association International

Reasons

• Rise of computer as home entertainment device

• Growing popularity of low-priced electronic keyboards

• Global recession in the early 1990s

Competition of Steinway

• Baldwin Piano and Organ Company, United States

• Yamaha Corporation, Japan

• Kawai Corporation, Japan

• Bosendorfer, Austria

• Fazioli, Italy

The Used Piano Market

Long life & fine reputation

of old pianos hit the market of new pianos

Problems

Role of

Dana Messina

&

Kyle Kirkland

#1

Whether Steinway should continue

its niche strategy of being world’s pre-eminent maker of

High quality pianos?

OR

Should it go with some more aggressive plan?

Steinway should stick to

its core values, which

have given it a brand

image.

It should focus on

producing quality

pianos…

…And serve its target

segment, which is affluent

people, having a great

taste in music…

… and make them feel that

they deserve something

different and exclusive,

and leverage the Steinway

brand name.

#2

What to do with Boston pianos?

Boston brand

proved its worth

And achieved its goal…

Sales of Boston Pianos

But it diluted the brand

image of the name

“Steinway & Sons”

So Steinway should drop

Boston to regain its

brand image

And

exclusivity

#3

What are the alternatives?

Steinway should continue to

innovate, and serve its elite

customers with new products

by extending its product line

for elite class

And it should come up with

new products for mid-priced

market to

target new market,

and increase its

Revenue and visibility

But…!!!

be careful

Steinway should not sell the

new products under the

umbrella of its brand name

Recap#1

#4#3

#2

References

steinway.com

Thanks

This presentation

was created during a marketing internship,

under the guidance of

Professor Sameer Mathur

IIM Lucknow

Ph.D.: Carnegie Mellon University

by

Abhishek Gupta

IIT Guwahati