The Myths and Mysteries of Violin Pricing
Part Two of Seven
by James W Robinson
Selling an instrument to a player is a matching process. It involves matching the skill, experience, and needs of the player to the sound and quality level of the instrument. The same instrument and bow, playing the same music, by 10 skilled and experienced players, will have 10 different sounds. The sound of the instrument bow combination might match some of the 10 player’s likes and preferences but certainly not all of them.
Different sellers could have different approaches to pricing, either from a marketing point of view, to support their positioning in the buyers’ minds (psychographics), an economic point of view, or a combination of both. Some pricing methods that might apply are;
Cost-plus pricing - one first adds the cost of making the instrument such as labor and materials adding overheads and cost of sales then an additional amount to represent profit.
Cost-plus pricing with elasticity considerations - which takes demand into consideration. Some individual makers and factories may use one of these first two pricing methods.
Competition-based pricing - Setting the price based upon prices of another instrument made by the same maker or a similar level of instrument or maker. The amount and quality of information become very important here. Just like a price history is important when buying real estate. Sometimes this price history information is not easily available to the buyer. Another important factor is the reliability of information the buyer has to determine the instrument’s true identity. An auction house will provide the buyer with some information about their degree of certainty regarding the identification of an instrument. They use specific language in describing each instrument or bow. Of course, in an auction, the value of an instrument is what someone is willing to pay for it at any given time and place. Close to a 'pure market' condition, this method is sometimes used by a contemporary maker or someone selling an older instrument. However, auction room hammer prices are traditionally viewed as a wholesale price since many violin shops/dealers acquire most of their stock this way. Now, this is not so clear-cut.
Penetration pricing - Setting a low entry price to attract new customers. In particular, this method might be used in the pricing of entry-level student instruments. Also, this method is sometimes used when the traditional supply chain of the manufacturer to distributor to wholesaler to retailer to consumer is short-circuited to either manufacturer to retailer or manufacturer to consumer.
Premium pricing - the practice of making the price of an instrument high in order to encourage favorable perceptions among buyers. This practice is intended to exploit the tendency for buyers to assume that the expensive instrument represents exceptional quality. The psychological impact of this can be very persuading in the mind of a buyer. According to the relatively new field of Neuroeconomics, this notion is even 'hardwired' in our brains within the nucleus acumbence. The psychological power of this can be so strong that some dealers might even raise the price of an instrument in an attempt to sell it quicker. The belief in the relationship between higher cost equals higher quality is most often apparent with complex products, where the buyer does not have a lot of information, which can be the case with string instruments.
(copyright James W Robinson)