Introduction Steinway pianos have long been well received by knowledgeable musicians, an estimated 90% of all classical music

concerts featuring a piano soloist in a year is said to have been performed on a Steinway concert grand piano. In institutions such as Juilliard, Oberlin and other renowned music schools own in more than 100 Steinways and an addition to the professional and institutional markets, Steinway also sold to affluent individuals for private use.

The reason for this immense popularity is because throughout history, little has changed in the process of how a Steinway piano is assembled. Skilled labour is emphasised with all products being assembled by craft methods, with limited use of assembly line techniques. On average, many of the craftsmen employed by Steinway have worked with the company for about 15 years; some even second or third generation employees. In fact, the total time spent on preparing the lumber for production and physically assembling the more than 12,000 individual parts would take almost two years. As a result, production volumes always remained small, with both their factories producing only around 3000 pianos per year, unlike their competitors such as Baldwin who focused on high-volume strategies produced on a large scale in highly automated production facilities but still made use of craftsmen on their concert grand pianos and Yamaha whose products were all produced using assembly-line techniques. With technology and information readily available to improve the efficiency of their production line and increase productivity, Steinway chose not to erode the quality and value of its pianos by switching to automated production lines. Technical excellence played a far greater emphasis with the firm taking out over 120 patents in piano making over the years.

Steinway believes in building the best piano possible and maintaining the quality of its product. The material used to produce their pianos are of the highest grade, the company sourced and uses over seven species of lumber and nine exotic veneers. Very high quality control is enforced in the selection criteria of the lumber. Every Steinway was made the same way, by the same people, with the same process. Yet every Steinway still ended up being a little different from every other Steinway. Each one had a unique sound signature. The signature was in the nuances of the tone, the coloration of the notes, and the strength of the voice. The sound and touch gave each Steinway its own personality. The immense attention to detail has also contributed to the legendary sound and durability of a Steinway, becoming one of its most iconic features. These are some of the key features that make Steinway stand out from their competitors.

They chose to position themselves in the niche, affluent market and a typical buyer of a Steinway piano was over 45 years old, had an annual income in excess of $100,000 and had a serious interest in music. The typical buyer of a Boston was five to 10 years younger and was slight less affluent. Their strict adherence to quality is to best suit their target market are informed and discerning individuals with taste and class.

Distribution Similar to its production and positioning strategies, Steinway adopted a unique promotion strategy for distribution and sale of its pianos. Prior to CBSs takeover, all pianos were sold through a network of independent dealers, 93 dealers in North and South America and 92 Dealers in Europe, Africa and Asia accounting to 85% of the total volume sold. The remaining 15% were sold in Steinways company-owned retail shops. An unofficial benchmark retail price was tagged to the New York store and most

dealers rarely discounted their prices relative to the New York price as it represented the best margins. During the time when CBS was in control of Steinway, many contracts were handed to additional dealers to expand its distribution network, however the promotion lacked focus in these new dealers as most of them were also carrying other brands and were not fully committed to Steinway as their primary product line. When the Birmingham Brothers took over Steinway, they restored the distribution network back to its original strategy of having only a handful of dedicated dealers and reduced the number from 153 to 93 and replaced over 20 underperforming dealers. A Partnership Program was introduced to provide merchandising and technical support, training, coordinated advertising and public relations and several other programs that enhanced the dealers selling activities. Steinway Rooms were created at dealers across the country. These specially designed and stocked rooms provided an elegant display space for the equally elegant Steinway pianos and created a visual and physical separation from the rest of the stores inventory.

Piano Bank A bank of pianos was maintained for use by Steinway Artists which spanned over 160 cities and included some 330 pianos valued at over $17million. The program was dedicated to artists who had achieved sufficient stature and was offered by the company to use Steinways for all their performances, their only expense would be the transportation cost and the tuning it to the performers preference. This idea was thought of to use the pianists as a proving ground and testament to the quality of Steinway concert pianos. Instead of telling the world how good their pianos were, it seemed more credible and practical to have it demonstrated live. It is also because of the concert bank that long standing relationships were forged between performers and specific

pianos and in return for all the services provided to the artists; Steinway was allowed to use the artists names for publicity purposes. This idea was later on copied by Yamaha in 1987 who launched an Artist Program, however they were unable to challenge Steinways leadership and discontinued the program in the early 1990s.

Boston Line The essence of the Steinway brand is to build the best piano possible and sell it at the lowest price consistent with quality. The company made a dedicated effort to stay true to the advice from its founder. However in recent years, four major trends impacted the piano industry. First involved a sustained downturn in the piano industry with global sales dropping by 40% since 1980, the second trend was the consolidation of piano manufacturing industries. The third trend was the emergence and rising popularity of Asian manufacturers like Yamaha, Kawai, Young Chang and Samick. Starting from a near zero share in the 1950s, Asian imports achieved a 35% unit share of vertical pianos market and 80% unit share of the grand piano market by 1994. The fourth trend was the opening of new and potentially large Asian markets such as Japan, South Korea and China.

Although a break from tradition, the Birminghams believed it was a necessary step to take in order to remain competitive in the market. With the new product offering, Steinway wanted to provide customers who were not yet ready to acquire a Steinway with a mid-priced option and allow them to capture sales that might otherwise have gone to Yamaha. Steinway made it a point to emphasize that the Boston line of pianos were only designed by Steinway and Sons but manufactured in Japan by Kawai who had excess capacity. By 1994, Boston piano revenues had grown to $16.9million from the sale of 2,300 units, up from $2.7million

from the sale of 600 units in 1992. The growth represents a substantial market size and opportunity for mid-priced pianos. However, the Boston piano does bring about its cons. There may be a negative effect on Steinways reputation because of its association with the Boston, once a brand only accessible to the affluent and discerning musical enthusiast can easily be accessed by the general middle and working class. There is the risk of losing its prestige and credibility as it may seem that they are breaking away from tradition and losing its essence. It might upset with the inferior product line. Although Steinway is clear as to not have the name Steinway & Sons on its Boston line, only giving credit that it was designed by the company and choosing to use a different manufacturer and assembly method, the general public may still generalize the two lines and associate it as a Steinway piano. Other competitors may jump at this chance to get consumers to switch to their brand If not handled properly, once they feel that their needs are not adequately met or they feel that other brands can provide them with the kind of exclusiveness that Steinway can no long provide. In my opinion, I would continue the Boston piano line simply because there is huge market potential for it. Instead of seeing the Boston as cheapening the Steinway brand, one can look at it as a stepping-stone product, as an affordable introduction to the Steinway family of products. If consumers are impressed with the quality and value presented by the Boston, they will only have greater expectations and admiration for Steinway since it will be perceived as the parent line, promising even better quality and may choose to purchase a Steinway in future. It is important in this day and age to stay competitive and relevant, regardless of industries. Maintaining reputation and quality is important for a company, but lest we forget that the main driving force for long term sustainability is essentially healthy profit margins. With the Boston,

Steinway will be able to dominate both the mid-priced and high-end segments of the market.