Piano World Home Page Forums Our Most Popular Forums Piano Forum FAQ - Piano Forum HOW DOES "BUY BACK GUARANTEE" WORK?

from Piano*Dad
"To the extent the guarantee is an insurance policy, there is a premium to be paid for that insurance. That premium is spread over all purchasers of that brand of piano. The insurance cannot be free. As PB has noted, there are certain rules of retail."


Dad,

When you say the insurance cannot be free, you are saying that the buyback of a piano against the sale of a more expensive one is basically a negative cost for the dealer. I don't think that's necessarily the case.

It would be the case in something like a manufacturer's rebate program where every consumer who perseveres through the paperwork and files his claim on time is a negative. It would be the case at Joe's All-You-Can-Eat Buffet when the old yellow school bus carrying the local h.s. football team pulls into the parking lot.

In the trade-in or trade-up scheme, there is the guaranteed promise of greater $$$ to be garnered from any buyer who chooses to participate and enough wiggle room to manipulate the transaction to the point that the trader-inner will generally be clueless as to what the real value of his trade-in was.

Oh, I actually agree with that. A buyer is often at an informational disadvantage.

I'm trying to build the best case for the trade-up policy assuming everyone is fully informed. In that 'insurance premium' case there are clear analogies with other insurance markets.

But my first presumption is that in most cases the program is of no material value because of the flexibility of discounts off of MSRP.

If the buyer is of the generally clueless variety the trade-up idea can be manipulated by the dealer to increase profits from that individual. The individual who thinks their trade-up is valuable may feel locked in to negotiating with that particular dealer or else they'll 'lose' the trade-up. This adds cards to the dealer's hand. So, if the consumer misunderstands the true 'value' of this rather complex 'guarantee' they can indeed wind up paying too much.

I don't think you followed my post. I am aware the dealer I use never charges Larry Fine MSRP for Masons(and neither do any other dealers)so of course there would be"room not to charge list price". Everyone at this dealer gets virtually the same price whether they are buying the piano for the first time or trading up. There are some dealers who price their pianos at what they think are a fair/appropriate price and do not negotiate.

So it seems that the discussion in my case has nothing to do with Fine saying the discount on Masons should be 25% or MORE.

That is why I didn't have to be concerned about getting less off MSRP than people buying a piano for the first time. Under these conditions, I think the trade up can be valuable for the buyer.

How is a prospective buyer aware that a dealer treats each and every soon to be client the same as for ex. alleged nonnegociation in their prices. In this day and age most retail dealers are hustling and do whatever it takes to make the deal happen. It's called survival mode.I've noticed the dealers have become very creative in their pitch to the prospective customer. Ex. Discounting the player system below cost but padding the price of the piano or vice versa .Pretty slick!
This analysis thusfar is very interesting and informational,if I must say.

PB,

I must say, that thought had occurred to me as well. How can one know the strike prices that other buyers have achieved without examining the receipts of the firm?

In any case, I'm perfectly willing to accept that in individual cases a person may have gotten what seems like a very useful trade-up. Perhaps the dealer was hard up that month and needed cash flow, so they accepted something that they might not have accepted the month before or the month after. This is why anecdotes rarely work as counter-evidence to a broader conjecture about incentives. Unfortunately, real statistical evidence is hard to come by in this industry.

A lot of salesmanship is slick.

I for one do not believe that there is any way that a store can buy back a piano that is now 2 years old and not loose something somewhere. Having seen 'the business' up close and personal while teaching at a piano store many years ago, I saw that yes, one could trade in and get back their money, but the discount off the higher price instrument could not be the same as if one walked into the store without any 'baggage'!

However it comes down to trusting the owner of the company/store.

And private emails with current purchasers for the same piano also adds to the trust of what the owner does. The prudent buyer does his homework, yes?

However...a few thing could possible be added to the piano purchase menu...bench, lamp or damp chaser. Prep and tunings are often determined by the mfg. You sell my pianos, these are the things that MUST be done before the piano goes out, or as part of the after service. A few things can be an icing on the cake though.

One might wonder... is the same extended prep going to go into this purchase that has the baggage attached? Well, yes...if that business is to stay in business and keep their reputation.

All those that I dealt with were lovers of pianos, pianists and the whole shabang. I am sure they wanted to see their customers happy and content.

That was 2 years ago.

I hope things have not changed for them. And I wish all of them well.

Some dealers have been operating in terms of pricing a certain way for many years if not decades, and people who shop there generally know or find out from others what the situation is. Is it possible that a few % of their customers got a price that was 1-4% less than the others? Yes, but the % of people(if any) and % discount in this case is so miniscule it is completely irrelevant.

My post does not refer to the situation for the last 1-2 years which was before my trade up. Today's economy is a once in a lifetime recession, and it's possible that the dealer from whom I purchased my trade up piano is operating differently. My trade up price had nothing to do with the dealer being hard up during the month when I traded up. Their policy regarding piano pricing and trade ups had been in effect for many, many years.

In my case the answer is yes because I bought a piano that had already been prepped for the dealer's showroom. It wasn't as though they had some way of knowing which piano on their floor I would select(or even if I would trade up) ahead of time! Virtually none of this dealer's customers buy a piano before it's prepped.

And WHICH dealer might this be PL?

Lilylady wrote,"Prep and tunings are often determined by the mfg. You sell my pianos, these are the things that MUST be done before the piano goes out, or as part of the after service."

I do not know of a single manufacturer who "determines" or mandates in any way what or how much prep work is done. All mfgrs. strongly suggest that their dealer network prepare their instruments, but there is no teeth in this.

The only dealers who religiously do complete piano preparation are those who believe, from a marketing basis, that it helps them sell more pianos more profitably.

"And WHICH dealer might this be PL?"

It's a good question. No doubt there are more retailers who tout a one-price-for-all policy than there are dealers who actually operate that way. I mean, what is the alternative really?....to let the customer know how much money he has needlessly left on the table?

Let's not forget also that a Mason traded on a Mason is a bit different from a Henry F. Miller traded on a .............?? A Mason will be recognized by any retailer to be an outstanding piano. The only place where a Henry F. Miller will get rave reviews is a dealership belonging to the consortium that contracted for it in the first place. I'm not knocking the piano in any way, but there are several factors that will imit its open market resale value.

The dealer that sells the Henry F Miller will get more for a used one than other stores. The mason would be a solid 5 figure selling price and would be worth it on a resale (by the dealer). The Henry would easily be a 4 figure selling price and would be worth it, on the flip flop. The longer the cliente has the piano the easier it is to recoup the trade in value, as the new prices push up (artificially) the prices of the used. (Anyone look at the price of gray market Yamaha 30 yrs old)

If the product is sold by a high gross profit chain that does not discount, than customers tend to agree to, pay high for the first piano so they have the right to pay high on the next one and get their trade back in.

Our prices are 25-30% off of MSRP. Our trade ins were sold on this formula, so it's a fair trade.