He has a passion for collecting famous guitars, and in class, he showed us Eric Clapton's Blackie guitar (above) worth $2 million. He turned this passion of his into a business opportunity for Guitar Center, which at his suggestion created 25 knockoffs of the guitar and sold each for $50,000. They sold all 25 knockoffs in 10 minutes. (They got Clapton's permission beforehand and gave some of the proceeds to his favorite charity.) This was an example of creativity in marketing.
Some of his modus operandi:
- Exceed expectations of superiors
- Exceed expectations of consumers
- Always say please and thank you
- Most important leader in society: leader of family
- Be on the lookout for opportunity
He went through 5 sales of the company, bought out 3 partners, experienced 2 LBOs, went public, went private, and now considering going public again. Wow!
After they bought out the first founder's widow, they levered the business too much (frothy times), and JPMorgan Private Equity became the owner. He realized that they were smart people but never ran anything, and most seemed too analytical and unable to make decisions without backup analysis. Now, the current PE owner is Bain Capital (since they went private). He believed that really big decisions must be made with the gut. He thinks testing and analysis has its use but most of the time is inconclusive.
For each issue, he decides, "is it a 1 or a 10 in importance?" Then, even if he's passionate about one way or the other, he can decide if it's worth the time and energy to fight about it.
Keys to customer service: low turnover of staff (went from 100% to 50% turnover on the sales floor) and keeping policies as simple as you can.
They now have 40% market share and consider their culture the key to their success.
He closed by posing an interesting problem of negotiation to the class: a customer offering to sell their vintage guitar at way below market to them. For used/vintage guitars, the only difference in valuation is due to age (like a step function). After the class struggled to come up with a good answer, he explained that their philosophy is to earn people's trust and tell the truth, paying the customer way more than they initially asked for. That sort of philosophy definitely left an impression on me.