Music Trade Review
Issue: 1925 Vol. 80 N. 21 - Page 5
Music Trade Review -- © mbsi.org, arcade-museum.com -- digitized with support from namm.org
MAY
23, 1925
THE MUSIC TRADE
REVIEW
The Trade-in and Its Effect on the
Net Profit of Piano Dealers
The Fifth of a Series of Articles Based on an Exhaustive Survey Recently Concluded by The Music Trade
Review of the Part Which the Trade-in Plays on the Net Profit of the Retail Piano Merchant
Together With a Study of the Methods Which Will Remedy Its Evil Effects
H E trade-in is an element of competition
in the retail piano trade which plays a
very large part. Retail piano houses
which are conducted apparently on a strictly
one-price basis sometimes forget this policy
entirely in the heat of competition on a sale
involving a trade-in, meeting competitors'
figures in the amount of the valuation on the
used instrument, and in this way making even-
tual price concessions to the customer. As a
matter of fact the chief evil of the entire trade-
in problem takes its source right here, for most
sales with trade-ins, where a loss eventually
occurs, are due to this competitive struggle,
which means, in a majority of cases, that the
prospective customer profits and that the deal-
er who receives the contract loses.
There are many houses in the field who make
it a policy to set a valuation on a used piano
strictly in accordance with its inherent value
and who prefer to lose a sale rather than de-
part from that basis. In a majority of cases
these are the houses which show an eventual
profit on their trade-ins, for they have not per-
mitted themselves to be deceived by an impos-
ing figure of the gross volume of business with
T
PIANO DEALERS R&PORTING 100%
COLD SALE MORE DIFFICULT- 3 9 . 1 -f o
TRADEr-IN 5ALE- MORE- DIFFICULT- 51.
PQUAL DIFFICULTY-9 Ho
Relative Difficulty of Cold Sales and Trade-in
Sales
disregard of ultimate net profit. It is an old
saying in the retail piano trade that at times
the sale the dealer does not make is more prof-
itable than the sale he does make, and nowhere
else than in relation to the trade-in is the truth
of this adage more apparent.
As a matter of fact not so many sales are
lost through undue inflation of trade-in allow-
ances on the part of competitors as it might
be thought. If the salesman has permitted the
sale to be based entirely on the factor of price
and has disregarded all other elements in it,
this would happen generally, but fortunately the
good salesman, and there are many of them in
the retail piano trade, sells on other bases be-
sides this particular one. If he sells the instru-
ment he carries as it should be sold, if he places
in the light every merit that it possesses, the
trade-in allowance can be made to assume a
secondary importance in the customer's ulti-
mate decision. That, of course, requires sales-
manship and naturally makes the sale more
difficult to close; but a sale without a profit is
worth nothing to the house that accepts it and,
in the long run, to the salesman who makes it.
Net profit is the goal that is aimed at, not mere
volume of sales.
Any consideration of the trade-in as a com-
petitive factor must necessarily begin with a
study of the relative difficulty of a cold sale of
a new instrument and one in which a trade-in
is involved. At first glance it might seem that
the latter is far the easier, since such a prospect
is already sold on the idea of the instrument
itself. According to The Review's survey on
which this series of articles is based, such is not,
however, the case. The opinion among the
dealers who reported calls the most difficult
PIANO Dr?ALE-RS REPORTING 100%
' mw//////////////////////////////, III ill
MANY SALE'S LOST- 4 5 . 5 <#>
FEW SALES LOST-
in
ZQAlo
NO 5AL&5 LOST-34 1 °fo
W////M/H/A,
The Inflated Allowance and Its Importance in
Competition
sale the sale with the trade-in, as is shown in
the following table, a summary of these dealers'
opinions:
Cold sale most difficult
Trade-in sale most difficult
Both types equally difficult
39.1%
51.2%
9.7%
According to this table approximately 12 per
cent of the retail piano merchants reporting
consider the sale involving a trade-in the more
difficult of the two types to close. This is prob-
ably largely due to the question of the allow-
ance and to the competitive fight which follows
in its train.
How many sales are lost because of competi-
tive inflation of trade-in allowances beyond the
real value of the used instrument involved in
ihe sale? Figures compiled by The Review in
its survey on this point appear in the following
table:
Many sales lost
Few sales lost
No sales lost
45.5%
20.4%
34.1%
In other words 54.5 per cent of the retail
piano merchants reporting consider that sales
lost through trade-in valuations are a relatively
unimportant number of the gross total of sales
made. The question here is evidently one of
salesmanship. A study of the reports of those
PIANO DE-ALtRS REPORTING 100%
INCREASE- VALUATIONS- 11.9%
DO NOT INCREASE: VALUATIONS - 4 7 (ofo
RARELY INCREASE- VALUATIONS - 4 0 5 #>
////////,.
Percentages of Dealers' Methods in Meeting In-
flated Allowances
merchants who state that they lose a good
many sales because of this factor shows that
in a majority of cases they are the type who
have not as yet thoroughly organized their busi-
nesses, and hence have not their selling organ-
izations going at full efficiency. A good selling
organization it would appear loses few sales be-
cause of this factor; a poor selling organization,
on the contrary, suffers considerably.
A small percentage of the dealers reporting
losing many sales* because of inflated trade-in
allowances stated that this condition was tem-
porary. One dealer in particular stated that in
his territory business was not good and that,
as a result, sales were difficult to close. He
went on to say that several dealers, in an effort
to sell pianos, were raising considerably the
amount of the trade-in valuations they were
offering prospects and that this, naturally, was
reflected in his own sales. Evidently these deal-
ers in an effort to stimulate sales are using the
trade-in as a means of hidden price-cutting, a
departure from the one-price system which was
mentioned earlier in this article. This is in line
with the lengthening of terms and with the
prevalence of "bait" advertising which has been
noticeable in the retail piano trade during the
past several months. The dealer in question
stated that he intended to stick to his own
policy of establishing trade-in valuations on the
basis of the intrinsic worth of the instruments
offered as such, as he felt that pianos he had in
stock were worth more to him on his wareroom
floors than were they placed out at a reduced
price which would compel him to sacrifice his
net profit on their sale. Several other dealers
reporting outlined the same conditions.
Competition involving inflation of trade-in
PIANO DEAlfrRS REPORTING lOOfo
'/i
PROFITABLE TO INCREASE- VALUATIONS ~ 3
The Results of Meeting Competition Based on
Inflated Allowances
values is met in various ways. It is good to see
from the following table that most retail piano
merchants have adopted the policy of not meet-
ing the figure offered by a competitor and that
a smaller group do it only in exceptional cases.
The Review's survey on this topic shows the
following results:
Increase valuations
Do not increase valuations
Rarely increase valuations
11.9%
47.6%
40.5%
It must be admitted that there is nothing
conclusive about these particular figures, as in
many retail houses, each individual case is con-
sidered on its own particular merits. Yet un-
questionably from the reports returned to The
Review, a big majority of retail piano mer-
chants consider increasing valuations in the
face of competition a bad business policy. That
they indulge in it occasionally is true; but it is
equally true that those who make it a regular
policy are in a small minority of those who re-
plied to The Review's questionnaire.
Increasing valuations on trade-ins in a com-
petitive fight for a sale means simply that two
dealers are bidding one against the other for
the purchase of a used piano. Such a policy
puts the prospective customer in a most ad-
vantageous position and naturally he uses it to
the fullest extent. A dealer who refuses to meet
a competitive bid, on the other hand, retains
the advantage of not diminishing the value of
the instrument which he is offering. This he
may consider small compensation, but properly
used by a good salesman it can be made to do
(Continued on page 9)
MAY
23, 1925
THE MUSIC TRADE
REVIEW
The Trade-in and Its Effect on the
Net Profit of Piano Dealers
The Fifth of a Series of Articles Based on an Exhaustive Survey Recently Concluded by The Music Trade
Review of the Part Which the Trade-in Plays on the Net Profit of the Retail Piano Merchant
Together With a Study of the Methods Which Will Remedy Its Evil Effects
H E trade-in is an element of competition
in the retail piano trade which plays a
very large part. Retail piano houses
which are conducted apparently on a strictly
one-price basis sometimes forget this policy
entirely in the heat of competition on a sale
involving a trade-in, meeting competitors'
figures in the amount of the valuation on the
used instrument, and in this way making even-
tual price concessions to the customer. As a
matter of fact the chief evil of the entire trade-
in problem takes its source right here, for most
sales with trade-ins, where a loss eventually
occurs, are due to this competitive struggle,
which means, in a majority of cases, that the
prospective customer profits and that the deal-
er who receives the contract loses.
There are many houses in the field who make
it a policy to set a valuation on a used piano
strictly in accordance with its inherent value
and who prefer to lose a sale rather than de-
part from that basis. In a majority of cases
these are the houses which show an eventual
profit on their trade-ins, for they have not per-
mitted themselves to be deceived by an impos-
ing figure of the gross volume of business with
T
PIANO DEALERS R&PORTING 100%
COLD SALE MORE DIFFICULT- 3 9 . 1 -f o
TRADEr-IN 5ALE- MORE- DIFFICULT- 51.
PQUAL DIFFICULTY-9 Ho
Relative Difficulty of Cold Sales and Trade-in
Sales
disregard of ultimate net profit. It is an old
saying in the retail piano trade that at times
the sale the dealer does not make is more prof-
itable than the sale he does make, and nowhere
else than in relation to the trade-in is the truth
of this adage more apparent.
As a matter of fact not so many sales are
lost through undue inflation of trade-in allow-
ances on the part of competitors as it might
be thought. If the salesman has permitted the
sale to be based entirely on the factor of price
and has disregarded all other elements in it,
this would happen generally, but fortunately the
good salesman, and there are many of them in
the retail piano trade, sells on other bases be-
sides this particular one. If he sells the instru-
ment he carries as it should be sold, if he places
in the light every merit that it possesses, the
trade-in allowance can be made to assume a
secondary importance in the customer's ulti-
mate decision. That, of course, requires sales-
manship and naturally makes the sale more
difficult to close; but a sale without a profit is
worth nothing to the house that accepts it and,
in the long run, to the salesman who makes it.
Net profit is the goal that is aimed at, not mere
volume of sales.
Any consideration of the trade-in as a com-
petitive factor must necessarily begin with a
study of the relative difficulty of a cold sale of
a new instrument and one in which a trade-in
is involved. At first glance it might seem that
the latter is far the easier, since such a prospect
is already sold on the idea of the instrument
itself. According to The Review's survey on
which this series of articles is based, such is not,
however, the case. The opinion among the
dealers who reported calls the most difficult
PIANO Dr?ALE-RS REPORTING 100%
' mw//////////////////////////////, III ill
MANY SALE'S LOST- 4 5 . 5 <#>
FEW SALES LOST-
in
ZQAlo
NO 5AL&5 LOST-34 1 °fo
W////M/H/A,
The Inflated Allowance and Its Importance in
Competition
sale the sale with the trade-in, as is shown in
the following table, a summary of these dealers'
opinions:
Cold sale most difficult
Trade-in sale most difficult
Both types equally difficult
39.1%
51.2%
9.7%
According to this table approximately 12 per
cent of the retail piano merchants reporting
consider the sale involving a trade-in the more
difficult of the two types to close. This is prob-
ably largely due to the question of the allow-
ance and to the competitive fight which follows
in its train.
How many sales are lost because of competi-
tive inflation of trade-in allowances beyond the
real value of the used instrument involved in
ihe sale? Figures compiled by The Review in
its survey on this point appear in the following
table:
Many sales lost
Few sales lost
No sales lost
45.5%
20.4%
34.1%
In other words 54.5 per cent of the retail
piano merchants reporting consider that sales
lost through trade-in valuations are a relatively
unimportant number of the gross total of sales
made. The question here is evidently one of
salesmanship. A study of the reports of those
PIANO DE-ALtRS REPORTING 100%
INCREASE- VALUATIONS- 11.9%
DO NOT INCREASE: VALUATIONS - 4 7 (ofo
RARELY INCREASE- VALUATIONS - 4 0 5 #>
////////,.
Percentages of Dealers' Methods in Meeting In-
flated Allowances
merchants who state that they lose a good
many sales because of this factor shows that
in a majority of cases they are the type who
have not as yet thoroughly organized their busi-
nesses, and hence have not their selling organ-
izations going at full efficiency. A good selling
organization it would appear loses few sales be-
cause of this factor; a poor selling organization,
on the contrary, suffers considerably.
A small percentage of the dealers reporting
losing many sales* because of inflated trade-in
allowances stated that this condition was tem-
porary. One dealer in particular stated that in
his territory business was not good and that,
as a result, sales were difficult to close. He
went on to say that several dealers, in an effort
to sell pianos, were raising considerably the
amount of the trade-in valuations they were
offering prospects and that this, naturally, was
reflected in his own sales. Evidently these deal-
ers in an effort to stimulate sales are using the
trade-in as a means of hidden price-cutting, a
departure from the one-price system which was
mentioned earlier in this article. This is in line
with the lengthening of terms and with the
prevalence of "bait" advertising which has been
noticeable in the retail piano trade during the
past several months. The dealer in question
stated that he intended to stick to his own
policy of establishing trade-in valuations on the
basis of the intrinsic worth of the instruments
offered as such, as he felt that pianos he had in
stock were worth more to him on his wareroom
floors than were they placed out at a reduced
price which would compel him to sacrifice his
net profit on their sale. Several other dealers
reporting outlined the same conditions.
Competition involving inflation of trade-in
PIANO DEAlfrRS REPORTING lOOfo
'/i
PROFITABLE TO INCREASE- VALUATIONS ~ 3
The Results of Meeting Competition Based on
Inflated Allowances
values is met in various ways. It is good to see
from the following table that most retail piano
merchants have adopted the policy of not meet-
ing the figure offered by a competitor and that
a smaller group do it only in exceptional cases.
The Review's survey on this topic shows the
following results:
Increase valuations
Do not increase valuations
Rarely increase valuations
11.9%
47.6%
40.5%
It must be admitted that there is nothing
conclusive about these particular figures, as in
many retail houses, each individual case is con-
sidered on its own particular merits. Yet un-
questionably from the reports returned to The
Review, a big majority of retail piano mer-
chants consider increasing valuations in the
face of competition a bad business policy. That
they indulge in it occasionally is true; but it is
equally true that those who make it a regular
policy are in a small minority of those who re-
plied to The Review's questionnaire.
Increasing valuations on trade-ins in a com-
petitive fight for a sale means simply that two
dealers are bidding one against the other for
the purchase of a used piano. Such a policy
puts the prospective customer in a most ad-
vantageous position and naturally he uses it to
the fullest extent. A dealer who refuses to meet
a competitive bid, on the other hand, retains
the advantage of not diminishing the value of
the instrument which he is offering. This he
may consider small compensation, but properly
used by a good salesman it can be made to do
(Continued on page 9)
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