Each month, LuxeSF profiles a member of The Luxury Marketing Council. This month we talk with Tom Austin, President of Sherman, Clay & Company ... since 1870, America's leading piano dealer and the Bay Area home of the world-renowned Steinway pianos.

LUXESF: Let’s start with Sherman, Clay & Company. Tell us a little about the company.

AUSTIN: Sherman Clay was founded in 1870 by a young man named Leander Sherman. Leander came to work in San Francisco and was a watch and clock repairman, but in 1870, before there was any electricity available in the City or telephone service or even paved roads, the piano was the cultural entertainment center of the American family. In fact, around 1920, there were well over 600 piano manufacturers in America, as compared to two today. Most manufacturing has now shifted overseas. Sherman saw an opportunity to get into the piano business and started a piano retailing shop at the corner of Sutter and Kearney.

He began selling various brands and actually worked the floor. For the next ten or 12 years, Sherman was responsible for helping the young city of San Francisco attract some important cultural and entertainment personalities. For example, he became very friendly with certain opera stars of the time and helped found the San Francisco Opera as well as the San Francisco Symphony. In the 80s, he found that he needed to get bigger. So he took on a partner, a retired military man, Major C.C. Clay, and it became Sherman, Clay & Company and started expanding throughout the West Coast. Around then, we became the first RCA Victrola talking machine distributor on the West Coast.

In 1890 Sherman, Clay became the first Steinway dealer on the West Coast. So, at the turn of the century, Sherman continued to run the company and oversee its expansion up and down the West Coast. It also expanded out into Central California, Sacramento, Modesto, Fresno, and then went north to Portland and Seattle.

By 1906, there were large urban stores in Seattle, Portland, San Francisco and Sacramento. When the earthquake hit in San Francisco, Sherman, Clay was able to shift its headquarters and operations out of its San Francisco building, which was heavily damaged, to the East Bay and to help participate in the rebuilding of the city.

By 1920, the company had expanded throughout all of the western United States , peaking in 1979-1980 with 62 stores from as far east as Pennsylvania and New York . It also had begun to sell associated musical instruments. Today, we have nine stores in Texas, Arizona, California, Oregon and Washington, which do more business than we did when we had 62.

LUXESF: What’s the primary product line today?

AUSTIN: Steinway.

LUXESF: Only Steinway?

AUSTIN: We’re a Yamaha store in our Texas market, but on the West Coast and in Arizona we carry Steinway only. We are the largest Steinway dealer in the United States .

LUXESF: Dimensionalize the business for us.

AUSTIN: Back in the late 70s, early 80s, our average ticket sale was much lower. We didn’t cater to the luxury market like we do today, so quantitatively we sell a lot fewer units but our average ticket sale is much higher -- up to ten times higher than it was just 15 years ago.

LUXESF: Describe the product range? What’s the low and what’s the high?

AUSTIN: They start around $50,000 for a grand, and go all the way up to $150,000 for a limited edition artcase piano.

LUXESF: Is there a sweet spot where the bulk of the business tends to fall?

AUSTIN: The $60,000 - $70,000 range. However, the entire Steinway line is recognized as the line by which all others are judged. It’s pretty much the standard of the piano world. It’s important to emphasize that Steinway makes about 2,500 grand pianos per year, and they sell out every single year. So what becomes important is not how many you sell but how you sell them and to whom.

Let me explain. For pianists whose livelihood depends on the quality of their performance to attract future bookings, their choice of piano is crucial to their success. Steinway does not pay any artist to endorse the brand, nor does it provide pianos free-of-charge to any artist. Period. Most, if not all other manufacturers pay endorsement fees and provide free merchandise. Last year there were 470 large venue concerts that were played on major city stages. 461 of them were played on Steinway pianos because the artists demanded them. Today, there are probably 50 piano manufacturers worldwide that make concert grands, yet 98% of the major concerts are played on Steinways.

LUXESF: Let’s discuss the Steinway buyer. Is there a prototypical buyer?

AUSTIN: There is, but it’s one of those cases where the prototypical average is a little bit misleading. Certainly, as I’ve just described, professionals who make their living playing the piano overwhelmingly choose Steinway because their success depends on choosing the right tool for their trade.

LUXESF: Outside of the professionals, the prototypical profile is ...

AUSTIN: ... someone with a post-graduate degree; with a household income in excess of $200,000; with a net worth in excess of $1 million; with three years of piano lessons; someone who is interested in the finer things in life; who attends four-to-five musical events per year; who is interested in furthering their education and in self-improvement. About 52% female, 48% male, making the decision to purchase.

LUXESF: Why are they buying?

AUSTIN: We feel the core reason is they want to be associated with the finer things in life. Eventually they get beyond acquiring a great car. All the necessities are taken care of -- shelter, transportation. That’s when they get to the electives. When it comes to electives, they put fine art on their walls and they get a double value from purchasing a piano because they get a beautiful piece of furniture as well as a world-class instrument that they can play.

LUXESF: Do they play it or do they leave it in the corner?

AUSTIN: Most play or have someone in their family who plays.

LUXESF: You mentioned once before that surgeons were an interesting buyer group. Why is that?

AUSTIN: I think that these people have shown a predisposition to improve themselves -- further their education and seek self-improvement. If you were to look at the population of surgeons, or even just MDs in America, I would speculate that well over half of them had formal piano training when they were young. First of all, you have to have a certain level of family affluence to not only have a piano in the home, but also be able to afford the training and dedicate the time and energy that it takes in learning how to play. So that bespeaks a certain prioritization of values within the family culture. But beyond that, there is a direct correlation between hand-eye coordination and the development of the brain, particularly when it comes to taking music lessons. It’s directly attributable to increased math scores and reading comprehension scores. The fact is that there is a high degree of correlation between people who are successful and generate high-income levels, and experience in playing the piano.

LUXESF: What is your primary marketing thrust and strategy?

AUSTIN: It really comes down to what we call one-to-one enterprise…recognizing that there are certain relationships that are crucial to our business. One of them is aligning our interests with centers of influence. What are centers of influence? The obvious ones are people who teach others how to play the piano. If we have a good relationship with an influential music teacher, it becomes our best source of referral business down the line ... teachers, professors of music, people who are in a position of authority. So when someone says, “You know, George, I’m considering buying a piano. Do you have any recommendations?” if we have done our marketing work properly, they’ll feel comfortable in making us their recommended choice.

LUXESF: How do you identify a target prospect?

AUSTIN: We’re always trying to find ways of tapping into the instructional/teaching community and sources of influence such as interior designers. In our Walnut Creek store, for example, one of our sales professionals has a Ph.D. in Piano Pedagogy and another is a professional musician. Every other week there are functions at the stores which bring in a variety of people from the community. These are free concerts by Steinway artists. And master classes for teachers. We use our stores to generate interest and attract targeted prospects.

LUXESF: How long is the product selling cycle?

AUSTIN: About six months. It could be as long as 18, but it could also be spontaneous.

LUXESF: Pardon my using automobile analogy, but I’m not a pianist, so I don’t understand the piano-buying mindset. When people buy high-end automobiles, the motivation can be highly visceral -- the smell of the leather, the “thunk” of the door, etc. What’s the definitive moment that convinces them that it’s time to buy this piano?

AUSTIN: When the buying cycle begins, it’s just a concept. As they develop more interest in the product, they become more educated about it. Their ear becomes more educated. Their eye becomes more educated. And they understand that there is a difference between a piano-shaped object and a Steinway. They become more informed as to what the variances are between one piano and another. For example, if your grandfather was to have purchased a Steinway six-foot piano in 1940, and it was kept in tune and in good condition, that piano would probably be worth many times what it sold for brand new, even though it has 65 years worth of use. There are no other pianos that can make such a claim, and there is a good reason for that. These pianos were not built to a price point. They were built to be the best they could be given the technology and the materials that were available at that time. So when the customer slows down, and instead of saying, “Let’s make a deal -- what’s the best you can do for me?” and actually listens to the piano, when they actually feel it, when they begin to understand the economic investment power that a Steinway holds, then they’re ready to buy.

LUXESF: Some marketing tactics. Where are you on traditional advertising?

AUSTIN : Since Steinway makes 2,500 pianos per year and we just passed over 300 million in population in America , the broad-based methodologies of media are inefficient. For us, the Holy Grail is to find out more demographic and psychographic information that allows us to communicate much more efficiently and effectively with the right prospect.

LUXESF: You want micro marketing.

AUSTIN: I want microscopic marketing.

LUXESF: Are you doing much in the way of direct response?

AUSTIN: We are. But we’re always looking for a better model. Beyond demographic information, for example, net worth above $1 million, new homes over $2 million that have been sold in the last 90 days, what we really want is psychographic information, but nobody is really capturing that data, reinserting it into the formula and coming up with an ever-increasing efficiency model. So that’s why we joined the Luxury Market Council. We believe that by putting an ad in the paper, we’re going to be talking to 99.99% of the people who are not interested in buying a piano.

LUXESF: You have the Steinway University in New York . How does that work?

AUSTIN: That’s really a retail support mechanism. Steinway University is where retail salespeople travel back to Mecca, if you will, to see how the mother ship does business and it tries to embrace all the ideology and methodology that Steinway is and has been for 150+ years.

LUXESF: How did you get into the business?

AUSTIN: I was a musician and even though I had had some success at being a musician, the corporate life was interesting to me. I felt that there was a better career potential in embracing that than being a professional musician.

LUXESF: In the course of your career at Sherman, Clay, what has been the most significant moment?

AUSTIN: We were once, very large, spread out, diffused and we tried to be all things to all people. Back in the mid-90s, we made, what for any corporation, were wrenching decisions to reinvent ourselves and become a much more focused organization along the lines that we’ve been discussing today. There are pianos out there selling for $1,500 or $2,000. That is not our core competency. Ours is selling a $50,000 world-class piano and marketing to the affluent. That was a momentous decision. As a company, we walked out without a net on a very high wire, lopping off dozens of stores and reinventing ourselves, becoming a new type of organization. Now we are undeniably the best at what we do.

LUXESF: In the future, what does the company look like?

AUSTIN: More of the same, but in more markets.

LUXESF: Always Steinway? Always pianos?

AUSTIN: Always pianos ... and always Steinway.

LUXESF: And you don’t see the marketplace walking away from learning the skill of playing the piano?

AUSTIN: The piano has been around for over 300 years. It’s been a part of American life, albeit in a much diminished profile versus the pre-radio, TV and Internet days. In fact, you can point very clearly to a decline in the number of piano manufacturers in America to the advent of radio. And the TV only hastened that. But one of the nice things about being in a mature business is that the business cycles and the vagaries of competition are far less disruptive forces. We’re focused on refining our business model and having better outreach to our targeted customers.

LUXESF: Do you see the Internet having any bearing upon how you are educating your market?

AUSTIN: My gut reaction and my experience to date is “no”, and I’ll tell you why. It’s because of sheer logistics. Pianos weigh hundreds of pounds.

LUXESF: Plus you’ve got to touch it and play it ...

AUSTIN: I think there are a lot of customers who would be willing to forego that experience if they could save a considerable amount of money. But the idea of having a piano shipped to your home is fraught with difficulty. You have to get it uncrated. You have to get it tuned. And there are penalties associated with having to return the product. I think that’s enough of a barrier that I won’t have to deal with it in my lifetime.

LUXESF: What made you join the Luxury Marketing Council?

AUSTIN: I recognize that our marketing model is evolving into a one-to-one strategy. Finding better ways to identify our prospects and better ways to interface with them was our primary objective in joining the Council.