Liz Grant, director, UK online for business: In deciding to outsource production of Avalon’s new range of guitars, Steve McIlwrath needs to make sure that quality is not compromised. A bit of due diligence on potential partners will help. He should get references from other clients and look at the financial performances of the firms.
Alternatively, he could ask Trade Partners UK, the government service that helps exporters, for advice on setting up partnerships with companies overseas.
Once a business has outsourced a process, it is all too easy to forget about it. But if it is going to work, time must be invested in managing the relationship with the outsourcing partner.
A service-level agreement should be used to set the benchmarks for quality, both in production and delivery. McIlwrath should ensure that this is in the contract, with financial penalties if standards are not met. Finally, should production be halted owing to circumstances beyond the outsourcing company’s control, Avalon must ensure that it can still supply its customers.
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Protect your reputation
Craig Rowland, managing director, business, BT: Launching a new brand aimed at the middle part of the market could damage Avalon’s reputation as a maker of high-quality guitars. So protecting this reputation has to be a top priority.
Despite the patchy brand recognition, careful thought should be given to harnessing the residual value of the Lowden name by highlighting the links between Lowden and Avalon. The company should seek endorsement from its well-known customers, stressing that the name may have changed but the quality remains the same.
Avalon should review its plan for expanding in the American market — the world’s biggest.
Having its own trading subsidiary in America may enable the company to retain more of the profit margin, but selling to only 120 of 6,000 dealerships leaves a lot of potential sales untapped.
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Selling over the internet would not only give the company greater control over the whole sales process and maintain control over the new brand’s reputation, but also boost margins further.
Marketing is central
James Radford, vice- president, SME business development, American Express: Avalon needs to restructure its business. Its productivity needs to be improved and it must review its mix of staff.
The company has to evolve from being production-led to becoming more focused on sales and marketing. Marketing for the hand-made, top-of-the-range guitars should target high-income, aspirational customers. The ‘hand-made’ tag should not prevent the company from using more efficient, semi-automated processes.
Because the brand is strong but awareness of it is poor, part of the funds raised from the sale of Avalon’s premises should be devoted to marketing both on and offline.
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Recruiting a brand manager, together with a sales and marketing team focusing on third-party distribution, will help to get the right balance between building awareness and delivery. There is no reason why the firm shouldn’t work through distributors in America. The profit margin may be smaller but Avalon will be able to secure a larger slice of the market.
Focus on the ‘cool factor’
Phil Smith, business development director, Cisco Systems UK: The guitar manufacturer could attempt to solve its recruitment problems by focusing on its ‘cool factor’ — the fact that it makes some of the world’s best instruments played by some of the world’s best guitarists.
The company may be able to recruit new workers from music colleges or from aspiring bands in the Belfast area rather than simply the local college. Open days, advertising and a strong presence on the web will provide more chance of finding the workers that are needed.
McIlwrath must focus on the company’s core skills and determine to outsource everything else. The secret of success will be in making sure that all the operations remain in touch with each other — whether they take place in Belfast or Beijing.
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With a good communications system, McIlwrath can also look forward to using global suppliers. This could shave another few valuable pounds off the cost of each guitar and allow the instruments to be sold to a broader market than is the case today.
Strong brand is precious
Peter Fisk, chief executive, Chartered Institute of Marketing: If top fashion designers can sell cheaper high-street versions of their expensive haute couture ranges, then it is not impossible for Avalon to do the same with its guitars.
Similar careful layering would allow an economy range to sit comfortably next to classic Lowden products.
A different marketing slant for each would ensure that the brand values of Lowden are not diluted and the company’s heritage is preserved.
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A strong brand is a precious commodity and one that should not be tossed aside lightly, but it should still be able to signal the dawn of a new era at an outmoded organisation.
Companies change their brand names for a variety of reasons — to attract a new type of consumer or to dissociate themselves from a less-than-glorious past. It is not always successful, and McIlwrath needs to be certain his reasons are compelling.
He concedes that the Lowden brand is respected, and he should be careful that he does not throw the baby out with the bathwater.
Don't be a 'bit player'
Nick Gatfield, managing director of Universal Island Records: Before Avalon stands the slightest chance of success in the middle market, it must build a far stronger presence on the top-level professional circuit.
To do that, it should present its very best guitars to the best musicians. If Avalon’s standard products impress the stars,
it should then offer to custom-build a guitar to whatever specification the artist requires. There should be no charge other than the right to publicise the musician’s use of Avalon guitars.
That endorsement will give Avalon the leverage it needs to sell other guitars into the medium sector, but without that it is bound to fail. For every megastar like Carlos Santana or Van Morrison there are 10,000 people who aspire to be like them. They will pay a premium for guitars like the ones their heroes play.
But unless Avalon can build a strong presence in the professional market, it is competing on price alone against hundreds of overseas companies with lower overheads — and it is bound to fail.