Founder and president of US guitar manufacturer Michael Kelly, tells MMR how he found success targeting a niche market.
Tracy Hoeft founded Michael Kelly Guitars in 1999 after seven years of working for Gibson and Dean Guitars. Before launching his own company, Hoeft had noticed that the major guitar brands were focused almost exclusively on the most popular market segments. This, he realised, left a number of potentially profitable niche consumers and product areas underserved. At the same time, the Internet boom of the late ‘90s was opening up new means of targeting and connecting with a broader base of consumers, allowing for more efficient and effective marketing to these specific segments.
Starting out with mandolins and acoustic basses, Hoeft and his team quickly found that the demand for niche products was far greater than they had anticipated.
Nearly two decades later, Michael Kelly Guitars has expanded its product line to include a variety of specialised electric and acoustic guitars, basses, and mandolins. Staying true to its founding strategy, the company continues to thrive by catering to niche market segments, using a suite of sophisticated digital marketing tools to identify and connect with customers.
Tell us about the growth of your product line since the initial mandolin and acoustic bass offerings?
Tracy Hoeft: Over time, we have expanded our product line and continued to use the reach of digital marketing to allow us to explore more specialized products. Acoustic basses and mandolins continue to be key products for us and we continue to surprise our dealers when they see how big the potential really is for these categories. However, one product category that really benefited from our approach was what we call the Hybrid: a solid body model with both traditional magnetic pickups and an acoustic pickup in the bridge.
When we first introduced it, we expected it to be a nice little product. In 2017, we will celebrate the 10th anniversary for our Hybrid Special and over that decade it has been one of our top sellers. Thanks to the reach that we have built, we were able to find the players who wanted one instrument with that diversity. I am not sure we could have done that a few decades ago.
Recently, we have added more specialised designs in acoustic guitars and electric models that have found an audience despite being something far from cookie-cutter.
You say that digital marketing allowed you to explore more specialized products – can you elaborate on your strategy behind market research and discovering new product opportunities?
Digital marketing has helped us with specialised products through its ability to offer more niche products due to reach. A product like a five-string fretless acoustic bass is for speciality applications and needs, so that is hard to offer if you cannot find those players that it would appeal to. We use digital marketing and the granular level of targeting it makes possible to allow us to offer those niche products. We have found this key to the growth of our brand and an increased demand at retail.
How did you start down the digital marketing path?
From our founding, we have focused on having a tight, direct communication with consumers. We always wanted to be the more reachable guitar brand. As digital tools like social media and highly targeted digital ads became available, we were early adopters. We take a highly experimental approach to digital marketing: we try lots of stuff, use the vast array of data available to analyse the results, and then we refine and move forward with it. Digital changes rapidly and is constantly evolving. The larger guitar brands are slower moving and simply cannot be as nimble with these mediums. This has been a way to enjoy a competitive edge, so we prioritise it.
Are there specific marketing tools that have you found to be most useful, in terms of cost versus benefit?
My favorite tool is more a capability rather than a specific medium. We are seeing the best results from the mediums that allow us to target consumers based on their interests and location. We use social media, re-marketing, and search engine marketing digital ads because they allow us to triangulate the consumers’ interests and location to deliver the right creative to best convert them to buyers. We are seeing these marketing tools deliver a great ROI.
How does your social media strategy play into this?
Our strategy is to use social media to build relationships with guitarists around the world. We see social media as a way to have a dialog on a regular basis with these consumers. It gives us the opportunity to more clearly convey what our brand is all about. It also allows us to listen to our consumers, and that has provided untold insights. Tactically, for our social media efforts we use a carefully crafted combination of paid and organic exposure on sites like Facebook, Snapchat, Instagram, Twitter, and YouTube.
In each case we have found the formula to reach the right customers and then create a lasting connection. This allows us to build relationships and develop demand. These tools also allow us to specifically direct a majority of our outreach to guitarists in cities where we have dealers. The goal is to drive the right customers into the right stores—it is really exciting.
What are the latest new developments that you and your team are excited about?
In 2016, we started a collection of instruments with upgraded electronics. This was a combination of some slick electronics mods that our team cooked up along with some great pickups made by makers like Seymour Duncan, TV Jones, Lindy Fralin, and Bare Knuckle Pickups. The success of these has increased our average selling price and brought MK to a new group of consumers. This has been a really gratifying evolution.
What do you see in the pipeline for Michael Kelly Guitars?
We continue to explore interesting products that appeal to a specific group of players. We launched three new acoustic guitars at NAMM 2017, including a cutaway with a torrefied top that will explore some new territory. We will also launch our first full line of solid body electric bass guitars. We will have our largest selection yet of 7 and 8-string guitars, yet another niche that we feel is a fit for our approach. You will also see some additional models that we are developing with Lindy Fralin and Seymour Duncan. We continue to seek ways to delight guitarists and work to be in touch with the community constantly to find the instruments that are in demand.
Thinking both at your company and the broader MI industry, what are your expectations for the coming months?
We are excited about the future. The last 18 months have been the best in our company’s history and we are stoked about what is ahead. The core of what is working so well for us is also a positive path for the industry. The unprecedented reach that we now all have to consumers around the world allows us to do some great things. We can use those to grow our brand and to help our dealers enjoy increased success and that is exactly what we plan to do. Beyond that, the reach presents an opportunity for us as an industry to tell consumers why music making is so great.
As a manufacturer, how do you balance online sales versus supporting brick and mortar?
There is a lot of talk about buying online and without a doubt that trend will continue. However, it is undeniable that the experience of visiting a great store and getting help picking the right instrument is the most comfortable way to buy. We have developed strategies to maximise our online success, but we have also been very intentional about driving consumers into our dealers’ stores.
Specifically, we are investing a majority of our marketing dollars focused on the cities where we have dealers. We support that with programs and technology that drive consumers in those markets into that store to see their Michael Kelly selection.
Tell me more about the marketing programs that drive consumers toward their local retailer?
We start with some technology that we have integrated into our website that features the local dealer with a high profile callout on every single product page on our site. This technology detects the location of the consumer visiting the Michael Kelly site and customises their view based on their location. We then use the digital marketing capabilities to run millions of digital ad impressions each quarter on sites like Facebook, Instagram, and a network of top content sites, all delivered only in the cities where we have dealer partners. This is just one of five different programs that we have to focus on helping our dealers enjoy increased traffic and sales.
Last question. Who is Michael Kelly? You are the founder, so why is the brand called Michael Kelly Guitars?
When founding the company, I wanted the brand to carry a family name, one that would give me added motivation and commitment to protect and cultivate the brand. I was pretty sure calling it Tracy Hoeft Guitars was not a good idea— heck, who would even know how to pronounce it? I have two children and at the time of founding they were quite young. My son is Michael and my daughter is Kelly. Naming the brand after them gave me the ongoing commitment to excellence that I was seeking.
