Marketing 101: How One Company is Resonating and Reverberating in the Music World

Whether you’re playing the same three chords or are a seasoned virtuoso, if you’re a musician, chances are you have strong, even fanatical opinions about your gear. One Chicago company was listening. In his article of 19 March 1982, “EXECUTIVE SUCCESS,” L. Ron Hubbard wrote: “The whole story of marketing is told in just a few words: “ONE FINDS OR STRENGTHENS OR CREATES A DEMAND. “The whole story of economics is told in a few words: “ONE SUPPLIES OR DOES NOT SUPPLY A DEMAND AND GETS ADEQUATELY PAID OR DOES NOT GET PAID FOR IT.” Musicians, their instruments and equipment form an intense, symbiotic connection that outsiders might not fully grasp, but Chicago-based Reverb.com was built upon that connection. Interested in a 1964 Höfner “violin” bass (think Paul McCartney)? How about a red-and-white Airline guitar from 2000, the kind famously played by Jack White? Or what about the ACTUAL GEAR used for creating legendary rock albums? The 1988 Fender Stratocaster, black and “metallic candy apple red,” played by Billy Corgan to record some of the biggest hits of the Smashing Pumpkins? How about an unbelievably rare 1928 Martin guitar of Adirondack spruce and Brazilian rosewood in its original hard-shell case? Price: $90,000. You can get it all—and infinitely more—on instrument and gear marketplace Reverb.com.1 If all this musical talk produces utter silence and blank stares, you’re not the primary public for the site. But if it strikes resonant chords and inner explosions at the volume of The Who, Live at the Isle of Wight Festival 1970, you’re one of millions of musicians for whom Reverb.com was created. Reverb.com is far more than “nerding out” for musicians. The Chicago company, founded in 2012, ranked #18 on the 2017 Inc. 5000 list, has grown over 12,000 percent in the last three years, and made $15.7 million for 2016.2 The company’s founder, David Kalt, had gone public with an online trading platform (OptionsXpress) in 2005, and he decided to treat himself to a ’63 Fender Strat for $7,500. Kalt had played guitar in high school, worked in a Chicago recording studio, and something about that guitar sparked renewed interest in musical instruments. He was visited by the muse once again.3 He bought the domain name reverb.com in 2009 and eventually purchased a popular store frequented by rock stars called the Chicago Music Exchange. For several years he gained priceless experience talking with musicians, repairing, buying and selling instruments, and acquiring deep insight into what makes musicians tick and what they need and want. With this knowledge, Kalt concluded he could provide an online marketplace—supply a demand—vastly better than what was out there. Amazon and eBay, while omnipresent, didn’t truly understand this specific clientele. A few investors (some of them famous musicians) concurred, and by 2015 Kalt had raised $30 million in capital. He also drew on his experience in the electronic stock market. “Good stocks retain value over time or go up. So do most musical instruments,” said Kalt. “This isn’t buying and selling doohickeys that lose all their value. New inventory depreciates 10 or 20 percent after you buy it, but its value holds after that. Once it becomes vintage, its value goes up. It’s this huge market that gets better with age—there aren’t many like that.” The Reverb Marketplace now connects hundreds of thousands of people to buy, sell and learn about new, used, vintage and handmade gear. It’s made up of luthiers (guitar makers), mom-and-pop shops, boutique builders, large retailers, manufacturers, musicians and collectors. It also boasts online stores curated by rock stars, and interviews with the likes of Chicago blues legend Buddy Guy, New Orleans wunderkind Trombone Shorty, and ukulele virtuoso Jake Shimabukuro. The marketplace includes everything from a garage band’s bare-bones rig to unusual finds like a 1939 Hammond Novachord tube synthesizer (considered to be the first synth commercially available), a 1929 Gibson “Mandobass” (hybrid of mandolin and bass), and an astronomically rare 1960 Gibson Les Paul Standard “Burst” (Serial #07615) in excellent condition for $285,000. The site features the Reverb Price Guide, which aggregates real-time transaction data to help sellers and customers understand market values. It’s free to list on Reverb, which takes a 3.5 percent fee when an item is sold. The company expects to hit $429 million in sales on its platform in 2017, bringing Reverb $29 million in revenue when factoring optional features available to sellers. The company plans to launch Reverb LP later this year, capitalizing on the explosive resurgence of vinyl records. LPs and related accessories are projected to generate about $1 billion in global revenue for 2017. In addition to audiophiles for whom vinyl never died, a new generation has discovered the analog experience of opening an LP jacket, dropping the needle and letting the record spin—and to many, the “warm and real” sound is far superior to compressed digital files. Reverb LP will differentiate itself with knowledgeable customer service and an image-rich platform emphasizing the uniqueness of album art.4, 5 Reverb is staffed by musicians, who, combined, play close to 900 hours per week, have played a cumulative 2,724 years, have been part of 817 bands, and play an average 5.2 instruments apiece. Summating marketing with the phrase SUPPLY A DEMAND, Reverb.com serves as an excellent example.