How An American Banjo Maker Stood Up To Cheap Chinese Competition

Some may view banjo music as an acquired taste, but that doesn’t mean the banjo market is not interesting. The LA Times recently published a profile of Deering Banjo, a San Diego based banjo maker (Deering Banjo in a groove, Feb 2). There is also a video accompanying the article.

The banjo market may not be huge but Deering has been generally successful. In 1997 their annual sales were around a million dollars. By 2011, they had weathered the recession and had sales over $3 million. And they have done this as they have faced increasing competition from Chinese banjo makers. In many ways, the way they have gone about this is a playbook for taking on low-wage foreign competition.

First, they have focused on productivity.

The efficiencies wrought from such a unique work space are unmatched in the industry, Deering said.

“We keep track of our man hours per banjo,” he said, “and this past week, it was three hours per banjo. That’s extremely good. One of the longest takes 20 hours. The Chinese can’t build banjos faster than we do.”

If your competitor’s primary weapon is inexpensive hands, limiting the number of hands you need lessens that advantage. In most instances, this will mean substituting capital for labour. That is certainly the case at Deering as they have built their own custom equipment. (Apparently, it is hard to buy banjo manufacturing equipment off the shelf.)

But Deering has taken this a step further by investing in its people and their skills.

Mostly, Greg Deering credits his workforce for the quality of the finished product. Some of Deering Banjo’s employees have been at the company for 30 years or more and came with considerable skills.

But he said skills aren’t necessary for the newest employees, trained through an apprenticeship-style program.

“What really matters is that they are conscientious and responsible people,” he said. “That is really the most important thing. The rest can be taught.”

If the labour force is productive, then you can afford to pay them more. It also makes sense to develop your workers so they have the skills you need. This would seem particularly true for Deering. The local community college is unlikely to be offering classes in banjo technology. Building up these skills will also serve to tie the workers to the firm. Maybe there are more luthiers than I can imagine in greater San Diego, but the skills of an experienced banjo maker are probably worth more to Deering than any other firm in town.

Deering has also been innovative with its product.

Fifteen years ago, the company began working with Jens Kruger, considered one of the top virtuoso players in the world. Since the 1940s, banjos had been made from hard maple wood. It was Kruger’s idea — heretical at the time — that the kind of soft maple used in Europe for violins would be better, and it was.

Kruger also helped design a tone ring that has a patent pending that has also helped enhance the sound of Deering banjos.

This is helped some by the fact that Deering is generally at the higher end of the market. Their banjos start around $500 and can go up $30,000. To the extent that Deering’s overseas competitors are aimed at the lower end of the market (looking on-line, banjos can be had for a few hundred dollars), they should have an incentive to innovate to reduce cost as opposed to improve quality. Pushing the frontiers of banjo technology then plays to Deering’s strengths and justifies a higher price in the market.

A final point. Deering also aims to provide good service. This may not apply to everyone who buys a banjo, but for the professionals who use their products (and Deering’s web site is currently bragging about how many of them are up for Grammies), Deering takes care of them. Again, this is not something that an overseas firm can easily do. I also suspect that it is something an American brand that builds its product overseas could easily match. Sure, such a competitor can answer the phone, but if it is a request to get an instrument replaced quickly, they may be hard pressed to deliver.

This post originally appeared at The Operations Room

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