tweeter etc case study
Post on 02-Jun-2018
457 Views
Preview:
TRANSCRIPT
-
8/10/2019 Tweeter etc case study
1/17
-
8/10/2019 Tweeter etc case study
2/17
Sandy Bloomberg formed the company in 1972 and the company faired wellin the 1970sand 1980s
A specialty retail store of middle and high end audio and video consumerelectronics.
From a 13-store chain with $ 35 million annual sales in 1991, it expanded toa 21-store chain with $ 82 million in annual sales in 1996.
Operates in a highly price-focused competitive market of New England inUSA.
The company had adopted major promotional strategies, which includedAutomatic Price Protection (APP) policy, implemented from 1993. Tweeter isthe only company to ever have adopted APP
Competition
Lechmere, Circuit City, Wiz and Tweeter are the maincompetitors in electronics business. Lechmere is in direct competition forTweeter as its major customers are Tweeters target customers.
-
8/10/2019 Tweeter etc case study
3/17
To analyze the viability of the continuation of the Automatic Price Protection(APP) strategy currently employed by Tweeter Inc. in view of the changedenvironment, especially after its ineffectiveness in making a significantimpact on sales of its acquired subsidiary, Bryn Mawr.
What should it do to change the customer perception that it was an
expensive brand ?
-
8/10/2019 Tweeter etc case study
4/17
Strength
High end, High quality electronicgoodsKnowledgeable Sales ForceHigh levels of customer serviceMember of PRO to get best retailpricesEDFP strategyAutomatic Price ProtectionPremiere facilities like sound proofaudio room
Weakness
Perceived to be with selective high endgoodsLoyal market is only 10% of overallmarket shareLocal chain of stores with small storespaceLimited selection of Low End productsIncreasing payouts due to APPRPP covered for only 100% as against110% of competitors
Opportunity
Market was growing at CAGR of 5.6%People will come to tweeter if pricewere not an issue as per surveyDecline of competitor- Lechmere30% retail margins
Threat
Increase in price competitionEntry of big playersEffectiveness of APPPrice perception of customerCompeting against lower end productstores
-
8/10/2019 Tweeter etc case study
5/17
Retail Level Stores Customer
1. Speciality Stores(tweeter , bryn mawr,cambridge)- good to excellent customer service
- high salesperson knowledge- medium to high end products, smaller size
2. Electronic Superstores (Lechmere, Circuit City, WIZ)- moderate to good customer services- varied sales person knowledge- all major product lines , larger stores
3. Department Stores
- Poor customer service- limited sales person knowledge- limited entry & middle level products
4. Mass Merchants- Little to no customer service- very little sales person knowledge- geared towards value brands only
5. Ware house Clubs- No customer service- Product selection is limited- Good Values on good quality equipments
6. Mail Order Houses- No service , catalogue or ad based- Prices attractive but shipping can be expensive
1. Entry-level customers
- buying the cheapest item in givencategory
- relatively indifferent to product quality- indifferent to customer service.
2. The price biter:- Very Cognizant of price.- concerned with product quality and
customer service also- Focused on best deal.
3. Convenience customer- Shopping convenience most important- Price, product and service quality are
secondary
4. The Quality/Service and customer:- High levels of product quality concerns- customer service was of primary
concern- Price was secondary
-
8/10/2019 Tweeter etc case study
6/17
In the late 1980s, the bottom fell out of the electronic market and caused
price wars with local competition.
To aid the price-based competition, Tweeter joined the Progressive Retailersorganization in 1988, a buying consortium founded in 1986. As a result,Tweeter was able to obtain prices from manufacturers that were comparablewith those obtained by it is larger competitors
This organization kept the retailers market from dropping out from underthem. They did this by setting price standards up that nobody who sellscertain brands and models of products can sell them below a given price atwhich they all agreed to.
Tweeter would monitor the weekly sales ads of all the major local papers andcross reference that with sales within 30 days; and if a customer paid more
for a product than the sale price, Tweeter would refund the difference. Atfirst, this strategy was good, but as larger competition moved in, Tweeterbegan writing more and larger checks. By December, 1995, Tweeter in totalhad written 29,526 checks to the tune of $783,863.
This strategy nearly drove the company into bankruptcy. The company stillfaces unremitting problems
-
8/10/2019 Tweeter etc case study
7/17
In 1993 , Tweeters sales and profitability began to deteriorate . After asurvey on focus groups which majorly indicated that customers who were
aware of tweeter perceived it to be more expensive than others. Customers indicated that they would consider buying at Tweeter if price was
not an issue.
Three Pronged Attack :
Abandonment of Sale -1. Do away with the weekend sale to stop competing with lower end product
competitors.
2. Use Every Day Fair Pricing Strategy to set competitive prices
Automatic Price Protection :
1. Tweeter would itself track for lowest prices within 30 days of purchase amongmarket competitors.
2. Tweeter would mail the check of difference if there was lower price to customer.
Change in Marketing Mix :
1. Since moving away from sale strategy , it started focusing away from print media
to radio & TVs
2. Focus on Tweetersprice competitiveness and APP.
-
8/10/2019 Tweeter etc case study
8/17
0%
10%
20%
30%
40%
50%
60%
70%
80%
Total Market Tweeter Lechmere Circuit City
Customer Base (Exhibit 8 )
Entry Level
Price-Biter
Convenience
Quality / Service
33.0%
0.0%2.8%
0.0%
64.2%
36.0%
7.4%2.7%
0.0%
53.9%
35.6%
18.6%
3.6%0.6%
41.6%
Lechmere Circuit City Tweeter Cambridge Sound Works Others
Market Share ( Exhibit 5)
1992 1994 1996
-
8/10/2019 Tweeter etc case study
9/17
TV's 40" and
under
14%
Camcorders
4%
Video Others
17%
Speakers
14%
CD Players
7%
Audio Others
20%
Car Stereo
14%
Others
10%
Product Mix
3
0
8
3
13
21
4
10
57
23
01
0
Exclusive Better Loser Matched
Product Pricing Comparision of
Tweeter with Market (Exhibit 13)
27" Color Television
Multiple CD Player
Camcorders
- More than 56 % of the items are
exclusive.
- Out of the remaining items
Tweeter is better on only 6.5 % of
products
- Tweeter is costlier on 48 % of thecommon items in market
- On the remaining 45 % items ,
Tweeter is as good or bad as the
market.
Why would the Public Perception
change ??
Maximum Contribution in Video
Category is from color TVs under 40
In Audio Category , Major Contribution
is from Speakers .
-
8/10/2019 Tweeter etc case study
10/17
(661)
1,387
2,702
79.46
261.47
442.93
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
3,000
1993 1994 1995
Net Profit vs APP (Exhibit 7 & 12)
Net Profit
APP
The APP cost has increased substantially over the 3 years !
This will greatly affect the bottom line if we keep continuing at this rate.
If Tweeter was following Fair Pricing , why this increasing APP ??
-
8/10/2019 Tweeter etc case study
11/17
APP compensation maximum in Nov-Dec every year
Time of Year End Sale for competitors who are big players or stores playing
on cost margins.
APP is affected by what the competitors are doing to Tweeter
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
$ Value of Checks (Ex-11)
$ Value of Checks
-
8/10/2019 Tweeter etc case study
12/17
Tweeters
Price Image
+
+
--
-
-
--
APP
EDFP
(Everyday Fair Price)
High-End Products
Small, Upscale
Stores
Past PriceImage
Superior
Customer Service
No Sales
Limited Advertising
It is easy to change prices but it is difficult to change price perception!
-
8/10/2019 Tweeter etc case study
13/17
Eliminate the need for extensive, price-based search: Consumersindicated that if price were not an issue, they would prefer to buyat Tweeter.
Break the wait for a sale buying mentality: Under APP, consumershave less incentives to wait.
Convert potential or free-riding customers: APP eliminates theneed to travel to another location.
Smoothes demand over time: APP eliminates the cyclical buyingpatterns of sale-based retailing.
Creates positive word-of-mouth(since word-of-mouth has asignificant impact on buying behavior).
-
8/10/2019 Tweeter etc case study
14/17
As per customer survey , the price efficiency of Tweeter is not recognised/accepted .
Shift from print media to TV & Radio may not have been successful inreaching out customers , who rely mostly on newspaper Adv to assess prices.
Tweeter is not competing on value pricing but is just following Market Based
Pricing.
Also , By competing on price in a sensitive market , it is allowing competitionto do damage to its bottom line because of APP.
With the Failure of APP at big Brawn , it was becoming evident that APP alone
can not guarantee sales increase.
In case of Tweeter , it may be due to increase in no of stores and decline ofother competitors in the market.
-
8/10/2019 Tweeter etc case study
15/17
Tweeter should focus on its line of products and should not try to compete
with Circuit City and Lechmere in mass pricing/product segment.
The mass market being very price sensitive will keep driving the margins forTweeter down.
Tweeter should try to advertise its value deal to customer rather than only
APP. It may come up with some value combo to express the cost of serviceand installation at customer site. Buyers guide should have the comparison between the prices of the products in different stores
-
8/10/2019 Tweeter etc case study
16/17
As 80 % of the consumers had the misperception that Tweeter was moreexpensive than other stores
It should distribute buyers guide with comparison of competitors price.
It should include overlap products in its portfolio which can demonstrate the
stores price competitiveness.
It should focus on the Specialty/Service and The Price Biter customersegments with improved customer service and high quality, high end audiocomponents and video equipment.
It should continue with the modified APP policy as sales have increased afterintroduction of the marketing strategy.
-
8/10/2019 Tweeter etc case study
17/17
top related