Tweeter etc.

Tweeter etc.Group 10 Sec A

Tweeter etc.Marketing II Case Analysis

Group 10/Sec AAnjali BhushanDhruval MehtaRahul BakshiKarthikeyan RSaurabh TondonVikash Thakur

Problem Identification: a) Tweeter was unable to change public perception despite Automatic Price Protection Policy. They continued to view it as more expensive.b) Brymn Mawr which was acquired by Tweeter failed to see any significant improvement in sales after APP which created a doubt in minds of Tweeters management about the success of APP Policy in Tweeter. c) In the summer of 1996, Wiz opened a new 50000 square feet retail outlet in Massachusetts. Bloomberg, CEO of Tweeter, wondered how effective the APP policy after the intense competition from players likes Wiz. d) For Majority of the Tweeters Consumer (Entry Level and Price-Bitter) price was an important factor while purchasing.e) Target audience of Tweeter was constituted of a very small portion of overall population.

Situational AnalysisMacro Environment: During the mid 1980s demand for high-end stereo and video devices was high. This growth in addition to strong regional and national economies and by the introduction of new technologies like VCR and CD Players improved the industry position. These conditions helped Tweeters positioning at the high-end of the audio and video market. Micro Environment: The main competition for Tweeter was coming from Lechmere, Circuit City and the Wiz. They were pioneered in low-cost products in each category. Tweeter was unable to change the perception of the consumer despite several steps like the introduction of APP, changing the period from 30 days to 60 days. Tweeter was competitively priced. They were providing products at low rate with good customer services and high quality products.Three factors contributed to overall decline in the New England electronics market in late 1980s and early 1990s. 1. New competitive entrants like Fretter Superstores and Highland Superstores. 2. Household penetration for colour televisions, VCRs and many other home electronics. 3. Impact of US Economy during the 1987 and 1988 in New England which was hardest hit.

Alternate Strategy -

1.Aggressively Market APP.The customer survey data shows that only about 30% of the potential customers know what APP actually means. Also of those who knew about the APP only 22% knew that Twitter offered APP. Thus it can be seen that there was lowawarenessamong potential customers.

In a fiercely competitive market like consumer electronics industry with new rivals like 'The Wiz' entering it is very important to let the customers know about the stores competitive offerings. The entry of 'The Wiz', know for its monstrous marketing campaigns touting rock bottom prices, especially threatens Tweeter's market position as most customers buyingdecisiondepends on Price and the price is often perception driven.

2. Carry Entry-level products. As the customersdecisionwas mainly based on Price of the product and competitors were advertising with low cost products in print media it was driving many customers away. By increasing the range of products offered Tweeter would be able to carter to price sensitive Entry-level customers and also an opportunity to change its perception among potential customers.

3. Campaign to change Brand Image.The perception of Tweeter among customers was that of a retailer of high quality, high-endaudiocomponents and videoequipment, with knowledgeable salespeople who offered high levels of customer service. However when it came to price customers thought it to be expensive than the competitorsin spiteof their competitive pricing and APP.

To change this the company should run campaigns in print media, as competitors were giving advertisements about low cost products which was leading customer perception of low cost offerings, along with increasing focus on Radio, direct mail and in-store promotions.

Alternate Strategy -

As can be observed with the value of checks being paid back to customers that there is an increase in payment of checks during the year end in the Wrap it Up Early sale or the Pre-Holiday sale. So to overcome that, Tweeter needs to work on their strategy of providing the APP promotion round the year. They can create and advertising policy in which the APP is not applied during the year end sales. By revoking the APP during year-end sales, they will be able to cut the expenditure because of re-payment of checks by 57.8 %.Loss during Nov-Dec each year = 453624Overall loss by payment of checks = 783863% loss during nov-dec = (453624/78363)*100= 57.8%

Alternative strategy-219921993199419951996

Sales4114043714551647030582400

Operating Profit37-661138727023600

Operating Margin0.089937-1.51212.5143213.8432544.368932

CAGR94.8089433.23464

The operating margin for FY 1996 is 4.3% while CAGR of Operating Profit growth is 33.23%Cost of APP is =780000/ (12*29) =320000 per year i.e 0.39 % of SalesSo without APP the Operating Margin is =4.368+0.39=4.758%Also the recent entry of Nobody Beats the Wiz which is known for its monstrous marketing campaigns that will put further downward pressure on margins.Change is strategySince Tweeter is mostly into retailing high value products for which there is huge probability that the price will fall by $2 in the 30 days after the purchase and so it often triggers APP cheques so its better to change it to 2 % i.e if the price decreases by more than 2 % in the next 30 days then only APP cheque is triggered. This will help to reduce the cost of the scheme and also would not dilute the effect of marketing campaign.