Tweeter Etc. Case Analysis
Transcript of Tweeter Etc. Case Analysis
Tweeter etc.
Case AnalysisGroup P Section 2
Group Members
Sumit Kumar JhaSunny ShekharShubhabhSiddarthSaurabh RainaSaurav Narjinary
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Case Background
1972 to 1980s
1980s to 1993 1993 1996
Questions
Analysis
United States Market Consumer Electronics was a $30 Billion Industry in 1995 Compound Annual Growth Rate for the industry was 5.6% Retail Margins averaged around 30% At retail level, it was distributed through various channels 1991 1993 1995
23
22
3
27
20
4
30
57
0
Sales in Million $
43%
28%
11%
4%
14%
SS & ES MM & WC DS MOH Specialty Stores and Boutiques (SS) -- Good facilities & customer service, medium to high end product line, Ex: Tweeter Electronic Superstores (ES) -- Moderate service, high volume selling, diverse product line, Ex: Wiz, Lechmere Department Stores (DS) -- Poor service, moderate selling pressure, limited product line, entry & middle level Mass Merchants (MM) -- No customer service, little selling pressure, focus on value brands, Ex: Wal-Mart Warehouse Clubs (WC) -- No customer service, no selling pressure, price is the USP, limited products Mail Order Houses (MOH) -- No service, no selling pressure, shipping expensive, returns difficult, catalogs present
Source for Graphs: Exhibit 2 and 4
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
The new england Market
Lechmere
Circuit City
Walmart
Tweeter
Others
0 10 20 30 40 50 60 70
33
0
0
2.8
64.2
Market Share 1992
Lechmere
Circuit City
Walmart
Tweeter
Others
0 10 20 30 40 50 60
36
7.4
0
2.7
53.9
Market Share 1994
Lechmere
Circuit City
Walmart
Tweeter
Others
0 5 10 15 20 25 30 35 40 45
35.6
18.6
3.9
3.6
38.3
Market Share 1996
New England represented 5% of the total U.S. consumer electronics market
Lechmere was the most popular retailer of the region
-- Well informed Salesforce, good service, fair pricing -- 28 stores Circuit City, which entered in New England
market in 1993, grew very rapidly -- Knowledgeable Salesforce, good service, wide product range -- 21 stores Cambridge Soundworks had less than 1%
market share -- niche player which grew rapidly in short span of time -- 23 stores In 1996, 8 retailers existed with market share
greater than 2% led by Lechmere (35.6%)
Source for Graphs: Exhibit 5
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Case Background
1972 to
1980s
1980s to 1993
1993 1996
Questions
Analysis
The Formative years
Came into existence in 1972, located near Boston University
High- end stereo market was developing in U.S.
Tweeter served this audience in their region
Demand for high end audio and video equipment grew in mid 1980s
VCR and CD player were introduced Tweeter strengthened its positioning in
high end audio and video equipment market
By 1986, it grew to 13 stores
Within few years, the stereo components market tripled & led to more retailers entering the market
Major players were Tech Hi-Fi and Lechmere
Tweeter avoided direct confrontation with them and focused on it’s student market with sophisticated tastes
Perceived as a high quality, high end audio and video retailer, with excellent Salesforce and offering best customer service
Customers perceived that they were paying premium price for the products
Value, Quality & Service
ORIGINATION
CUSTOMER PERCEPTION POSITIONIN
G
SEGMENTATION
Bloomberg
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Case Background
1972 to 1980s
1980s to
19931993 1996
Questions
Analysis
The shake- out years
1. Market growth led to fierce competition especially in lower end of retail market (against Tweeter )
2. Market growth halted because everyone already owned VCRs and home electronics
3. Halt in the U.S. economy in 1987-88 with New England market taking the hardest hit
1. Not all retailers were able to survive and thus filed for bankruptcy
-- Tech Hi-Fi (1985), Highland Superstores (1991) & Fretter (1995) 2. Increased Price promotion by retailers and emergence of ‘Sale’ every weekend -- Customers delayed their purchase & waited for weekend sale
Customers perceived Tweeter as an expensive and high- end retailer charging much more than the competitors
Their print advertisement of quality products was damaging their own image
Result was the severe loss in profitability
Happenin
gs
Consequence
s
Customer
Perceptio
n
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Case Background
1972 to 1980s
1980s to
19931993 1996
Questions
Analysis
Counter measures by tweeter
Quality &
Service
But Sale?
&Why Counter
Measures?
Change in strategy and played on pricing as well as product quality and customer service -- Began to carry Sherwood audio components which were of lower price to compete against Lechmere and Fretter In 1988, they joined the Progressive Retailers Organization (PRO), a buying consortium of small
high- end retailers in U.S. -- Obtained prices from manufacturers which were comparable to those obtained from its larger competitors
No, the perception still persisted among the customers and still viewed it as expensive when compared to Lechmere
Acknowledged its high level of services but were not willing to take those at the expense of higher priceDid the Customer
Perception
Change?
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Analysis of Customer behavior Tweeter conducted no. of focus groups and came up with two sets of insights:
1. Individuals shopping for consumer electronics displayed the following behavior and traits -- Thought of purchasing the product 1 or 2 months before actually buying it -- 8 out of 10 customers checked newspaper ads for product availability and price information -- Consumers visited 2 to 3 retailers before actually buying it -- their purchase was affected from Newspaper ads, past experience and recommendations from friends & family
2. Individuals familiar or who purchased from Tweeter displayed the following behavior and traits -- 4 out of 5 customers viewed Tweeter as expensive, however if price was not an issue, then they would have favored Tweeter -- Customers who visited Tweeter also visited Lechmere, Fretter and Sears for the product search -- 1 in 3 customer came to Tweeter to check out the product and bought it from Lechmere or Fretter at a better price
Newsp
aper
Exper ience
Recom
mendati
on
70
50
40
Factors
Lechmere Fretter Sears
60
45
20
Retailers
Source for Graphs: Case Page 5 & 6
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Types of electronic consumers
Interested in purchasing the ‘Lowest Priced’ item in each product category
Product quality and customer service did not matter to them
Cognizant about the price but product quality and customer service also mattered to them
Focused on ‘Absolutely Best Deal’ in the product category
Price, product quality and customer service were secondary to ‘Shopping Convenience’ to them
Preferred to shop from ‘Familiar’ stores like Lechmere and Sears
Could purchase products in almost all the product categories on the same shopping trip
High level of product quality and customer service were of utmost importance
Price was of secondary concern to them Also referred to as ‘BBCOs’ i.e. Buy the Best and Cry Once
Entry Level Customers
The Price Biters
The Convenience Customers
TheQuality/Service Customers
H1 Service
H1 Convenience
L1 PriceH1 Service
L1 Price
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
‘ Three- pronged attack’ strategy
Eliminated the concept of ‘Sale’ to build the traffic in stores
Big players like Lechmere could sustain this Sale but not Tweeter
Competitors were offering sales on low range products which Tweeter didn’t even stock
Their perceived image of ‘Being Expensive’ was also working against them
Wanted to again focus on its unique selling proposition of ‘High quality and excellent service’
Moved to ‘Everyday Fair Pricing’ (EDFP) Strategy
Had a shift in the Marketing mix away from ‘Print Ads’ towards Television & Radio ads, direct mail and product catalogs
Majority of marketing budget (8% of gross sales) was spent on Newspaper ads for ‘Sale’ announcement
Shift in marketing mix focused on Tweeter’s price competitiveness and APP policy
Released a ‘Buyer’s Guide’ which was released 4 times a year and was available at all it’s retail locations
Buyer’s Guide was also mailed to the customers directly
Change in theMarketing Mix
Abandonment of The ‘Sale’
1993
Print TV RadioDirect Others
1996
Source for Graphs: Exhibit 10
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Automatic price protection policy If a customer purchased a product at one store and later (normally within 30 days) found that
product is available at lower price, the customer can visit the store with the proof and get reimbursed for the difference
Competitors like Lechmere, Circuit City and Fretter all offered 110% of the difference amount for a period of 30 days
Tweeter offered 100% refund for the period of 30 days but then went a step further
Under APP, Tweeter decided to itself track the newspapers and send out the rebates
Tweeter tracked 8 major newspapers of the region for this purpose
APP was applicable for products priced at $50 or more and applied to a price difference of $2 or more
APP was taken care by a special department at their Headquarters
Information was stored in the Tweeter’s database and was cross checked, if the price was less then cheque was automatically generated and mailed with 5 days
Definitio
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Competito
rs
Tweete
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Impact of A.P.P. under scanner Sales almost doubled from $43.7 million in 1993 to $82 million (projected) in
1996 Media response was extremely positive with articles in leading newspapers Asst. Attorney General of Consumer Protection praised Tweeter for this
Some observers argued that most of the retailers sell products which are not available at other stores, thus little chance of a product getting eligible for the refund
Some thought that it was more of a perception creating tactic than actual refund policy as Tweeter sells products which were not available with its competitors
By the end of year 1995, Tweeter mailed 29,526 cheque amounting to over $780,000
Created doubts because if Tweeter’s price were competitive, then why was this number so high!
Was Tweeter’s message of Price Competitiveness reaching the potential customers?
Some surveys still indicated that the image of being ‘Expensive’ still persisted among the customers 1993 1994 1995
050000
100000150000200000250000300000350000400000450000500000
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2000
4000
6000
8000
10000
12000
14000
16000
Refund in $ No. of ChequeSource for Graphs: Exhibit 12
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Other causes of concern
Finalized the purchase of Bryn Mawr Stereo & Video, headquartered outside of Philadelphia
Similar high end, high service firm but the battlefield was entirely different
Customers perceived Bryn Mawr as expensive in comparison to the large electronic superstores like Circuit City, Best Buy & the Wiz, who were it’s competitors
Bryn Mawr adopted APP policy but it failed to increase sales for them thus raising questions on effectiveness of APP
Added burden of extracting profits from Bryn Mawr while competing in alien market
Purchase of Bryn Mawr
Entry of ‘Nobody Beats the Wiz’
In 1996, Wiz entered the New England market by opening a 50,000 sq. feet store and major expansion plans
3rd largest consumer electronics retailer chain in U.S.
Was known for its fearsome marketing campaigns offering rock bottom prices
Campaigns included eminent sport stars
Offered 110% price protection within 30 days policy
What Tweeter Said: -- Wiz may have to withdraw soon What It Actually meant: -- Wiz may give them tough time -- Reconsideration of APP policy
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
4p and 5c analysis
Product• Offered quality products• High end audio components
and video equipment • Best Customer service
Price • High Price perception among
customers• Comparable to competitors in
actual scenario• Price Sensitive offering
Place• New England Market• Post acquisition of Bryn Mawr
– Philadelphia
Promotion
• Automatic Price Protection• Every Day Fair Pricing• Print, Television, Radio,
Direct Mail, Music Series and Pre-openings
• Audio and Video equipment• Present in the market since a
long time - 21 stores in 1996• EDFP and APP
Company
• Entry level Customers• Price Biter• Quality/Service Customers
Customer Needs
• Lechmere• Circuit City• New Wiz
Competitors
• Bryn MawrCollabor
ators• Bad Economic conditions in
1987-1988• Seasonal Factor• High Bargaining Power of
Consumers
Context
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Positioning of tweeter w.r.t. App & edfp
Positioned as a high- end retailer in audio and video customer electronics market In 1980s, because of price wars and stiff competition, it had to widen it’s positioning as a
retailer catering to low- end market also, but the move did not pay off Were still perceived as high- end expensive retailer among the customers
Brought about a change in the marketing strategy in 1993 Restored to its original USP of product quality and customer service Strengthened its positioning in medium to high- end audio and video market conveying its
price competitiveness to the customers Introduced strategies like APP and EDFP and strongly advertised them to gain from these
Before change in Marketing Strategy
After change in Marketing Strategy
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Customer behavior in Boston area
Is tweeter trying to change this behavior ?
Detailed analysis of customer behavior is shown in Slide no. 7 Customers focused more on price and waited for weekend sale in every product line
Quality/ Service
Customer V/S
Price biter
Yes, both types of customers behaved differently in terms of pricing For price biters, price was primary concern but for quality/ service
customers, it was still secondary Showed similarity when it came to product quality and customer service
Yes, Tweeter is trying to change this customer behavior through APP and EDFP policies APP policy showcased their ‘Price Competitiveness’ keeping its USP in the main frame It was specially targeted for quality/ service customers and price biters Price biters wanted high service which Tweeter was already providing, by APP they showed that their
products were lowest priced and will be refunded if this was not true, thus using it as a ‘customer acquisition’ strategy
Quality/ service customers were given additional benefit of lowest price and auto refunds, so were given even better service thus using it as a ‘customer retention’ strategy
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
How they make money ?
Avoided direct confrontation with big players in the initial years and focused on its student market
Price cut on selected items during weekends in order to boost sales in times of fierce competition
Introduction of new lower end products like Sherwood audio components
Joined PRO, thus getting the prices equivalent to its big competitors for various products, so cost was reduced and chances of higher profitability increased
Incorporating APP and EDFP policies and thus bringing about change in the marketing promotion mix to focus more on its USP of quality and service
Product (Service) -- Offered wide variety of products including PC, home appliances, audio tapes, compact disc, audio and video components -- Knowledgeable staff and offered good customer service
Promotion -- Media- blitz advertisements for promotion was extensively used to create market for themselves in the market -- Promotional strategies focused on the consumer
Price -- Fierce price competitiveness thus providing rock bottom prices to customers
TWEETER
CIRCUIT CITY
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Case Background
1972 to 1980s
1980s to 1993
1993 1996
Questions
Analysis
Are app & EDFP effective strategies for tweeter?
Yes, both have turned out to be effective strategies for Tweeter in past couple of years
But these alone were not effective, instead ‘Three- Pronged Attack’ strategy was effective for them
APP and EDFP may have not been so effective without the change in marketing mix strategy and its aggressive campaigning
Alternate strategies for tweeter Three- Pronged attack strategy may no longer work for Tweeter in the current structure Reason for this is the entrance of ‘Nobody Beats the Wiz’ in the New England market Wiz is known for it’s rock bottom pricing across different product categories which will
negate APP policy of Tweeter and Tweeter may suffer with heavy losses We suggest that they should modify APP policy and turn it into 110% refund of price
difference in form of ‘Store coupons’ Will increase the frequency of visits by the customers and more chances that customers will
buy products of greater price