Tweeter etc

PRESENTED BY - GROUP 6

Ashish Karhana - MBA06003

Ankit Hooda - MBA06021
Asutosh Mishra - MBA06033
Jitendra Sonboir - MBA06072
Nishant Tirkey - MBA06094
 BACKGROUND - US
MARKET
• In 1995 consumer electronics was a US $ 30 Billion
• The annual growth rate was 5.6% compounded
• On average margin in retails were around 30%
• At retail level distribution were through various
channels
CHANNELS OF DISTRIBUTION FOR FOR CONSUMER
ELECTRONICS
• Specialty stores and boutiques - good to excellent customer service, high salesperson
knowledge, medium to the high-end product lines. Eg Tweeter
• Electronic/Appliance Superstores- Moderate to good customer service, high-volume selling
machines, diverse product line Eg. Circuit City, Best Buy, Lechmere
• Department Stores - Poor to moderate customer service, limited salesperson knowledge, less
selling pressure, limited product line, entry & mid-level products Eg. Sears and Macy’s
• Mass Merchants - Little to no customer service, little salesperson knowledge , very less
selling pressure and Limited product line, main focus is on value brands Eg. Walmart
• Warehouse Clubs - No Customer service, No selling pressure, Price, not service or ambiance,
is the reason people shop, limited products Eg. Costco and Sam’s Club
• Mail-Order Houses - No Customer service, No selling pressure, expensive shipping, Eg.
Crutchfield and Sound City
 THE NEW ENGLAND MARKET
• Account's for 5% of the total US consumer electronics market
• For decdes the most popular retailer of the region was Lechmere with a well-informed
Salesforce, good service, and fair pricing, and have 28 stores.
• Circuit City entered 1993 and grew rapidly with knowledgeable salesforce, good service
and wide product range and have 21 stores
• Cambridge Soundworks having less than 1% market share was a niche player and grew
rapidly in small time, with 23 stores
• In 1996, 8 retailers existed with a market share of more than 2%, and Lechmere was
leading with 35.6 %
 THE EARLY YEARS
• Tweeter came into existence in 1972 near Boston University
• As the high-end streo market was growing in US, Tweeter was the main
player in the region
• Customer perceived Tweeter as high-quality, high-end audio and video
retailer with excellent salesforce and service
• They also believed they were paying premium price for the product
• Now within few years, the strereo components market were tripled and it
gave rise to more retailers who entered the market
• Main competitors were Tech Hi-Fi and Lechmere
• Tweeter mainly focussed on students market and avoided confrontations with
competitions
• Advertising slogans "We don’t carry all the brands, only the ones that count"
& "Some hi-fi salesman can sell you anything, and often do."
 THE EARLY YEARS CONT.

• As there was increased demand for high-end audio and video

equipment in the mid-1980s, the introduction of VCR and CD
players, Tweeter strengthened its position in the high-end audio
and video equipment market. By 1986 it had 13 stores
• Tweeter’s share of the New England consumer electronics market
had grown to almost 2% overall, and close to 5% in the Boston
area.
SHAKE-OUT YEARS Factors contributed to decline in new England market:
• Market growth in mid-1980s led to new competitive entrants, especially at
the lower end of the retail market.
• Household penetration (color televisions, VCRs, home electronics) had
grown appreciably, thereby limiting future growth in those product
• Screeching halt in US economy in 1987 and 1988, New England among
hardest hit geographies.

Retailers like Tech Hi-Fi, Highland Superstores, and Fretters

filed bankruptcy in 1985, 1991 and 1995 respective years
Due to the Sale promotion store saw more customers in
weekends and very few in weekdays

CONSEQUENCES
• Now customers percieved Tweeter as high-end and expensive who
charged more than competitors
• There was damage to their image and loss in profitability
 COUNTERMEASURES

• They changed strategy and played on pricing, product quality and customer service as they
began to carry Sherwood audio components of lower prices to compete against Lechmere
and Fretters
• In 1988 they joined Progressive Retailers Organization, a buying consortium of small and
high-end retailers in US, thus obtained price from the manufacturers which were
comparable to those obtained from large competitors.
• Even after this consumers still thought Tweeter as expensive but acknowledged its high
service level.
 TWEETER CUSTOMER BEHAVIOR ANALYSIS
Focus group resulted in two sets of insights:

• Individuals shopping for consumer electronics in the New England area:

• On average, consumers actively thought about purchasing a new product one to two months
before actually making the purchase.
• On average, consumers visited two to three retailers prior to purchasing a desired product.
• Eight out of ten consumers checked newspaper advertisements for product availability and price
information when in the market for consumer electronic equipment.

2. Individuals who were familiar with or considered purchasing at Tweeter:

• 4 out of 5 viewed Tweeter as being more expensive. consumers reported that if price were not an
issue, they would prefer to purchase their desired product from Tweeter.
• of all tweeter visiting customer 60%, 45%, 20% also visited Lechmere, Fretter and Sears for
product search
• 1 out of 3 customer figured out the product to but at Tweeter at later bought them at Lechmere or
Fretter, believing they can get a better price.
 THE SEGMENTED CUSTOMERS

ENTRY LEVEL - INTERESTED IN LOWEST PRICE ITEM AND DIDN'T CARE ABOUT SERVICE

PRICE BITERS - FOCUSSED ON BEST DEAL AT BEST PRICES

THE CONVINIENCE CUSTOMERS- THESE FOCUS TO SHOP FROM FAMILIAR PLACES AND PRICE,
QUALITY WERE SECONDAY FOR THEM.

THE QUALITY/ SERVICE CUSTOMERS- FOR THEM PRICE WAS SECONDAY ISSUE BUT QUALITY
AND SERVICE WERE OF UTMOST IMPORTANCE AND BELIEVED IN BUY THE BEST AND CRY
ONCE
THREE PRONGED ATTACK STRATEGY 1993

ABANDONMENT OF SALE

• Tweeter abandoned Sale strategy to bring in more customers during weekdays as

Lechmere could survive but not possible for the tweeter
• The image of being expensive was also against tweeter
• So Tweeter wanted to focus on USP, "High quality and excellent service"
• So they moved onto Every Day Fair Pricing (EDFP)
 THREE PRONGED ATTACK STRATEGY 1993

CHANGE IN MARKETING MIX

• Shifted from print-ads to TV and radio ads, direct mails

• This shift was focused on tweeter's price competitiveness and APP policy
• Released a 'Buyer's Guide' four times a year and was available in all retail location
• Buyers Guide was mailed to the customers directly also
 THREE PRONGED ATTACK STRATEGY 1993
AUTOMATIC PRICE PROTECTION POLICY
• If a customer purchased a product at one store and later (generally within 30 days) found that the
product is available at a lower price, the customer can visit the store with the proof and get
reimbursed for the difference
• Tweeter offered a 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 of 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 within 5 days
 EFFECT OF APP
• Sales almost doubled from $43.7 million in 1993 to $82 million (projected) in 1996
• The media response was highly positive with articles in leading newspapers
• Asst. Attorney General of Consumer Protection praised Tweeter for this.

• 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
 CONCERNS
PURCHASE OF BRYN MAWR
• 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 its
competitors
• Bryn Mawr adopted APP policy but it failed to increase sales for them thus
raising questions on the effectiveness of APP
• The added burden of extracting profits from Bryn Mawr while competing in an
alien market
 CONCERNS
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 the U.S.
• Was known for its fearsome marketing campaigns offering rock bottom prices
• Campaigns included eminent sports 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 a tough time
-- Reconsideration of APP policy
 CONCLUSION AND RECOMMENDATIONS

BEFORE CHANGE IN MARKETING MIX, APP AND EDFP

AFTER CHANGE IN MARKETING MIX, APP AND EDFP

 CONCLUSION AND RECOMMENDATIONS
However, the company's management is still wrestling with the pricing strategy model so below are
some of the recommendations
• The company should strengthen its custom installation marketing strategies as it provides
products of high quality, some of which are not even in competitors' portfolios
• The company should also try to position its image and product brand through proper marketing
strategies such as differentiation, product mix, and promotion mix strategies rather than price like
providing accessories, support, extended warranties and all.
• the company should also try other promotion mix elements such as personal selling, corporate
image, and public relations
• The company should also restore its weekend discounting model as this would enable it to be
competitive with the larger discount retailers such as Circuit City, The Wiz, and Best Buy.
• They should also modify the APP policy and turn it into a 110% refund of the price difference in
form of ‘Store coupons, dicount next purchase, store membership cards’
THANK YOU