Case Analysis Tweeter etc. Company Overview Tweeter etc. was founded in 1972 by Sandy Bloomberg in Boston to sell high-end stereo components. The current portfolio of the company consists of brand stereos, television, car radios and car phones. Tweeter has recently witnessed a healthy growth in its financial performance.
Sale has almost doubled in the last three years reaching $82. 3 million in FY 1996. Its sales per store has increased by 50% and number of stores increased to 21 from 14 during the same period. The Making and Current ScenarioDuring its formative years, Tweeter gained the reputation of being the retailer of high quality, high-end audio components and video equipment. They had a knowledge able sales force providing high levels of customer service and their sales soared during this period. However in the late 1980’s, there was an overall decline in the New England electronics market and caused two things: price wars with the local competition and Tweeter joining the Progressive Retailers organization in 1988. In the early 1990’s, Tweeter’s sales were dropping.
They conducted focus groups to find out what the problem was. Their surveys indicated that the consumers perceived them to be providing excellent service, but at high price. The consumers were highly price sensitive at that time which led to a dip in their sales. So Tweeter’s management came up with a three-fold strategy to counter the problem. Firstly, they eliminated the use of “sale” and rather adopted an “Every Day Fair Pricing” strategy. Secondly it instituted “Automatic Price Protection” to combat its perception of high prices. Tweeter would monitor the weekly sales ads of all the major local newspapers and cross check that with sales within 30 days and if a customer paid more for a product than what its competitors would offer for a particular model, Tweeter would refund the difference by mailing the cheque of the difference amount to it to the customer.
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The sales almost doubled in the three years since the institution of the new strategy, from $43. 7 million in FY 1993 to a projected $ 82. 3 million in FY 1996. In the year 1996, Tweeter finalized the purchase of Bryn Mawr Stereo and Video.Bryn Mawr adopted Tweeter’s Automatic Price Protection in September last year and failed to see any appreciable increase in their sales. Sandy Bloomberg always believed that Automatic Price Protection had played a major role in Tweeter’s growth. But the Bryn Mawr case made him a little doubtful about the effectiveness of the strategy.
Also, by December 1995, Tweeter in total had written 29,526 checks accounting $783,863. Along with this consumer electronics giant Wiz is also entering its market which is expected to increase the price war further.
Problems Tweeter is faced by the following issues as they look into entering new market as well as expecting to face tough competition from the consumer electronics giant The Wiz:
- Concern 1: What strategies should be adopted by Tweeter for Bryn Mawr? Bryn Mawr Stereo and Video store had grown to approximately $35 million in annual sales over 13 stores. It uses a similar high-end, high-service strategy as tweeter. Bryn Mawr adopted Tweeter’s Automatic Price Protection policy last year but failed to see any improvement in its sales. Thus, tweeter is dilemma about the ineffectiveness of APP here and has to make decision about what to do ahead.
- Concern 2: The entry of consumer electronics giant The Wiz The Wiz is privately held company with over $900 million in sales and was the third largest consumer electronics retailer chain in the United States. It had the potential to reshape the competitive playing field with its aggressive marketing campaigns featuring rock bottom prices. It is recognized with intensive customer service. They also offer 110% price protection for 30 days on all items.
- Concern 3: Was Tweeter’s message of price competitiveness reaching potential customers and what was their perception? Tweeter deals in middle and high end range of consumer electronics. It sells name-brand stereos, television, car radios and car phones. The starting price for its products as communicated to the consumers by ads was well above the other retailers. Thus, consumers being price sensitive thought of Tweeter as the store selling high priced goods. Even though the middle and high end stuff are sold at around the same prices as in all stores. The lack of awareness along with the price advertising has made the Tweeter appear more costly and specialized for high end customers and thus driving consumers away. As can be justified Tweeter’s 70% sales was due to Quality/Service customers which look for high levels of product quality and customer service due to its image. As can be seen from the survey, the awareness level of people about APP was very low. Only 32% of the respondents could define it. Only 22. 1% of the respondents knew that Tweeter offered the APP service.
- Concern 4: Is Tweeter targeting the right customer sector and should it continue with APP? The price bitter and the quality/service customers together account for 90% of Tweeter customers.It lacks behind in Entry level and convenience customers. This can be attributed to the various misconceptions about the store in the market such as Tweeter stocks high end goods only. This has led to Tweeter running in losses during early 1990’s. Though, it has shown some improvement after that due to the inclusion of APP.
- Concern 5: Is Tweeter actually price competitive among its competitors Tweeter is price competitive in almost the entire range of items and models that it sells. When you compare quality and level of service and price paid Tweeter is actually cheaper than the competition.
However, the competitors run spot sales (not advertised) and advertised sales, which at the point of sale gives the impression that the competition is more competitively priced. More importantly though the competition namely Lechmere, Circuit City and the Wiz all carry lower range and lower priced items in each category i. e. Colour TV, Multiple CD Players, Camcorders, and Full size speakers, which allow the competition to offer customers cheaper goods than Tweeter, within each category. This creates a reference point for customers to compare against and makes Tweeter look more expensive to buy from.So factually Tweeter is competitively priced, however it suffers from an image problem where it is generally perceived as more expensive than the competition which likely dissuades some customers buying from Tweeter and leaves others feeling that they might have obtained their purchase cheaper elsewhere had they tried. Suggestions Tweeter is witnessing changes from all directions. It has some concerns which it needs to find solution of before it is sidelined by its competitors.
The various recommendations would be:
- They should focus on improving their marketing strategies.
- They need to make their presence felt in the market.With consumers not even able to recognise the company’s price offering or its policies (about 50% of the respondents). Tweeter cannot expect to bring a revolution in its sales just by its policies.
- They can diversify into other forms of marketing and revive their strategy such as push more in the direction of direct marketing campaign which had an 83% conversion rate.
- Going by the current brand image of Tweeter, they hold a strong position in the niche market and thus, they can leverage on that and can charge premium for added services and customization from its quality customer base and do away with the APP.
This would also help them in new markets like Philadelphia. As is evident in the case, the price competition is intense and if Tweeter gets involved in the same. It is under the threat of being given intense competition from big fishes like The Wiz without yielding much on the profit part. Tweeter should also think of expanding into new markets in the United States. As what it would be selling is its brand image and increasing awareness among the customers. Carrying on with the strategy, Tweeter should also do away with the products that their competitors are offering and rather offer less products which would help its exclusive image.
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