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TWEETER IS A SPECIALTY CONSUMER ELECTRONICS RETAILER PROVIDING MID 
AND HIGH END ELECTRONIC EQUIPMENT 
I 
n 
t 
r 
o 
d 
u 
c 
t 
i 
o 
n 
2 
Founded : Early 1972 
Founder : Sandy Bloomberg 
Roots : New England 
Company Acquired : Bryn Mawr Stereo 
Types of Stores : 
1. Specialty stores 
2. Mass Merchants 
3. Department Stores 
4. Mail Order Houses 
Stores : 21 stores(1996) 
Annual Sales : $82 million(1996) 
Company 
Customers 
Competitors 
Collaborators 
Context 
• Audio and Video equipment 
• Present in the market since a 
long time - 21 stores in 1996 
• Entry level Customers 
• Price Biter 
• Quality/Service 
• Lechmere 
• Circuit City 
• New Wiz 
• Bryn Mar 
• Bad Economic conditions in ‘87-’88 
• Seasonal Factor 
• High Bargaining Power of Consumer
TWEETER’S GROWTH RATE OVER THE YEARS HAD BEEN BETTER THAN THE 
INDUSTRY AVERAGE 
G 
r 
o 
w 
t 
h 
C 
o 
m 
p 
a 
r 
i 
s 
o 
3 
n 
50 
40 
30 
20 
10 
0 
-10 
-20 
PERCENTAGE GROWTH RATE 
Company growth rate Industry Growth Rate 
Period: 
1992-1996
1. ABANDONMENT OF THE “SALE” CONCEPT 
3 
p 
r 
o 
n 
g 
e 
d 
s 
t 
r 
a 
t 
e 
g 
y 
4 
• Two negative impacts that the sales were having were: 
• Too many makes and models of product, making it impossible to compare prices across retailers 
• Weekend “Sale” was diluting the USP of the company – high quality products and great customer service 
2. AUTOMATIC PRICE PROTECTION (APP) 
• Retailing tactic intended to assure consumers that they were receiving the best prices available 
• Consumers were promised to refund 100% of price difference for a period of 60 days 
• Tweeter itself tracked local newspapers and sent out rebates 
• Applicable to items over $50 and a price difference of more than $2 
3. CHANGE IN THE MARKETING MIX 
• Aim was to restore price capability by shifting their marketing mix away from print advertising (to promote 
“Sale”) and toward television and radio advertising (to promote Tweeter’s Price competitiveness and APP 
Policy)
TWEETER WAS INITIALLY POSITIONED UNDER THE PREMIUM STRATEGY ALONG 
WITH CAMBRIDGE AND SOUNDWORKS 
P 
o 
s 
i 
t 
i 
o 
n 
i 
n 
g 
5 
High Medium Low 
High 
Medium 
Low 
Tweeter 
Cambridge 
Soundworks 
- 
- 
- 
Lechmere 
Circuit City 
The Wiz 
- 
- 
Fretter 
Highland 
Tech High-Fi 
Price 
Quality 
Actual: HQ-HP 
Perception: HQ-HP 
Actual: MQ-MP 
Perception: MQ-HP 
Actual: MQ-LP(MP) 
Perception: HQ-MP 
Till 
Mid 
‘80s 
‘80s to 
1983 
1983 
to 
1996
High Involvement 
• Thought for 2 months on average 
• Visited 2-3 retailers prior to purchase 
• Actively checked advertisements 
Consumers familiar with Tweeter: 
• High-Quality, High Price Perception. 80% had 
preference for Tweeter if price were not an 
issue 
• Visited Lechmere (60%) and Fretter (45%) 
Entry Level 
Sought 
Cheapest 
Item 
Classification 
of Consumers 
on their 
Behavior 
Price Biter 
Absolute 
Best Deal 
Convenience 
Shopping 
Convenience 
Quality 
Service 
Quality and 
Service, 
BBCO policy 
CONSUMER BEHAVIOUR BEFORE CHANGE 
6
7 
QUALITY/SERVICE 
• High Level Product 
Quality 
• High Level 
Customer Service 
• Price Concern: 
Moderate to Low 
• Policy: BBCO 
• Constituted 10% of 
New England 
Market 
• Preferred Store: 
Tweeter 
PRICE BITERS 
• Moderate Level 
Product Quality 
• Moderate Level 
Customer Service 
• Price Concern: 
Moderate to High 
• Policy: Absolute 
Best Deal 
• Constituted 15% of 
New England 
Market 
• Preferred Store: 
Circuit City 
Preferred Stores 
Customer 
Segment 
Total Market Tweeter Lechmere Circuit City 
Entry Level 50% 5% 40% 35% 
Price-Biter 15% 20% 10% 35% 
Convenience 25% 5% 40% 15% 
Quality/ 
Service 
10% 70% 10% 15% 
QUALITY/SERVICE VS. PRICE
THE USE OF EDFP AND APP BY TWEETER TO CHANGE CONSUMER BEHAVIOR 
P 
r 
i 
c 
i 
n 
g 
S 
t 
r 
a 
t 
e 
g 
i 
e 
s 
8 
• In fact, it is not just intended to change the behavior but also the consumer perception 
• Tweeter had lost Price Credibility 
• Tried to Change consumer behavior and perception towards it by the “three pronged attack” 
Role of EDFP: 
• Aimed to Promote Consumer Spending 
• Restore the “Perceived Value” USP 
• EDFP pointed to a more stable mindset resulting in favorable consumer perception (similar to EDLP vs. High Low Pricing) 
APP: Meant to communicate Price Competitiveness 
Eliminate the need for extensive, price-based search: Consumers indicated that if price were not an issue, they 
would prefer to buy at Tweeter 
Break the “wait for a sale” buying mentality: Under APP, consumers have less incentives to wait 
Convert “potential” or “free-riding” customers: APP eliminates the need to travel to another location 
Smoothens demand over time: APP eliminates the cyclical buying patterns of sale-based retailing 
Creates positive word-of-mouth (since word-of-mouth has a significant impact on buying behavior)
TWEETER AND CIRCUIT CITY FOLLOW DIFFERENT STRATEGIES TO ATTRACT 
CUSTOMERS 
P 
r 
i 
c 
i 
n 
g 
S 
t 
r 
a 
t 
e 
g 
i 
e 
s 
9 
• Focus groups 
 Entry level 
 Price Biter 
 Convenience 
 Quality/Service 
• Advertising Slogans 
• Skilled salespeople 
• Weekend sales to Everyday fair pricing strategy 
Customer Segment 
Total Sales in 
1996 
Total 
Market Tweeter 
Circuit 
City Tweeter 
Circuit 
City 
Entry Level 31914 0.5 0.05 0.35 797.85 5584.95 
Price Bitter 31914 0.15 0.2 0.35 957.42 1675.485 
Convenience 31914 0.25 0.05 0.15 398.925 1196.775 
Quality/Service 31914 0.1 0.7 0.15 2233.98 478.71 
V/S 
• Good consumer service 
• Skilled sales-force 
• Huge variety of products (Personal 
computers, home appliances, audio tapes 
and compact discs) 
• Media blitz advertising
APP DIDN’T WORK BUT EDFP DID, WHY? 
10 
APP has NOT been effective because: 
Reasons: 
• Failure of the same w.r.t. Bryn Mawr 
• Unaltered High Price Perception 
• Mere 32% people cognizant of APP 
• Only 22% people aware that Tweeter 
offers it 
• Among those aware of Tweeter’s APP, 59% 
still perceived it High Priced or didn’t 
know the implications 
• $783,000 given out in Checks 
EDFP turned out to be effective because: 
• Pointed to a more stable mind-set 
• Resulted in more accurate consumer perception of price as opposed to High-Low pricing 
• Focus on USP: High quality products and great customer service 
EDFP depicting Stability 
P 
r 
i 
c 
i 
n 
g 
S 
t 
r 
a 
t 
e 
g 
i 
e 
s
ALTERNATE PRICING STRATEGY 
11 
Pricing Objective 
• Current: Maximum Market Share 
• Suggested: Product-Quality Leadership 
Demand Determination 
• Survey suggests 70% of people are Quality-Service Consumers 
• Less price sensitive  Inelastic Demand Curve 
Cost Estimation 
• Advertising Costs: Paid Media: TV, Radio, Print Media 
• Should focus on Earned and Owned Media too 
Analysis of Competitors Costs, Prices and Offers 
• Lechmere, Circuit City, The Wiz focus on Market Share 
• Hence their prices are very low 
Pricing Method 
• Current: Going Rate Pricing 
• Suggested: Perceived Value Pricing 
Selecting the Final Price 
• Brands with High Quality and High Advertising command the highest premium 
• Tweeter should follow the same path esp. with customers attaching value to its customer support too
12 
Watch, but don’t take on the 
new rival 
N 
Don’t launch a price war. Increase the differentiation of 
your products by using a combination of tactics 
Are sufficient 
number of 
consumers 
willing to pay 
more for the 
benefits? 
Learn to live with a smaller company. 
If possible, merge with take over 
N N 
rivals 
If Low-Cost 
business is set-up, 
will it 
generate 
synergies with 
existing 
business? 
Switch to selling solutions or 
transform your company to a 
low-cost player 
Attack your low-cost rivals by setting up a low cost 
business 
Intensify differentiation by offering more benefits. Over 
time restructure the company to reduce the price of 
benefits offered 
Y 
Y Y 
FRAMEWORK FOR 
TAKING ON LOW-COST 
RIVALS 
Will competitors 
take away market 
share?
FACTORS FOR APP EFFECTIVENESS 
 Tweeter’s customers pay lower prices for products that overlap with its competitors. 
 Tweeter’s small stores and higher levels of customer service translate to a higher costs of operations. 
 The key to success for Tweeter is the management of their product overlap: 
 Sufficient product overlap to make APP a credible promotional strategy in the eyes of the 
consumers. 
 Sufficient product uniqueness to generate the overall customer margins necessary to maintain 
the business. 
13
PRICE COMPARISON WITH COMPETITORS 
C 
o 
m 
p 
e 
t 
i 
t 
i 
o 
n 
14 
554 
229 
Lechmere Circuit City The Wiz Tweeter 
713 
261 
507 
240 
740 
244 
563 
229 
737 
355 
648 
389 
845 
642 
2 7 ” C O L O R T V MULTIPLE CD PLAYERS CAMCORDERS STEREO SPEAKERS 
MEAN PRICES ($) 
PRODUCT LINE 
 Tweeter’s Mean Product Prices are higher by 15-27% for 27” Color TVs 
 Tweeter’s Mean Product Prices are higher by 65% for CD Players 
 Tweeter’s Mean Product Prices are higher by 125% for Stereo Speakers
ANALYZING PRODUCT PORTFOLIO & PRICE COMPARISON 
15 
Color TVs 
Lechmere 
Competitor 
Circuit City The Wiz 
Competitor's Mean Price $675 $552 $666 
Tweeter's Mean Price $668 $566 $676 
Number of Overlapping Models 10 5 9 
CD player 
Competitor 
Lechmere Circuit City The Wiz 
Competitor's Mean Price $193 $255 $215 
Tweeter's Mean Price $180 $257 $200 
Number of Overlapping Models 3 4 4 
C 
o 
m 
p 
e 
t 
i 
t 
i 
o 
n
ANALYZING PRODUCT PORTFOLIO & PRICE COMPARISON (CONTD..) 
16 
Camcorders 
Stereo speakers 
Competitor 
Lechmere Circuit City The Wiz 
Competitor's Mean Price $893 $875 $805 
Tweeter's Mean Price $895 $877 $806 
Number of Overlapping Models 11 11 8 
Competitor 
Lechmere Circuit City The Wiz 
Competitor's Mean Price N/A N/A $198 
Tweeter's Mean Price N/A N/A $200 
Number of Overlapping Models 0 0 1 
C 
o 
m 
p 
e 
t 
i 
t 
i 
o 
n
THANKYOU

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Tweeter Electronics: Marketing Case Analysis

  • 1.
  • 2. TWEETER IS A SPECIALTY CONSUMER ELECTRONICS RETAILER PROVIDING MID AND HIGH END ELECTRONIC EQUIPMENT I n t r o d u c t i o n 2 Founded : Early 1972 Founder : Sandy Bloomberg Roots : New England Company Acquired : Bryn Mawr Stereo Types of Stores : 1. Specialty stores 2. Mass Merchants 3. Department Stores 4. Mail Order Houses Stores : 21 stores(1996) Annual Sales : $82 million(1996) Company Customers Competitors Collaborators Context • Audio and Video equipment • Present in the market since a long time - 21 stores in 1996 • Entry level Customers • Price Biter • Quality/Service • Lechmere • Circuit City • New Wiz • Bryn Mar • Bad Economic conditions in ‘87-’88 • Seasonal Factor • High Bargaining Power of Consumer
  • 3. TWEETER’S GROWTH RATE OVER THE YEARS HAD BEEN BETTER THAN THE INDUSTRY AVERAGE G r o w t h C o m p a r i s o 3 n 50 40 30 20 10 0 -10 -20 PERCENTAGE GROWTH RATE Company growth rate Industry Growth Rate Period: 1992-1996
  • 4. 1. ABANDONMENT OF THE “SALE” CONCEPT 3 p r o n g e d s t r a t e g y 4 • Two negative impacts that the sales were having were: • Too many makes and models of product, making it impossible to compare prices across retailers • Weekend “Sale” was diluting the USP of the company – high quality products and great customer service 2. AUTOMATIC PRICE PROTECTION (APP) • Retailing tactic intended to assure consumers that they were receiving the best prices available • Consumers were promised to refund 100% of price difference for a period of 60 days • Tweeter itself tracked local newspapers and sent out rebates • Applicable to items over $50 and a price difference of more than $2 3. CHANGE IN THE MARKETING MIX • Aim was to restore price capability by shifting their marketing mix away from print advertising (to promote “Sale”) and toward television and radio advertising (to promote Tweeter’s Price competitiveness and APP Policy)
  • 5. TWEETER WAS INITIALLY POSITIONED UNDER THE PREMIUM STRATEGY ALONG WITH CAMBRIDGE AND SOUNDWORKS P o s i t i o n i n g 5 High Medium Low High Medium Low Tweeter Cambridge Soundworks - - - Lechmere Circuit City The Wiz - - Fretter Highland Tech High-Fi Price Quality Actual: HQ-HP Perception: HQ-HP Actual: MQ-MP Perception: MQ-HP Actual: MQ-LP(MP) Perception: HQ-MP Till Mid ‘80s ‘80s to 1983 1983 to 1996
  • 6. High Involvement • Thought for 2 months on average • Visited 2-3 retailers prior to purchase • Actively checked advertisements Consumers familiar with Tweeter: • High-Quality, High Price Perception. 80% had preference for Tweeter if price were not an issue • Visited Lechmere (60%) and Fretter (45%) Entry Level Sought Cheapest Item Classification of Consumers on their Behavior Price Biter Absolute Best Deal Convenience Shopping Convenience Quality Service Quality and Service, BBCO policy CONSUMER BEHAVIOUR BEFORE CHANGE 6
  • 7. 7 QUALITY/SERVICE • High Level Product Quality • High Level Customer Service • Price Concern: Moderate to Low • Policy: BBCO • Constituted 10% of New England Market • Preferred Store: Tweeter PRICE BITERS • Moderate Level Product Quality • Moderate Level Customer Service • Price Concern: Moderate to High • Policy: Absolute Best Deal • Constituted 15% of New England Market • Preferred Store: Circuit City Preferred Stores Customer Segment Total Market Tweeter Lechmere Circuit City Entry Level 50% 5% 40% 35% Price-Biter 15% 20% 10% 35% Convenience 25% 5% 40% 15% Quality/ Service 10% 70% 10% 15% QUALITY/SERVICE VS. PRICE
  • 8. THE USE OF EDFP AND APP BY TWEETER TO CHANGE CONSUMER BEHAVIOR P r i c i n g S t r a t e g i e s 8 • In fact, it is not just intended to change the behavior but also the consumer perception • Tweeter had lost Price Credibility • Tried to Change consumer behavior and perception towards it by the “three pronged attack” Role of EDFP: • Aimed to Promote Consumer Spending • Restore the “Perceived Value” USP • EDFP pointed to a more stable mindset resulting in favorable consumer perception (similar to EDLP vs. High Low Pricing) APP: Meant to communicate Price Competitiveness Eliminate the need for extensive, price-based search: Consumers indicated that if price were not an issue, they would prefer to buy at Tweeter Break the “wait for a sale” buying mentality: Under APP, consumers have less incentives to wait Convert “potential” or “free-riding” customers: APP eliminates the need to travel to another location Smoothens demand over time: APP eliminates the cyclical buying patterns of sale-based retailing Creates positive word-of-mouth (since word-of-mouth has a significant impact on buying behavior)
  • 9. TWEETER AND CIRCUIT CITY FOLLOW DIFFERENT STRATEGIES TO ATTRACT CUSTOMERS P r i c i n g S t r a t e g i e s 9 • Focus groups  Entry level  Price Biter  Convenience  Quality/Service • Advertising Slogans • Skilled salespeople • Weekend sales to Everyday fair pricing strategy Customer Segment Total Sales in 1996 Total Market Tweeter Circuit City Tweeter Circuit City Entry Level 31914 0.5 0.05 0.35 797.85 5584.95 Price Bitter 31914 0.15 0.2 0.35 957.42 1675.485 Convenience 31914 0.25 0.05 0.15 398.925 1196.775 Quality/Service 31914 0.1 0.7 0.15 2233.98 478.71 V/S • Good consumer service • Skilled sales-force • Huge variety of products (Personal computers, home appliances, audio tapes and compact discs) • Media blitz advertising
  • 10. APP DIDN’T WORK BUT EDFP DID, WHY? 10 APP has NOT been effective because: Reasons: • Failure of the same w.r.t. Bryn Mawr • Unaltered High Price Perception • Mere 32% people cognizant of APP • Only 22% people aware that Tweeter offers it • Among those aware of Tweeter’s APP, 59% still perceived it High Priced or didn’t know the implications • $783,000 given out in Checks EDFP turned out to be effective because: • Pointed to a more stable mind-set • Resulted in more accurate consumer perception of price as opposed to High-Low pricing • Focus on USP: High quality products and great customer service EDFP depicting Stability P r i c i n g S t r a t e g i e s
  • 11. ALTERNATE PRICING STRATEGY 11 Pricing Objective • Current: Maximum Market Share • Suggested: Product-Quality Leadership Demand Determination • Survey suggests 70% of people are Quality-Service Consumers • Less price sensitive  Inelastic Demand Curve Cost Estimation • Advertising Costs: Paid Media: TV, Radio, Print Media • Should focus on Earned and Owned Media too Analysis of Competitors Costs, Prices and Offers • Lechmere, Circuit City, The Wiz focus on Market Share • Hence their prices are very low Pricing Method • Current: Going Rate Pricing • Suggested: Perceived Value Pricing Selecting the Final Price • Brands with High Quality and High Advertising command the highest premium • Tweeter should follow the same path esp. with customers attaching value to its customer support too
  • 12. 12 Watch, but don’t take on the new rival N Don’t launch a price war. Increase the differentiation of your products by using a combination of tactics Are sufficient number of consumers willing to pay more for the benefits? Learn to live with a smaller company. If possible, merge with take over N N rivals If Low-Cost business is set-up, will it generate synergies with existing business? Switch to selling solutions or transform your company to a low-cost player Attack your low-cost rivals by setting up a low cost business Intensify differentiation by offering more benefits. Over time restructure the company to reduce the price of benefits offered Y Y Y FRAMEWORK FOR TAKING ON LOW-COST RIVALS Will competitors take away market share?
  • 13. FACTORS FOR APP EFFECTIVENESS  Tweeter’s customers pay lower prices for products that overlap with its competitors.  Tweeter’s small stores and higher levels of customer service translate to a higher costs of operations.  The key to success for Tweeter is the management of their product overlap:  Sufficient product overlap to make APP a credible promotional strategy in the eyes of the consumers.  Sufficient product uniqueness to generate the overall customer margins necessary to maintain the business. 13
  • 14. PRICE COMPARISON WITH COMPETITORS C o m p e t i t i o n 14 554 229 Lechmere Circuit City The Wiz Tweeter 713 261 507 240 740 244 563 229 737 355 648 389 845 642 2 7 ” C O L O R T V MULTIPLE CD PLAYERS CAMCORDERS STEREO SPEAKERS MEAN PRICES ($) PRODUCT LINE  Tweeter’s Mean Product Prices are higher by 15-27% for 27” Color TVs  Tweeter’s Mean Product Prices are higher by 65% for CD Players  Tweeter’s Mean Product Prices are higher by 125% for Stereo Speakers
  • 15. ANALYZING PRODUCT PORTFOLIO & PRICE COMPARISON 15 Color TVs Lechmere Competitor Circuit City The Wiz Competitor's Mean Price $675 $552 $666 Tweeter's Mean Price $668 $566 $676 Number of Overlapping Models 10 5 9 CD player Competitor Lechmere Circuit City The Wiz Competitor's Mean Price $193 $255 $215 Tweeter's Mean Price $180 $257 $200 Number of Overlapping Models 3 4 4 C o m p e t i t i o n
  • 16. ANALYZING PRODUCT PORTFOLIO & PRICE COMPARISON (CONTD..) 16 Camcorders Stereo speakers Competitor Lechmere Circuit City The Wiz Competitor's Mean Price $893 $875 $805 Tweeter's Mean Price $895 $877 $806 Number of Overlapping Models 11 11 8 Competitor Lechmere Circuit City The Wiz Competitor's Mean Price N/A N/A $198 Tweeter's Mean Price N/A N/A $200 Number of Overlapping Models 0 0 1 C o m p e t i t i o n