Tweeter etc. was a consumer electronics retailer operating in New England. It faced challenges in the 1980s-1990s from competitors offering lower prices and perceptions of Tweeter being expensive. Tweeter analyzed customer behavior and launched a three-pronged strategy including an Automatic Price Protection policy to match competitors' prices. This led to increased sales but some doubts remained about perceptions of its pricing. Tweeter also acquired stores in Philadelphia as it aimed to change its positioning from a high-end to a broadly competitive retailer.
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US: 4th largest wine producer in the world
US: 34th in world per capita wine consumption
Top 8 firms produce more than 75% of all the wine volume
Estimated 2500 firms produce the remaining 25%
Dominance of few large players in the low price market
Greater shelf space & high marketing budget
1990s: Consolidation of retailers and distributors across US
No of distributors fell from 5000 to 250 by 2000
Only 50 to 100 left with access to widespread national distribution
Large retail consolidation in US
Top 10 supermarkets control 55% of the US market in 2000
Majority of producers are focused on low volume/high price to gain maximum return/margin
Distributors are focused on high volume/low price to maximize economies of scale
Near impossible for a new company to establish itself
Low barriers invite more players to wine market
Porter’s five forces analysis
Threat of new entrants – HIGH
Low barriers to entry for new players in wine industry
Firms spent 40% of their expenditures on marketing and distribution
Existing rivalries in industry – HIGH
Total no of wineries in US increased by more than 400%
Glut of grape supply due to low growth in demand
This put downward pressure on price and margins
Bargaining power of Buyers – HIGH
More players are entering the market
Production outstripped demand by 20%
Consolidation of retailer and distributor
Bargaining power of Suppliers – LOW
Wine producers with their own vineyards attempts to control the operations starting from production to distribution
Threat of Substitutes – LOW for Budget
Only 10% people drank wine regularly
Of the remaining 90%, 46% preferred beer or spirits
35% drank alcoholic beverages other than wine
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The study also reveals the Pros and Cons of all the alternatives discussed by the executives of the company to overcome their problem.
Finally a recommendation, its plan of action, and a contingency plan is also added in this Powerpoint.
NOTE: This powerpoint was presented in the form of a role play cum presentation, wherein the members of the group enacted a Board meeting scene of the company back in late 1980s, discussing the future of the company.
Case Analysis |Altius Golf and the Fighter Brand|Anahit Babayan
Questions covered.
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Crafting winning strategies in a mature market - US wine marketSaurabh Arora
The Industry Landscape in 2001
US: 4th largest wine producer in the world
US: 34th in world per capita wine consumption
Top 8 firms produce more than 75% of all the wine volume
Estimated 2500 firms produce the remaining 25%
Dominance of few large players in the low price market
Greater shelf space & high marketing budget
1990s: Consolidation of retailers and distributors across US
No of distributors fell from 5000 to 250 by 2000
Only 50 to 100 left with access to widespread national distribution
Large retail consolidation in US
Top 10 supermarkets control 55% of the US market in 2000
Majority of producers are focused on low volume/high price to gain maximum return/margin
Distributors are focused on high volume/low price to maximize economies of scale
Near impossible for a new company to establish itself
Low barriers invite more players to wine market
Porter’s five forces analysis
Threat of new entrants – HIGH
Low barriers to entry for new players in wine industry
Firms spent 40% of their expenditures on marketing and distribution
Existing rivalries in industry – HIGH
Total no of wineries in US increased by more than 400%
Glut of grape supply due to low growth in demand
This put downward pressure on price and margins
Bargaining power of Buyers – HIGH
More players are entering the market
Production outstripped demand by 20%
Consolidation of retailer and distributor
Bargaining power of Suppliers – LOW
Wine producers with their own vineyards attempts to control the operations starting from production to distribution
Threat of Substitutes – LOW for Budget
Only 10% people drank wine regularly
Of the remaining 90%, 46% preferred beer or spirits
35% drank alcoholic beverages other than wine
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1. Tweeter etc.
Case Analysis
Group P Section 2
Group Members
Sumit Kumar Jha
Sunny Shekhar
Shubhabh
Siddarth
Saurabh Raina
Saurav Narjinary
1
2. 2
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
23223
27204
30570
1991 1993 1995
Sales in Million $
SS & ES MM & WC DS MOH Others
43%
28%
4%
11%
14%
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
3. 3
Case
Background
1972 to
1980s
1980s to
1993
1993 1996
Questions
Analysis
The new england Market
33
2.8
0
0
64.2
0 20 40 60 80
OTHERS
TWEETER
WALMART
CIRCUIT CITY
LECHMERE
Market Share 1992
36
2.7
0
7.4
53.9
0 10 20 30 40 50 60
OTHERS
TWEETER
WALMART
CIRCUIT CITY
LECHMERE
Market Share 1994
35.6
18.6
3.6
3.9
38.3
0 10 20 30 40 50
OTHERS
TWEETER
WALMART
CIRCUIT CITY
LECHMERE
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
4. 4
Case
Background
1972 to
1980s
1980s to
1993
1993 1996
Questions
Analysis
The Formative years
Value,
Quality &
Service
ORIGINATION
CUSTOMER PERCEPTION
SEGMENTATION
POSITIONING
Bloomberg
5. 5
Case
Background
1972 to
1980s
1980s to
1993
1993 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
6. 6
Case
Background
1972 to
1980s
1980s to
1993
1993 1996
Questions
Analysis
Counter measures by tweeter
Quality &
Service
But
Sale?
&
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 price
7. 7
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
70
Factors
50
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
40
NEWSPAPER EXPERIENCE RECOMMENDATION
60
Retailers
45
20
LECHMERE FRETTER SEARS
Source for Graphs: Case Page 5 & 6
8. 8
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
9. 9
Case
Background
1972 to
1980s
1980s to
1993
1993 1996
Questions
Analysis
‘ Three- pronged attack’ 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
1993
Print TV Radio Direct Others
1996
Source for Graphs: Exhibit 10
10. 10
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
11. 11
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
16000
14000
12000
10000
8000
6000
4000
2000
500000
450000
400000
350000
300000
250000
200000
150000
100000
50000
‘Expensive’ still persisted among the customers 0
0
1993 1994 1995
Refund in $ No. of Cheque
Source for Graphs: Exhibit 12
12. 12
Case
Background
1972 to
1980s
1980s to
1993
1993 1996
Questions
Analysis
Other causes of concern
13. 13
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
Collaborators •Bryn Mawr
•Bad Economic conditions in
1987-1988
•Seasonal Factor
•High Bargaining Power of
Consumers
Context
14. 14
Case
Background
1972 to
1980s
1980s to
1993
1993 1996
Questions
Analysis
Positioning of tweeter w.r.t. App & edfp
Before change in Marketing Strategy
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
After change in Marketing Strategy
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
15. 15
Case
Background
1972 to
1980s
1980s to
1993
1993 1996
Questions
Analysis
Customer behavior in Boston area
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
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
Is tweeter trying to change this behavior ?
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
16. 16
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
17. 17
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