Case Analysis of Tweeter Etc

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

18. 18