Tweeter etc., is a company that specialises in retailing electronic goods of high end, and that has been facing the weight and the pressure of the growing competitive pricing on the market from the wide regional and national consumer chains in the early 1990s according to the case study regarding by John T. (1997).
In 1993, the company with the unique selling preposition “High quality products and great customer service”, turned its strategy in order to bring back the credibility of its prices among the consumers and introduced the “APP” which is referred to the Automatic Price Protection that consists on giving back a refund to the consumers if the good purchased from Tweeter costs more than the price in competitors’ stores, fact that had an important impact on the company’s competitive positioning in the market.
In this individual report about the case study of Tweeter etc., one or several of the given questions have to be answered. As I belong to a group of three people, we decided to equally share the questions between us, and thus I carried out the three first questions from the list and that are about:
Factors that motivated Tweeter etc. to target the Price-Biter market.
Comparison of Tweeter’s prices with its competitors.
Perception of the consumers about Tweeter’s prices comparing with its competitors.
As the report should be clear and precise in terms of answering the chosen questions, and these answers should be justified by information from the case study, so, the focus was more upon Tweeter’s case study, and supported by concepts and tools used in class.
These information are considered to be secondary data, but very helpful to find out specific needs related to the report as the information about the company’s strategy, its struggles and its competitors. However, other information related were picked up from online resources, and other books referenced in the bibliography section at the end of the report.
Also, this report requires a personal strategic recommendation that should be concise and strategically thought by considering me a consultant that reports to Sandy Bloomberg, Tweeter’s founder and CEO, to critically evaluate my recommendations.
This 1982 words report is written with Arial font and of 1.5 line and paragraph spacing.
Factors that motivated Tweeter etc. to target the Price-Biter market
According to the case study, what mainly drove the motivation of Tweeter to target the Price-biters is the overall decline of the electronics market in the New England during the period of the late 1980s and the early 1990s, which led down the profitability of the company. However, this decline has been provoked by three factors.
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The first factor is the market penetration of some new competitive entrants, more specialised in the lower end products in the mid-1980s led by the market growth. Then, the increase of the household penetration for colour television, VCRs and several other home electronics has affected the future growth of those product categories and limiting it. Finally, the last factor is the screeching halt of the U.S. economic growth in 1987 and 1988, and the New England amongst the most affected regions.
In order to further analyse the situation of this crisis Tweeter had been through, we will process to the application of the five forces that shape strategy in relation with the company according to Porter (2008):
Rivalry among competition: The size of the industry is very large, and the main competitors for Tweeter are Lechmere and Circuit City.
New entrants: It requires a high capital of investment, strong brand name, the use of the latest technologies, the use of economies of scale, and also it could be affected by the consumers’ loyalty to the existing brands, nevertheless, Nobody beats the Wiz enters to the local market in 1996 according to the case study.
Bargaining power of suppliers: There is a high competition among suppliers and multiple distribution channels. Also, the inputs remain similar and cost low.
Bargaining power of buyers: The market knows an increasing demand for technological products.
Substitution: The products could be replaced by others of lowest quality and lowest price.
Comparison of Tweeter’s prices with its competitors
As Noah Herschman, the Marketing vice president of Tweeter, stated according to the case study “â€¦ The consumers just wanted price, price, price”. Although the company does not carry entry-level products, but middle and high-end range, it still sells its products at the same prices as the competitors, whereas, people who never experienced buying from Tweeter still had the impression of the prices being more expensive than the competitors. And that was mainly caused by the advertisements where Tweeter exhibits middle and high-end products at a price that is the same as the competitors’, but the competitors advertise a lower-end product with a cheaper price, which in fact had been driving away the consumers from Tweeter.
Thus, Tweeter’s prices are not different from the competitors’, but all what matters is the difference between the range of products every company focuses on, and the fact Tweeter focuses on the middle and high-end products resulted on the consumers believing it being more expensive that the competitors’.
In order to overcome that issue, Tweeter should focus more on the four positions in which the company might already go through to achieve its strategy according to Porter (1980), and that are about:
Overall cost leadership: Through the implementation of the economies of scale.
Differentiation: Through proposing pretty different products from the competitors.
Focus: Through the aim to become a leader within a specific segment of the market.
Middle of the road: Though trying to satisfy quite a few customers of all types.
Also, the company should concentrate on the Porter’s four determinants of the competitive advantage in its actual market, the New England, by considering the following:
Factor conditions: Mostly about land, labour and capital of the company.
Demand conditions: The competitive advantage of the company is improved when there is a strong local demand for the electronic products.
Related and supporting industries: Tweeter should have a network of linked industries to be more competitive, as done lately according to the case study with the purchase of Bryn Mawr in 1996.
Firm strategy, structure and rivalry: The strategy of the company should fit with the local culture and approach to business.
Customers’ perception of Tweeter’s prices comparing with its competitors
Very often, tweeter was perceived by its customers as a place where they pay a premium price for their purchased products, and get the best customer service comparing to the competitors according to the case study.
Although Tweeter had made some efforts to attempt to compete on prices along with keeping its reputation on products quality and customer services as to carry some entry-level brands with low prices as the competitors’ offerings, and some lower-end products from the middle and high-end brands it had been carrying before, the customers’ perception of Tweeter remained the same, which means, a company that is more specialised in middle and high end products, and more expensive that the competitors in the New England.
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Even if the majority of the consumers have recognised the high level of services provided by Tweeter, many others still believed that these quality services were behind the high prices of the products and that they were less able to afford those products of high prices, which in fact had led the profitability of the company to decrease in the early 1990s as shown in the income statement of the company in exhibit 7 of the case study.
In order to change the perception of the consumers toward its prices, Tweeter launched the APP to better communicate its price competitiveness; however, this new strategy doesn’t seem to be working for the long term benefit of the company.
Recommendations and Action Plans
After all the efforts made by Tweeter to gain the trust of the consumers, and the launch of the APP, as well as the purchase of Bryn Mawr Stereo and Video in 1996, a consumer electronics chain using the same strategy as Tweeter, it seems that the company will still have to struggle in the New England market, especially with the new entry to the local market of the third largest consumer electronics retailer chain in the United States, “Nobody Beats the Wiz”, well known of its huge marketing campaigns, and for that reason, Tweeter should review its marketing strategy, and improve it to keep alive, to position well itself, and why not to become the leader in the market.
In my opinion, Tweeter should start focusing on brand new ideas that will attract consumers to come and buy from it. First of all, I suggest to Sandy Bloomberg to give up on the idea of the APP, as the company had to pay back to its consumers over $780,000 in 1995, which remains a huge amount of money the company can benefit from.
Afterwards, the company should keep the same price level as under the APP system. And as we all know, the electronic products may breakdown at any time, so the company can make profit from that if it invests on extending the guarantee period of the products, and to play on that fact on their advertising campaigns. People will certainly feel more comfortable paying a bit more on products they are guaranteed on even longer, and that will create a competitive advantage to the company which it lacked on the time of the case study.
Tweeter should also keep in touch with its consumers, which will make them grateful and feel the company more trustful to its brand’s image by inspecting, either by emails or phone calls, the consumers’ satisfaction with the products they purchased from Tweeter stores after fifteen days or one month as for example. These consumers will feel more comfortable to come back to Tweeter to buy other products rather than going to a competitor’s store as Tweeter will raise on these consumers a brand loyalty, and at the same time, it will create a good reputation to the company, and they will be trusted by the other people who never experienced buying from Tweeter.
Finally, my last suggestion, as I went through online researches concerning the company and I did not notice any mascot the company can use on its marketing campaign, therefore, I had the idea of the company creating one that would be attractive especially for the young audience, as youth people use electronic products more than old people, and this mascot could also be used as small soft toys to be offered to the clients’ children whenever there is a holiday, and that will keep in these children’s minds the brand name and the gratitude toward the company and will have an impact on the long term profitability of the company.
I am pretty sure with these suggestions, Tweeter etc. will see its sales growing over the time especially that the company’s unique selling proposition is “High quality products, and great customer service”.
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