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Tweeter Case Study

Autor:   •  September 10, 2018  •  Case Study  •  1,504 Words (7 Pages)  •  7 Views

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Executive summary

Tweeter’s CEO, Sandy Bloomberg, is concerned about the weak performance of the company’s most recent acquisition – Bryn Mawr Stereo and Video. Despite implementing Tweeter’s signature Automated Price Protection, the company has failed to increase market share and is loosing to the old and new competitors, such as the Wiz – nationwide chain of low-cost consumer electronics stores. Sandy has to make a decision to whether stick to the current strategy that is believed to have cause Tweeter’s growth, or react to changing market conditions and adopt a different approach.

Situation Analysis

In 1993, after several years of bad financial results, Tweeter’s management has drastically changed company’s strategy. Before is was employing the strategy of “sales” – frequent discounting of a limited amount of products’ models and makes to attract customers and create a perception of being the lowest-cost retailer. Such strategy was used by all major players in the consumer electronics market and it was effectively disrupting customers’ research. Since each retailer was arbitrarily choosing what products to put on sale and for how long, the customers had to either spend a substantial amount of time on searching newspapers for deals on required products, or to rely on referral, or make an uninformed decision. This has been playing well for big retailers like Lechmere, and Sears who were already perceived as the low-cost option as opposed to boutique stores like Tweeter. For Tweeter, however, it has proven to be a bad fit drawing customer’s attention from Tweeter’s high quality and good service to focus solely on price. Tweeter’s response was to return to more consistent pricing but to step up their Price Protection Program which would automatically refund customers on the purchases of products they could have gotten somewhere else for cheaper. By 1996, the same-store sales grew by 50% and a number of new stores was opened. The precise input of APP to Tweeter’s growth is unknown. The decision to go with this strategy was based on the focus group study which placed consumers into the following segments:

Customer Segment

Total Market

Tweeter

Lechmere

Circuit City

Entry Level

50%

5%

40%

35%

Convenience

25%

5%

40%

15%

Price-Biter

15%

20%

10%

35%

Quality/Service

10%

70%

10%

15%

The market share information is the following:

1992

1994

1996

Lechmere

33%

36%

35.6%

Circuit City

0%

7.4%

18.6%

Sears

7.8%

7.4%

8.7%

Radio Shack

4.9%

5.8%

3.9%

Wal-Mart

n/a

n/a

3.9%

Tweeter

2.8%

2.7%

3.6%

Bradlee’s

2.2%

2.5%

2.4%

Service Merchandise

4.1%

3.0%

2.1%

Fretter

5.0%

4.9%

1.7%

BJ’s Wholesale Club

2.5%

2.3%

1.3%

K-Mart

0.6%

0.4%

1.2%

Costco

n/a

0.7%

0.6%

Jordan Marsch

1.3%

0.4%

0.6%

Cambridge Sound Works

n/a

n/a

0.6%

Bradlee’s

2.2%

2.5%

2.4%

Other

35.8%

26.5%

15.3%

One of Tweeter’s expansion moves was acquiring Bryn Mawr Audio and Video – a similar high-end consumer electronics retailer in Philadelphia area that was facing similar challenges when competing with low-cost retailers. Implementing APP hasn’t produced expected results and the next steps are unclear. Moreover, entering of Wiz – a low-cost nationwide consumer electronics retailer, possesses additional threat to Tweeter’s market share standings. The management’s objective is to identify the key issues slowing down the growth of Bryn Mawr and work out the solutions for them.

Key Issues

Issue #1: Program Awareness Rate is Low

As we can clearly see from the Exhibit 14, almost 70% of consumers are either unaware of what APP is, or have a wrong impression of it. Moreover, from those who do know what it is, some think it’s offered by Tweeter’s competitors – Circuit City and Lechmere. There is a clear problem in the communication between Tweeter and the consumers about the nature and features of the APP.

It’s entirely possible that the growth of 93-96 was achieved thanks to APP. Tweeter originated in Boston area and was recognized much more there than anywhere else in New England. This definitely layered in on top of Tweeter’s marketing effort of communicating the benefits of APP. Consumers are likely to share such information with each other, but they have to know and trust the company first, and have a positive experience with the program. Tweeter was a trusted source of consumer electronics on Boston market for two decades. At the same time, Philadelphia market customers in general, and Bryn Mawr customers in particular, were completely unfamiliar with both Tweeter and APP. A substantial marketing effort is required to clearly communicate such programs. Despite this fact, it was stated that Bryn Mawr advertised APP less aggressively than Tweeter did in 1993.

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