CASE ANALYSIS

Tweeter etc.

MARKETING-II
DATE OF SUBMISSION-26.11.2012

SUBMITTED BY:-
SECTION-C, GROUP 13:
Abhijit Das- 2012PGP005
Ashwin Vijayan- 2012PGP073
Kumar Abhishek- 2012PGP178
Payal Anand- 2012FPM10
Rajat- 2012PGP292
Sumit Bapuji Gedam- 2012PGP382
Vikash Kumar- 2012PGP438
Situation analysis:

Company:
Tweeter etc. was founded by Sandy Bloomberg, who was also the CEO of the company,
in 1972. It is a specialty retail store of middle and high end audio and video consumer
electronics. From a 13-store chain with $ 35 million annual sales in 1991, it expanded to a 21-
store chain with $ 82 million in annual sales in 1996. Given the highly price-focused competitors
of New England in USA, the company had adopted major promotional strategies, which included
Automatic Price Protection policy, implemented from 1993. On May 16, 1996, the company
purchased a controlling interest in Bryn Mawr Stereo in suburban Philadelphia.

Customers:
Customer usually visit two to three stores before they buy a product for a better price. Twitter
categorized four types of customers in New England market:

1. Entry-level customers: Interested in buying the cheapest item in a given category and
was relatively indifferent to product quality and customer service.

2. The price biter: Very Cognizant of price and also concerned with product quality and
customer service. Focused on best deal.

3. Convenience customer: Shopping convenience most important. Price, product and

service quality are secondary.

4. The Quality/Service and customer: High levels of product quality and customer
service were of primary concern. Price was secondary

Collaborations:
To aid the price-based competition, Twitter joined the Progressive Retailers organization
in 1988, a buying consortium founded in 1986. As a result, Twitter was able to obtain prices
from manufacturers that were comparable with those obtained by it is larger competitors.

Competition:
Lechmere, Circuit City, Wiz and Tweeter are the main competitors in electronics business.
Lechmere is in direct competition for Tweeter as its major customers are Tweeters target
customers.
SWOT Analysis
1. Strength
 Tweeter was recognized as a retailer of high quality, high-end audio components
and video equipment, with knowledgeable salespeople who offered high levels of
customer service.
 Tweeter had joined the Progressive Retailers Organization in 1988 which helped
it to obtain prices from the manufacturers that were comparable with those
obtained by its larger competitors.
2. Weakness
 Customers (around 80%) perceived Tweeter to be expensive brand even though it
was offering competitive rates to customers.
 Tweeter’s print advertisements discouraged consumers from purchasing their
products. It was driving away consumers.
 It lost $780,000 by APP. It was unclear if their low pricing policy was effective.
3. Threats
 “The Wiz”, which was recognized nationally as a discount retailer, had opened 2nd
outlet in New England Market in the series of planned 10 outlets.
 Wiz was offering 110% price protection against 100% offered by Tweeter.
 Lechmere’s product level was of entry level while Tweeter offered middle & high
end stuff. This was making tweeter look more expensive than their competitors.
4. Opportunities
 Market was growing at CAGR of 5.6% and future growth was projected to be
strong through 1998.
 80% of the consumers reported that if price were not the issue they would prefer
buying from Tweeter.

Problem Identification
 To analyze the viability of the continuation of the Automatic Price Protection (APP)
strategy currently employed by Tweeter Inc. in view of the changed environment,
especially after its ineffectiveness in making a significant impact on sales of its acquired
subsidiary, Bryn Mawr.
 To create a new marketing plan which would change the customer perception that it was
an expensive brand.
Alternatives
1. They should continue to use the APP pricing strategy so as to communicate their price
competitiveness.
2. They should communicate their APP policy aggressively through newspapers and
distribution of catalogues or buyer’s guide to the customers visiting the store

Evaluation Of Alternatives
1. 33% of the customers who are going to the competitor store in search of better price
should be given buyer’s guide which should have the comparison between the prices of
the products in different stores.
2. Company should focus on newspaper advertisement as 80% checked newspaper
advertisement for product availability. The customer survey data shows that only 22.1 %
of the consumers were aware that Tweeter offers the APP plans & 40.6 % of the
consumers did not know about APP plan.

3. It should increase overlap in certain products so as to highlight the price competitiveness

to the consumers and decrease the product overlaps in the categories it does not have
price competitiveness in-order to reduce price protection refund checks.
4. The sales per store have increased by 50% between 1993 and 1996 after the introduction
of “Every Day Fair Pricing”, “Automatic Price Protection” and promotions in television
and radio advertising.

Year Revenues Gross Margin Gross Margin %

1993 43714000 15229000 34.84
1996 65571000* 30100000 36.53
*The same store sales have increased by 50% between 1993
and 1996

Proposition and Our Stand

As 80 % of the consumers had the misperception that Tweeter was more expensive than other
stores, it should distribute buyer’s guide with comparison of competitors price. It should include
overlap products in its portfolio which can demonstrate the stores price competitiveness. It
should focus on the “Specialty/Service” and “The Price Biter” customer segments with improved
customer service and high quality, high end audio components and video equipment. It should
continue with the modified APP policy as sales have increased after introduction of the
marketing strategy.