Black & Decker Case Questions

1(a) Why is Makita outselling Black & Decker 8 to 1 in an account which gives them equal shelf
space?

Makita is outselling B&D 8 to 1 in an account which gives them equal shelf space because B&D has an
image problem. Some tradespeople viewed all B&D products as for the home rather than the job. As one
tradesmen explained to Joseph Galli, “. . . B&D makes a good popcorn popper, and my wife just loves her
Dustbuster, but I’m out here trying to make a living. . .” B&D product designed for the home had been
used on the job and failed, contributing to the poor perception of B&D among tradespeople. Tradesmen
constantly talked about tools and their performance on the job site, so misinformation concerning B&D
tools (the poor performance of B&D products on job sites) easily spread.

B&D’s lack of differentiation may also be a contributing factor. B&D’s research on tradespeople’s
perceptions indicated that tradespeople considered color a significant product differentiator. Yet, B&D
used black as its consumer grade color and charcoal grey for its Industrial and Tradesmen grades, while

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competing brands were more highly differentiated in color (e.g., Makita – Teal; Milwaukee – Red). With

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no clear color distinction between B&D’s consumer and professional products, it was easy for Tradesmen

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to mistake consumer products for professional ones, which led to the wrong products (consumer products)
being used on job sites and failing, which really hurt B&D’s image.

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1(b) Why are Black & Decker’s shares of the two professional segments – Industrial and Tradesmen –
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so different?

B&D’s shares of the Industrial and Tradesmen segments are so different because the customers in these
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segments are so different. The $550 million Industrial segment consisted primarily of commercial
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contractors working on large projects and company assembly lines. The buyers in the Industrial segment
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were typically corporations. By contrast, the $420 million Tradesmen segment was made up of tradesmen
such as carpenters, electricians, plumbers, framers and the like working in residential construction.
Buyers in the Tradesmen segment purchased tools for their own personal use on a job site.
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While the “very knowledgeable purchase decision influencers in the Professional-Industrial segment
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viewed B&D as offering high-quality, differentiated products and excellent service,” the decision makers
in the Tradesmen segment viewed all B&D products as for the home (i.e., not for them). The Professional
Industrial buyers, who were not the users of the products, were more concerned with the price and
performance of products, whereas the Tradesmen buyers were more concerned with appearances. As one
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tradesmen commented, “On the job, people notice what you’re working with. . . if I came out here with
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one of those Black & Decker gray things, I’d be laughed at.”

Additionally, the distribution channels were different for each of the segments. In the Industrial segment,
distributors were instrumental in providing technical expertise and service. They could even specify a
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contractor’s tool requirements for a specific job and they could recommend a specific brand. By contrast,
Tradesmen products were distributed through retail distribution channels, such as The Home Depot,
Lowe’s, and Ace.

1(c) Wouldn’t you expect them to be similar?

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 Because the tools are being used in both segments (Industrial and Tradesman) in a similar
professional/heavy-duty manner, you would expect B&D’s shares in the two segments to be similar.
However, because the customers’ perceptions of B&D products are so different in the two professional
segments, it’s understandable that B&D’s shares in the two professional segments are so different.

2. Joe Galli’s objective is “to develop and gain corporate support for a viable program to challenge
Makita for leadership” in the Tradesmen segment. To gain support, the minimal share objective
would have to be “nearly 20% within three years, with major share ‘take-away’ from Makita.”
How realistic is this?

Yes. This is realistic, especially in light of Galli’s research that the source of B&D’s share problem in the
Tradesmen segment is not inherent product quality or awareness. Laboratory tests and field tests
indicated that “B&D’s product quality was very strongly competitive in the large majority of product
categories.” Although Makita dominates the Tradesmen segment, tradespeople perceived that Makita
provided “a good baseline option in all major categories, and other suppliers had particular product
strengths.” Drills, saws, and sanders made up 80% of the total sales in the Tradesmen segment. As

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Figure E demonstrates, B&D has competitive to leadership products in each of these product types. This

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data suggests there is room for B&D’s strongest product offerings to make an impact. Also, the

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Tradesmen segment was growing at 9%, so there is opportunity for B&D to grow its market share.

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Additionally, overall awareness of B&D among the Tradesmen segment was 98%. If B&D can leverage
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its brand awareness, capitalize on the strength of its product quality, and redefine its product image, it can
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likely achieve Galli’s objective.

3. Be specific about what you would do and remember you have several audiences to please, i.e., (a)
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end consumer, (b) tradesmen, (c) retailer, (d) Nolan Archibald and (e) Gary DiCamillo.
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We would recommend Option 3: drop the B&D name from the Tradesmen segment. We think it’s
important to drop the B&D name because tradespeople associate the B&D name with tools for the home,
not the job. Tradespeople were constantly talking about their tools and their performance on the job and
they surely didn’t want to show up to work with tools associated with household work. Thus, to reach the
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Tradesmen segment, B&D should introduce a brand targeted to tradespeople. B&D has a great option to
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use the DeWalt brand name to address its image problem. Doing so would likely please Galli’s boss,
Gary DiCampillo, as well as B&D’s president and CEO, Nolan Archibald, by using a name already in
B&D stable of brands. DiCampillo and Archibald would likely also be pleased by the limited financial
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risk inherent in Option 3. The DeWalt name had a 70% awareness rating, and most of those who knew
DeWalt were positively disposed to it. It would also please tradespeople by eliminating the “household
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tool” image. Moreover, DeWalt had achieved an “Is One of the Best” agreement percent of 63% from
tradesmen. Also, research indicated that 51% of tradespeople would have some “purchase interest” in the
DeWalt brand. Retailers would also be pleased because the DeWalt name has strong awareness (70%)
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and positive perception.

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