Purpose:

Tweeter etc. founded by CEO Sandy Bloomberg in 1972, is a specialty retail store of middle and high end audio and video consumer electronics. Between the years 1991 to 1996, it expanded from a 13-store chain with $ 35 million annual sales to a 21-store chain with $ 82 million in annual sales. To sustain its market share amongst the highly price-focused competitors of New England in USA, the company had adopted 3 major promotional strategies. Unfortunately, Tweeters long-nurtured consumer image as a highly specialized and expensive retail outlet still remained unchanged, and the company was forced to formulate the Three Pronged Attack strategy in 1993. However, the refined Automatic Price Protection (APP) policy yielded negative impacts on Tweeters profitability and on its alliance partner Bryn Mawr Stereo and Video, making Bloomberg wonder whether APP would continue to be an effective policy in a market increasingly dominated by large discount retailers.

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Key Issues

a. Tweeters prices of similar offerings as its competitors were uncompetitive, so it had to put major emphasis on APP as a promotional strategy to sustain its market share. Tweeter is a retailer of middle and high end consumer electronics, so its products were comparatively more expensive than its competitors. For this reason, it made rebates to consumers by sending checks if any competitor came up with a print ad quoting a lower price for the same product. It also took upon the hassle of tracking local newspapers for such advertisements. However, the rebates sent to consumers were not for its unique middle and high end products, but for those product-models which were common to competitors. Moreover, the success of APP policy was also questionable in such a dominant discount retailers market.

b. In spite of Tweeters weekend Sale policy, its prices continued to remain higher than its competitors. In order to retain market share, Tweeter followed its competitors and undertook weekend Sale campaigns, where consumers were provided price discounts. However, since Tweeter carried only middle and high end products, its prices were still higher than competitors who offered entry level products. Consumers failed to perceive this distinction, and Tweeters profitability suffered in the highly price conscious market.

c. Tweeters print advertisements discouraged consumers from purchasing their products. Traditionally Tweeter dedicated around 80% of its marketing budget on newspaper ads announcing weekly Sales, and the balance 20% was split between radio ads, direct mail, market research and in-store promotions. Since its Sale campaigns were ineffective, Tweeter was losing its majority customers having high price perceptions for the company.

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Marketing strategies & Action plan:

a. Change in product line:

Tweeter mainly focuses on selling high-end good quality products and hence its customers are mainly people who want to get high quality products and services which keep Tweeter away from a very big portion of the market. From the product line category we see that Tweeter sells a very selective range of models of their products than their competitors (Lechmere, Circuit City, and Wiz). They should introduce 3 different product lines for their products: i. ii. iii. Lower-end product Middle-end product High-end product

Action Plan:
The introduction of a new 3 different product lines should clearly be distinguished by their price line, separate rows or shelves and tagging. Although the products will be categorized differently, the service quality should remain the same.

b. Change in positioning:
Tweeter has positioned itself as a specialty store which sells high line products with good service. This positioning has made people perceive Tweeter as a very expensive store (Almost 51% people from statistics) although they are charging almost the same as other stores like Lechmere, Circuit City and Wiz. Their advertising slogans should change to Get the best deal out of it from We dont carry all the brands, only the ones that count.

Action Plan:
Changing an already built positioning is not very easy to change. The perception in peoples minds can be overdrawn by using i. New TVC and radio ads (like the new Blackberry ad)
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ii.

Interesting outdoor & print ads.

c. Outdoor Advertising:
Rather than spending intensely in print, radio and television advertisements, Tweeter should allocate a portion (25%) of their marketing budget in outdoor advertisements in the localities where they have their stores. Tweeter should go for outdoor advertising because i) its customers are people living nearby their stores and ii) it is easier to inform them by these outdoor advertisements and it is cheaper. However, they have to use the broadcast and print media as well (50% of total marketing budget)

Action Plan:
These outdoor advertisements can be in the form of: i. ii. iii. iv. Advertisements in bus stations and also on the sides of buses. Selectively putting billboards in places of high exposure (in squares and busy roads) In front of shopping carts in big grocery retail stores. In subway terminals.

d. Controlled Sale Promotion:

Rather than abandoning the sale strategy Tweeter should introduce sale promotion in a controlled manner. i. ii. iii. There can be a quarterly sale offer but the gap between two promotions should not be same and it should be in a random manner. Offer a sale during Christmas Eve and months when the sell needs to boost up. Discount Coupon: Every time a buyer who purchase products worth of $300 or more will get a discount coupon which will let them to have a discount of 10% on their next purchase (within 3 months). This will increase the customer retention rate.

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Action Plan:
Sale strategy can only boost up the sell for a short term. So this push strategy should not be used on continuous basis. To let customers know about the sale promotion Tweeter can use i. ii. iii. Print ads in local and daily newspapers, Radio and TV commercials They can also use flyers.

Each sales promotion should not go beyond 15days.

e. Increase customer relationship:

Losing a customer is way easy than getting one. If the customers are loyal then they make all purchases from the same store bring other customers as well. It is seen that total lifetime equity by a loyal customer is worth $30000. To make customers loyal Tweeter should be more customer focused and maintaining a good customer relationship is the key.

Action Plan:
To make an efficient customer relationship first of all Tweeter has to make a customer database for every customer who has purchased from their store. Database include name, contact address, date of birth & email. Things they can do: i. ii. iii. Send their regular customers a quarterly published new products catalog (by Tweeter etc.) featuring their compatibility, features and price Sending greeting cards to customers on special occasions like their birthday, Christmas and other occasions (from Tweeters customer database) Providing loyalty cards to those who purchases at least once in every two months from Tweeter, these cards will provide customers with priorities which one can enjoy in Tweeter stores when they are there for purchase. Such as, refreshments, special care etc.

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APPENDIX

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Appendix:
Market share of New England (from 1992-1996)

Store Lechmere Circuit City Sears Radio Shack Wal-Mart Tweeter

1992 33% 0% 7.8% 4.9% N/A 2.8%

1994 36% 7.4% 7.4% 5.8% N/A 2.7%

1996 35.6% 18.6% 8.7% 3.9% 3.9% 3.6%

Customer base across New England Customer Segment Entry level Price-biter Convenience Quality/Service Total Tweeter 5% 20% 5% 70% 100% Total Market 50% 15% 25% 10% 100% Lechmere 40% 10% 40% 10% 100% Circuit City 35% 35% 15% 15% 100%

People perception about pricing of Tweeter Tweeter prices are Lower About the same like competitors Higher Dont know Total Responders (1286) 4.7% 25.3% 16% 54%

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4000 3000 2000 1000 0 -1000 -2000 -3000 -4000 -5000

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