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, Tweeter’s 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 Tweeter’s 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.
a. Tweeter’s 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 Tweeter’s 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 Tweeter’s profitability suffered in the highly price conscious market.
c. Tweeter’s 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.
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. Lower-end product
ii. Middle-end product
iii. High-end product
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...