QUESTIONS: Should Tweeter continue with its Automatic Price Protection (APP) policy along with Every-day Fair Pricing (EDFP)? Tweeter should continue with its current Marketing strategy based on APP policy and Every-day Fair pricing. Their target customer is the Quality/Service oriented and they should focus on retaining their loyalty. The shift from having continuous Sales Events to fair pricing and price protection has been proven successful as same store sales have increased, new stores have delivered consistent sales and total marketing expense has not increased as a % of Sales. Also profitability of the company has gone back to positive numbers as a result of the new pricing strategy. By not entering the Sale events, Tweeter will be able to maintain its reputation of high-end quality service retailer and keep its current market segment very well satisfied with its price protection program. 1. Customer Analysis:
(a) What are the challenges that Tweeter faces in the market environment that they have to compete in? Use the data in Exhibit 13 to assess whether Tweeter is price competitive with its competitors when comparing objective prices? What factors impact the price image of retail store and how does Tweeter compare with its competitors? As a retailer of consumer electronics Tweeter faces several challenges in order to keep growing its sales and capture new consumers into their stores. As a boutique or specialty retailer of electronics Tweeter faces direct competition from other distribution channels in which the same products are sold. These are Electronic/Appliance Superstores, Department stores and in less weight Mass merchants and Warehouse clubs. These bigger retailers characterize by giving consumers an image of everyday low prices which drive them into their stores, generally offering attractive Sales Event every week. Another challenge Tweeter faces is the entrance of new stores to the market with the chain Wiz planning to open 8 more stores in the New England Market, so this means Tweeter will need to work a strategy to keep its core customer loyal and not switching to these new stores. Bigger retailers carry more products so portfolio offering to consumers is greater than Tweeter creating a one stop shop for electronics consumers, which could drive away customers from Tweeter. Comparing price competitiveness of Tweeter against other retailers; 32 audio and video products sold across multiple retailers were analyzed. Of those 32 products 18 products sold on Tweeter were sold at the same price or below compared to Lechmere, Circuit City or Wiz. Only 9 products were priced higher by Tweeter in % ranging from 4% to 17% higher and most of the prices were on sale or advertised. See Exhibit 1 for calculations. Based on information in exhibit 1, Tweeter has a competitive position in similar products against the other retailers, the key is how they could advertise this position so that consumers think they have competitive prices even though they are a high-end, high quality retailer. (b) How do consumers make purchasing decisions in the electronics market? What are the challenges faced by Tweeter due to this? Will APP help in overcoming some of these challenges and how? By conducting Focus Groups Tweeter identified how consumers made their decisions in the New England Market. They identified consumers thought about their purchase decision two months in advance on average and visited two to three retailers prior to making the purchase. Most of visits were driven by newspaper ads and most of them waited for the product to be advertised in order to purchase the desired product. Tweeter also found out that most of the customers who shopped on Tweeter stores also visited Lechmere, Fretter and Sears because they believed Tweeter was more expensive than other retailers. Finally focus group interviews showed that if price would not be an issue, most of the customers would prefer to shop on Tweeter. Another key...
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