Tweeter Case Analysis

7/28/2019 Tweeter Case Analysis

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Submitted ByGroup 10, Section A

Anshu KumarNakul Gola

Nikhil SharmaNishad N

Sudeep Mohan M

Yadav Rahul Radhakishan

Pricing Policy


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Objective Price Competitiveness:

Mean Product Price

0

100

200

300

400

500

600

700

800900

1000

CCTV Multiple CD

players

Cam corders Stereo

speakers

Price

Mean Product Price

Lechmere

Circuit City

The wizTweeter


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Mean product prices are higher by 15-27% for 27 TVs and

Camcorders, by 65% for CD players and by 125% for Stereospeakers.

Reason for these high prices is that Tweeter does not carryentry level products which are lesser in price.

Higher mean prices do not imply lower price competitivenessfor Tweeter because it offers high quality products.

Also its promotion of high-end, high quality products create apicture of premium shop. And the high quality service offeredwas believed to be a factor of cost

But the 15% to 125% price premium does have an impact onTweeters price image

Objective Price Competitiveness:

Mean Product Price


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Mean product price for

overlapping products

10 or 35%

5 or 25%

9 or 47%

3 or 18%

4 or 20%

4 or 19%

11 or 37% 11 or 23%

8 or 28%

0 0

1 or 10%

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$900.00

$1,000.00

Lechmere

CircuitCity

TheWiz

Lechmere

CircuitCity

TheWiz

Lechmere

CircuitCity

TheWiz

Lechmere

CircuitCity

TheWiz

COLOR TV CD PLAYER CAMCORDER Stereo Speakers

CompetitorsMean price

TweetersMean price

* Numbers on the bar represent the no. of overlapping models. Read as Lechimore and Tweeter have 10 models ofColor TV in common or 35% of Lechimore TV models match with Tweeter


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Lechmere Circuit City The WizCompetitors Mean price $675.00 $552.00 $666.00

Tweeters Mean price $668.00 $566.00 $676.00No. of Overlapping models 10 5 9



CD Players (Tweeter carries 20 Models: 7 overlap and 13 are unique to Tweeter)

Color TVs (Tweeter carries 14 Models: 11 overlap and 3 are unique to Tweeter)


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Lechmere Circuit City The WizCompetitors Mean price N/A N/A $215.00

Tweeters Mean price N/A N/A $200.00No. of Overlapping models 0 0 1

Stereo Speakers (Tweeter carries 23 Models: 1 overlap and 22 are unique to Tweeter)

Camcorder (Tweeter carries 13 Models: 12 overlap and 1 are unique to Tweeter)


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Subjective Price Competitiveness

TweetersPrice

Image

LimitedAdvertising

Past PriceImage

SmallUpscaleStores

High End

Products

APP

EverydayFair Price


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Considering only the overlapping products it can be seen that

difference between Tweeter's prices and its competitors is notvey much

But as tweeter stocks medium to high end products which areprice higher than its competitors entry level products, it isperceived as high priced by the consumers

Print advertising is also not giving the correct picture of the

prices There is a misconception by the consumers as they attribute the

excellent service of the Tweeter coming with a higher price

Subjective Price Competitiveness


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Eliminatingneed forextensive

price basedresearch

Breaking

sale seasonbuyingmentality

Converting

free ridingor potentialcustomers

Smoothensdemand

over time

Introduction of APP for

Customer Acquisition

APP helped ineliminating the needfor potential or free-riding customers to goto another store insearch of lower prices

Under APP, consumershave less incentives to

wait, hence breakingsale season buyingmentality.

Consumers indicatedthat if price were not

an issue, they wouldprefer to buy atTweeter.

APP eliminates the

cyclical buyingpatterns of sale-basedretailing and

smoothens demand.

Besides this, APP creates positive word of mouth which has a hugeimpact on buying behavior


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Effectiveness of APP

0.00%

10.00%

20.00%

30.00%40.00%

50.00%

60.00%

Lower Aboutthe

same

Higher Don'tknow

Respondersunaware ofTweeters APP

Responders awareof Tweeters APP

People aware of Tweeters APP policy showed better knowledge

of the prices of APP


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MarketingMix

ActivitiesLower Prices

ProductUniqueness

Managementof Product

Overlap

Effectiveness of APP :

Necessary FactorsPricing strategy must becoordinated with other

marketing mixActivities

Tweeters customers paylower prices for products

that overlap with itscompetitors

Sufficient overlap tomake APP a crediblepromotional strategy inthe eyes of the consumers.

Sufficient productuniqueness to generate

overall customer marginsnecessary to maintain the

business


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Financial Impact

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1990 1991 1992 1993 1994 1995 1996

Industry salesin million dollars

Tweeters salesin (1000$)

CAGR of 23.52%

from 1993 to 1996

CAGR of 5.4% from

1993 to 1996


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There is clear indication of increase in sales from 1993 to 1996

with sales showing a year on year increase of 23.52% ascompared to industry standards of 5.4%

Increase of market share from 2.8% in 1992 to 3.6% in 1996(Exhibit 5)

Increase in Net income from -$661K to $3600K


Financial Impact


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Sustainability of APP

APP eliminates theprice based searchingbehavior. Also ithelps in reducing

promotion cost

APP eliminates thecyclical buyingpatterns of sale-basedretailing and leads to

a more sustainablemodel bysmoothening demand

Implementation ofAPP would lead tochange in customersperception ofTweeters product

being high priced andwould lead to asustainable change inthe buying behaviorof customers

Competitors wouldnot benefit much ifthey implement APPthey have either verylow product overlap

(CambridgeSoundwork) or verylow productuniqueness

Imitabilityby

Competitors

Change inPrice

Perception

Conversionof free riding

customers

Eliminationof cyclical

buyingbehavior

Documents

Tweeter Case Analysis