Tweeter Price Competitiveness

Tweeters price competitiveness

From exhibit 13 in the case it is clear that Tweeter is price competitive in almost the entire range of items and models that it sells. In an objective model by model comparison (see appendix 1 for a sample comparison) Tweeter either matches or betters competitor’s prices. Further more when you compare quality and level of service and price paid Tweeter is cheaper than the competition.

However, the competitors run spot sales (not advertised) and advertised sales, which at the point of sale gives the impression that the competition is more competitively priced. More importantly though the competition namely Lechmere, Circuit City and the Wiz all carry lower range and lower priced items in each category i.e. 27” Color TV, Multiple CD Players, Camcorders, and Full size speakers, which allows the competition to offer customers cheaper goods than Tweeter, within each category. This creates a reference point for customers to compare against and makes Tweeter look (subjectively) more expensive to buy from.

So factually Tweeter is competitively priced, however it suffers from an image problem where it is generally perceived as more expensive than the competition which likely dissuades some customers buying from Tweeter and leaves others feeling that they might have obtained their purchase cheaper else where had they tried.

Tweeter’s core customers

According to the segmentation in the case Tweeter is a Specialty Store and its most important customers are the Quality/Service Customer (Appendix 3). This group accounts for 70% of Tweeter’s clientele. This segment cares about high quality, service and a secondary concern is low price (Appendix 3).

In 1992 the majority of this class of customer, 47.4%, was shopping at Other retailers i.e. not Tweeter, Lechmere or Circuit City. Tweeter at the time had only 19.6% of this customer category (Appendix 4). Over 1994 and onto 1996 this class of customer has moved from Other retailers 11.30% to Lechmere 35.60%, Circuit City 27.90% and Tweeter 25.20% (Appendix 5 & 6). Even though this segment is Tweeters core customer they have been unable to attract the majority of this class of customer. In 1996 Over 63% of this customer class is shopping at Electronic Appliance Superstores.

In 1996 retaining 1% of New England’s market of Entry level would increase cost of good s sold at Tweeter by 13.89% and with a industry standard markup of 30% would add a margin contribution of over 2 million dollars per percent of Entry level market share (Appendix 7). In contrast 1% of Price biter, convenience customer, or quality service customer would increase goods sold at Tweeter by 4.17%, 6.94% and 2.78% respectively. Focusing on the Entry level market will apparently be the most profitable approach. To do this they will have to work hard to change the markets perception that Tweeter is more expensive than the competition, and they will have to stock lower priced items in all the range of goods they carry.

Tweeter will also have to change their store design or layout to accommodate the greater number of SKU’s or they may have to lease larger stores to cater to a larger volume of customers. Alternatively, Tweeter can continue as high end retailer for quality customer service customers and will thrive if they are able to get more of that class of customers away from the Electronic/Appliance Superstores. They can do this by educating this segment of customer about their service and low pricing. If Tweeter continues to focus on high end customers their growth will be slow compared to their competition and they will face greater threat for their long term survival.

Quality service customer behavior and APP

This class of customer plans 3 months in advance to buy and usually waits for the item to be advertised in one of the local newspapers, so that they can get the latest availability and price information. By abandoning the sales ad strategy and adding APP Tweeter is encouraging this class of customer to buy now and not worry about the possibility