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Tweeter, etc.

What is the overarching problem?


Whether APP would continue to be an effective policy More generally, that it is a strategic problem and that a change in the pricing policy is going to be reflected in the STP (iteration concept)

Price competitiveness

Objective price competitiveness


Mean product price indicates that Tweeter most expensive Overlap product price comparison, 4 categories * 3 competitors

Subjective price competitiveness


Relative good quality and customer services Small, boutique style store Elimination of sales and relative lack of newspaper ads Historic price image

Tweeters Customer

Market Share by Segments

E/L Tweeter Lechmere Circuit City Total Market 0.00 0.29 0.13 50%

P/B 0.05 0.24 0.43 15%

C 0.01 0.57 0.11 25%

Q/S (0.7*0.036)/0.1=0.25 (0.1*0.356)/0.1=0.36 (0.15*0.186)/0.1=0.28 10%

Consumer Behavior

Impact of APP on Buying Behavior


Eliminate the need for extensive, price -based search Break the wait for a sale buying mentality Create positive word-of-mouth APP is relative complex, difficult to communicate via media Sales people are more likely to have fully explained APP to someone who has previously purchased a product at Tweeter Someone who has purchased an item at Tweeter stands a chance to receive an APP check, gaining first hand experience with the process People who purchase an item at Tweeter end up on Tweeters direct mailing list and receive product catalogs that reinforce the process of APP APP is effective at converting potential customers who happen to be visiting a Tweeter location.

APP customer acquisition or customer retention


APP Effectiveness and Cost

Has APP been effective


1990-1993 Tweeter (3.4%) vs. Industry (4.5%), 1993-1996 Tweeter (14.5%) vs. Industry (5.6%) The same store sales increased by 50% from 1993 to 1996 Net income has grown from -$661K in 1993 to $ 3,600k in 1996 from Exhibit 7 Reasonable question on the contribution of APP

Low awareness, failure of Bryn Mawr

Cost?

780k/29*12=320k/ year, about 0.39% of sales

Is APP Sustainable for Tweeter

Necessary factors for APP effective


Sufficient product overlap to make APP a credible promotional strategy Sufficient product uniqueness to generate the overall margins necessary to maintain the business Tweeter, 44% (32 of 73)

Can competitors copy APP?


Cambridge Soundworks: overlap is too low, not credible Lechmere (60% ), Circuit City (60%), the Wiz (70%)

Small market share of Tweeter (3.6%)

Tweeter, etc. take-aways

Think through cases using a market orientation

Objective vs. subjective price perceptions:


Price image price easy to change prices, hard to change image

Think through the three Cs!

Customers (behavior): how do they buy? How does APP affect the
buying process? Who are their customers? Who should be?

Company (Costs): how much does APP cost? Is it worth it? How
does APP affect Tweeters brand image?

Competitors: how can/will they respond to APP?

Tweeter, etc. take-aways

Marketing Strategy requires rigorous analysis to arrive at a positioning strategy.


The APP program is not a stand alone activity. It is an integrated part of how Tweeter seeks to position itself in the marketplace (and find points of parity as well as points of differentiation versus the competition). A view of the role how the APP program works depends on segmentation and targeting (price biters vs. quality/service).

Good decisions rely on both quantitative and qualitative analysis

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