Tweeter 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...