Pricing Policy

Submitted By Group 10, Section A Anshu Kumar Nakul Gola Nikhil Sharma Nishad N Sudeep Mohan M Yadav Rahul Radhakishan

Objective Price Competitiveness: Mean Product Price

Mean Product Price

1000 900 800 700 600 500 400 300 200 100 0
CCTV Multiple CD Cam corders players Stereo speakers

Price

Lechmere Circuit City The wiz Tweeter

Objective Price Competitiveness: Mean Product Price

Mean product prices are higher by 15-27% for 27 TVs and Camcorders, by 65% for CD players and by 125% for Stereo speakers. Reason for these high prices is that Tweeter does not carry entry level products which are lesser in price. Higher mean prices do not imply lower price competitiveness for Tweeter because it offers high quality products. Also its promotion of high-end, high quality products create a picture of premium shop. And the high quality service offered was believed to be a factor of cost But the 15% to 125% price premium does have an impact on Tweeters price image

Mean product price for overlapping products

$1,000.00 $900.00 $800.00 $700.00 $600.00 $500.00 $400.00 $300.00 $200.00 $100.00 $0.00 The Wiz The Wiz The Wiz Lechmere Lechmere Lechmere 0 0 Circuit City The Wiz 3 or 18% 4 or 20% 4 or 19% 10 or 35% 9 or 47% 11 or 37% 11 or 23% 8 or 28%

5 or 25%

Competitors Mean price 1 or 10%

Tweeters Mean price

COLOR TV

CD PLAYER

CAMCORDER

Circuit City

Circuit City

Circuit City

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

Lechmere

Stereo Speakers

Mean product price for overlapping products

Color TVs (Tweeter carries 14 Models: 11 overlap and 3 are unique to Tweeter)
Lechmere Competitors Mean price Tweeters Mean price No. of Overlapping models $675.00 $668.00 10 Circuit City $552.00 $566.00 5 The Wiz $666.00 $676.00 9

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

Lechmere Competitors Mean price Tweeters Mean price No. of Overlapping models $193.00 $180.00 3 Circuit City $256.00 $257.00 4 The Wiz $215.00 $200.00 4

Mean product price for overlapping products

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

Lechmere Competitors Mean price Tweeters Mean price No. of Overlapping models $893.00 $895.00 11 Circuit City $875.00 $877.00 11 The Wiz $805.00 $806.00 8

Stereo Speakers (Tweeter carries 23 Models: 1 overlap and 22 are unique to Tweeter)
Lechmere Competitors Mean price Tweeters Mean price No. of Overlapping models N/A N/A 0 Circuit City N/A N/A 0 The Wiz $215.00 $200.00 1

Subjective Price Competitiveness

Small Upscale Stores Past Price Image High End Products APP

Limited Advertising

Tweeters Price Image

Everyday Fair Price

Subjective Price Competitiveness

Considering only the overlapping products it can be seen that difference between Tweeter's prices and its competitors is not vey much But as tweeter stocks medium to high end products which are price higher than its competitors entry level products, it is perceived 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

Introduction of APP for Customer Acquisition

Consumers indicated that if price were not an issue, they would prefer to buy at Tweeter. APP helped in eliminating the need for potential or freeriding customers to go to another store in search of lower prices

Eliminating need for extensive price based research Converting free riding or potential customers

Breaking sale season buying mentality

Under APP, consumers have less incentives to wait, hence breaking sale season buying mentality.

Smoothens demand over time

APP eliminates the cyclical buying patterns of sale-based retailing and smoothens demand.

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

Effectiveness of APP

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

Lower About Higher Don't the know same Responders unaware of Tweeters APP Responders aware of Tweeters APP

People aware of Tweeters APP policy showed better knowledge of the prices of APP

Effectiveness of APP : Necessary Factors

Pricing strategy must be coordinated with other marketing mix Activities

Marketing Mix Activities

Lower Prices

Tweeters customers pay lower prices for products that overlap with its competitors

Sufficient overlap to make APP a credible promotional strategy in the eyes of the consumers .

Management of Product Overlap

Product Uniqueness

Sufficient product uniqueness to generate overall customer margins necessary to maintain the business

Effectiveness of APP : Financial Impact

90000 80000 70000

CAGR of 23.52% from 1993 to 1996

60000
50000 40000 30000 20000 10000 0 1990 1991 1992 1993 1994 1995 1996 CAGR of 5.4% from 1993 to 1996 Industry sales in million dollars Tweeters sales in (1000$)

Effectiveness of APP : Financial Impact

There is clear indication of increase in sales from 1993 to 1996 with sales showing a year on year increase of 23.52% as compared 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

Sustainability of APP
Competitors would not benefit much if they implement APP they have either very low product overlap (Cambridge Soundwork) or very low product uniqueness

Imitability by Competitors Change in Price Perception

Implementation of APP would lead to change in customers perception of Tweeters product being high priced and would lead to a sustainable change in the buying behavior of customers

APP eliminates the cyclical buying patterns of sale-based retailing and leads to a more sustainable model by smoothening demand

Elimination of cyclical buying behavior

Conversion of free riding customers

APP eliminates the price based searching behavior. Also it helps in reducing promotion cost