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 Lechmere
Price

500
Circuit City
400
The wiz
300
200 Tweeter
100
0
CCTV Multiple CD Cam corders Stereo
players speakers
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
Tweeter’s price image
 Mean product price for
overlapping products

$1,000.00
11 or 37% 11 or 23%
$900.00
8 or 28%
$800.00
10 or 35% 9 or 47%
$700.00

$600.00 5 or 25%

$500.00
Competitors
$400.00
Mean price
4 or 20%
$300.00 Tweeters
3 or 18% 4 or 19% 1 or 10% Mean price
$200.00

$100.00
0 0
$0.00
The Wiz

The Wiz

The Wiz

The Wiz
Lechmere
Lechmere

Lechmere

Lechmere
Circuit City

Circuit City

Circuit City

Circuit City
COLOR TV CD PLAYER CAMCORDER Stereo Speakers

* 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
 Mean product price for
overlapping products

Color TVs (Tweeter carries 14 Models: 11 overlap and 3 are unique to Tweeter)

Lechmere Circuit City The Wiz

Competitors Mean price $675.00 $552.00 $666.00

Tweeter’s Mean price $668.00 $566.00 $676.00

No. of Overlapping models 10 5 9

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

Lechmere Circuit City The Wiz

Competitors Mean price $193.00 $256.00 $215.00

Tweeter’s Mean price $180.00 $257.00 $200.00

No. of Overlapping models 3 4 4

 Mean product price for
overlapping products

Camcorder (Tweeter carries 13 Models: 12 overlap and 1 are unique to Tweeter)

Lechmere Circuit City The Wiz

Competitors Mean price $893.00 $875.00 $805.00

Tweeter’s Mean price $895.00 $877.00 $806.00

No. of Overlapping models 11 11 8

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

Lechmere Circuit City The Wiz

Competitors Mean price N/A N/A $215.00

Tweeter’s Mean price N/A N/A $200.00

No. of Overlapping models 0 0 1

Subjective Price Competitiveness

Small
High End
Upscale
Products
Stores

Past Price
APP
Image

Tweeter’s
Limited Everyday
Advertising Price Fair Price
Image
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 Under APP, consumers
that if price were not Eliminating have less incentives to
Breaking
an issue, they would need for wait, hence breaking
sale season
prefer to buy at extensive sale season buying
buying
price based
Tweeter. mentality mentality.
research

APP helped in APP eliminates the

Converting
eliminating the need Smoothens cyclical buying
free riding
for potential or free- demand
or potential patterns of sale-based
riding customers to go over time
customers retailing and
to another store in smoothens demand.
search of lower prices

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% Responders
30.00% unaware of
20.00% Tweeters APP
10.00% Responders aware
0.00% of Tweeters APP
Lower About Higher Don't
the know
same

People aware of Tweeter’s APP policy showed better knowledge

of the prices of APP
 Effectiveness of APP :
Necessary Factors

Pricing strategy must be Tweeter’s customers pay
coordinated with other lower prices for products
marketing mix that overlap with its
Activities Marketing competitors
Mix Lower Prices
Activities

Management
Sufficient overlap to of Product Product Sufficient product
Overlap Uniqueness uniqueness to generate
make APP a credible
promotional strategy in overall customer margins
the eyes of the consumers necessary to maintain the
. business
 Effectiveness of APP :
Financial Impact

90000 CAGR of 23.52%
from 1993 to 1996
80000
70000
60000
50000 Industry sales
in million dollars
40000 CAGR of 5.4% from
1993 to 1996 Tweeters sales
30000 in (1000$)
20000
10000
0
1990 1991 1992 1993 1994 1995 1996
 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
 • Implementation of
not benefit much if APP would lead to
they implement APP change in customer’s
they have either very perception of
low product overlap Tweeter’s product
(Cambridge being high priced and
Soundwork) or very Imitability would lead to a
low product Change in sustainable change in
by the buying behavior
uniqueness Price
Competitor of customers
Perception
s

Elimination Conversion
of cyclical of free
buying riding
• APP eliminates the behavior customers • APP eliminates the
cyclical buying price based searching
patterns of sale-based behavior. Also it
retailing and leads to helps in reducing
a more sustainable promotion cost
model by
smoothening demand