Examining a Business Failure: Tweeter
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Examining a Business Failure: Tweeter
Tweeter Home Entertainment Group was founded in 1972 by a college dropout, Sandy Bloomberg in Boston Massachusetts and over 36 years grew the business to a public company with sales more than $232 million, over 100 stores strong and employed over 1400 people (Boston.com, 2008). Tweeter was a high-end audio and video equipment retailer with a reputation for excellent sales service and quality installations. The demise of Tweeter in 2008 was largely because to poor decision making by management in managing price perception, advertising focus and actions they took to compete to stay profitable.
Price Perception
Tweeters initial success was largely due to offering high end brands sold by friendly and knowledgeable staff. Consumers were drawn to the experience of shopping for electronics and were willing to pay higher prices due to the atmosphere of Tweeters showrooms, the attention they received by the sales representatives and the vast amount of knowledge shared when making purchasing decisions. However, in the early 1990s and with competition mounting, Tweeters sales started to slow. Under new management with the hiring of Jeff Stone, president and chief operating officer, he revamped Tweeters corporate strategy and quickly made changes to staffing and training to turn the falling sales around (History of Tweeter Home Entertainment Group, Inc.).
In addition to the internal changes, management surveyed their customer base and learned that although the consumer appreciates the high-level of service, Tweeters prices were too high so they implemented Automatic Price Protection guarantee (APP).APP would issue refund checks to customers within 30 days of their original purchase if a competitors pricing was advertised as better (History of Tweeter Home Entertainment Group, Inc.). The APP program was wildly successful; however, no one predicted that competitors like Circuit City and Best Buy would result in 30,000 checks were distributed in denominations of 20 dollars or less totaling just under a million in refund dollars. It was noted in their bankruptcy report that APP was viewed as adverse pricing strategies that aided in the demise of Tweeter (United States Securities and Exchange Commission, 1999).
Advertising Focus
Unfortunately, Tweeter did not learn from their experiences with APP and applied another proven failure concept in their advertising. As stated in The Strategy Process: Concepts, Contexts, Cases, 4e, as organizations age, they tend to repeat their behaviors: as a result, these become more predictable and so more amenable to formalization (Mintzberg, Lampel, Quinn & Ghoshal, 2003). Tweeter decided to stop print advertising and invest less money into radio advertizing. What Tweeters management was doing was losing sight of what their niche was and that was customer service and high-end products. With huge businesses like Circuit City and Best Buy offering lower prices to products that