RU Consulting, L.L.C
Brenna O’ Regan
Tweeter, etc. is an audio/video company that faced pricing strategy problems in 1993 that made the history books for adverse pricing strategies. Sandy Bloomberg formed the company in 1972 and the company faired well in the 1970’s and 1980’s. It grew to 13 stores when they implemented the Automatic Price Protection pricing strategy. This strategy nearly drove the company into bankruptcy. The company still faces unremitting problems which this paper will address. This ...view middle of the document...
 In short this organization kept the retailer’s market from dropping out from under them. They did this by setting price standards up that nobody who sells certain brands and models of products can sell them below a given price at which they all agreed to.
In the early 1990’s, Tweeter’s sales were dropping. They conducted focus groups to figure out where the problem was. Their surveys said the customer understood that they had excellent service, but they didn’t like the high prices. So Tweeter’s management staff came up with Automatic Price Protection to combat the perception of high prices. Tweeter would monitor the weekly sales ads of all the major local papers and cross reference that with sales within 30 days; and if a customer paid more for a product than the sale price, Tweeter would refund the difference. At first, this strategy was good, but as larger competition moved in, Tweeter began writing more and larger checks. By December, 1995, Tweeter in total had written 29,526 checks to the tune of $783,863.  This nearly drove the company into bankruptcy and later led them to be studied as adverse pricing strategies.
Tweeter began to shift its focus from APP pricing strategy to making money by acquisition of other small high-end retailers of electronics. Like the APP, this strategy worked well at first and then failed. Here is a listed breakdown of their acquisitions (listed only for historical relevance):
• “1996 Bryn Mawr -13stores
• 1997 HiFi Buys- 10 stores
• 1998 made their first public offering of stock, $40 a share and
changed their name to Tweeter Home entertainment Group, Inc.
• 1999 Home Entertainment of Texas- 7 stores
• 1999 DOW Stereo/Video, Inc. – 9 stores”
• “2000 Douglas TV- 4 stores
• January,2001 House of Blue Concerts to rename the Lakewood
Amphitheatre to HiFi Buys Amphitheatre
• April,2001 E-Center in Camden, NJ to rename it the Tweeter
Center at the Waterfront
• May, 2001Big Screen City- 4 stores
• June, 2001 Audio-Video Systems – 3 stores
• August, 2001 Sound Advice- 33 stores
• March 2002 Hillcrest High Fidelity
• April, 2003 Coral Sky Amphitheatre to Sound Advice
• July, 2004 NOW! Audio Video- 6 stores”
The purpose of listing all the acquisitions is to emphasize how the company has grown into 154 stores in 13 states and it is crucial to know where we have been so we know where we are going. Each of the companies that they acquired were small retailers with a reputation for high quality service and installations. This is a rapid evolution in 10 years. It changed its strategy to focus on becoming a national retailer. They were trying to become a household name through the ‘back door’ of people’s...