Marketing Mid Term AssignmentAlex Scott Student no.
1920428Marketing C105 Spring 2014Stream E, MBA2015
1. What is the cause of Black & Deckers 9% share versus
Makitas 50% in the tradesmen segment? Explain your answer
(20%).Black & Deckers (B&D) low market share in the
tradesmen segment is due to poor positioning. B&Ds current
positioning in this segment does not account for the consumer
psychology of tradespeople. B&Ds products are high quality and
should theoretically provide tradespeople with what they need but a
psychological barrier prevents market penetration. Tradespeople
perceive B&D products as more suitable for home-use rather than
for a job site.In addition to the consumer-oriented brand
perception there is also a lack of aesthetic differentiation of the
product. B&D power tools lack any distinctive colouring that
defines the competitors products in this segment. This reinforces
the image of B&D power tools as an inferior product that will
not stand up to the demanding requirements of job site work.2. How
does the purchase process of tradesmen impact the situation? More
generally, how do the purchase processes of the different segments
affect the companys performance in this market? (30%)The purchase
process of tradespeople is the primary cause of the low market
share in the tradesmen segment. The contrasting purchase processes
of each professional segment are contrasted in Table 1.Table 1 -
Purchase process by professional segmentsSegmentPurchase
process
Professional - IndustrialStrictly based on objective criteria
such cost, performance, and qualityBiased towards System 2 decision
making
Professional TradesmenSay that they are buying because
performance or quality but in reality they are heavily influenced
by brand perception. Biased towards System 1 decision making
These fundamentally different ways of making purchase decisions
has had a direct impact on B&Ds market share in each segment.
B&Ds products have been recognised by the Industrial segment
because of their objective high quality and durability. However in
the tradesmen segment this quality has not been acknowledged
because of the segments bias against B&Ds strength in the
consumer segment. 3. Which of the three alternatives presented at
the end of the case should Black & Decker pursue to address its
position in the power tools market? Explain your choice. (25%)I
recommend pursuing option 3 because it clearly addresses the root
cause of the low market share. An analysis of the three options is
presented in Table 2.
Table 2 - Options
recommendationsOptionDescriptionRecommendation
1Harvest Professional-Tradesmen Channels No, do not choose this
option. Will not achieve market share or operating income goals.
There is also a risk of losing more market share to stronger
competitors if B&D do not act now.
2Get Behind B&D Name with Sub-branding No, do not choose
this option. Not enough to distance B&D from its
consumer-oriented perception in the tradesmen segment. Consumers
will continue to think of B&D as a household products
company.
3Drop the B&D Name from the Professional-Tradesmen Segment
Yes, choose this option. Best option because it removes the main
barrier to penetrating this segment. Also limits any risks to the
professional-industrial and consumer segments. Some risks
associated with building a new brand but this is really the only
option that will address the underlying perception issue
4. For the alternative you have picked, present a tangible
action plan. What could the company do address the cause of its
current position with the tradesmen? Base your analysis on the
framework/s we have covered in class and on the case information.
(25%)We have structured our action plan based on the Place,
Promotion, Price, and Product framework.Place (Channels):Makitas
arrogance in how it deals with distributors presents an excellent
opportunity for B&D to improve distributor relationships and
capture market share.Action - Work with distributors to promote new
products (Makita offers no channel protection). For example we
could offer higher margins on large volumes of DeWalt power tools
in exchange for better shelf positioning, in-store advertising and
up-selling by sales people. Tradespeople make the majority of
purchases through Two-step and Home Center channels.Action Focus
initial product launch on Two-step and Home Center
channels.Promotion:We know that our tradesmen segment primarily
makes decision based on their System 1 decision making system. We
can therefore hypothesise that they will be receptive promotions
that target their emotional and intuitive decision making. For
example we could incentivize purchases of our product with
lottery-style prize draws for pick-up trucks; this would play on
both this segments emotional tendencies and their pragmatic needs
at work.Action Conduct consumer research to better understand
tradespeoples receptiveness to promotions such as
lotteries.Price:It is critical that we introduce the price of the
DeWalt brand as an equal to Makita and Milwaukee. This means
pricing at or above these competitors in order to establish the
brand as a premium alternative to the segment leaders.Action -
Conduct consumer research regarding price sensitivity and set
prices near those of Makita and Milwaukee.Product:From Table 3 we
can conclude that B&D has many industry leading power tools
that can be leveraged when creating the new DeWalt product range.
This is a tremendous strength that will help establish a strong
reputation in the tradesmen segment.Table 3 - Professional power
tool product assessment
In order to make best use of this strong product portfolio, we
recommend prioritising the following products when building the
DeWalt tradesmen power tools brand:
Table 4 - Phased product launchPriority productsPhase 2Invest in
R&D
Cordless drills Circular saws Corded drills Finishing sanders
Scruguns Chop saws Impact wrenches Angle grinders Reciprocating
saws Jig saws Hammers/drills Miter saws Routers/trimmers Belt
sanders
This phased approach to introducing the new DeWalt products
ensure that we establish the brand as a high-quality, premium
product that competes with Makita and Milwaukee. As our market
share grows we can begin introducing other competitive products in
a second phase of product launches. As our R&D investment
improves the undeveloped products then we can also introduce these
newly improved tools to the market.Action - Focus on industry
leading products in the first wave of product launchAction - Invest
in R&D for weak/undeveloped products for introduction in future
product wavesThere is an opportunity to address Makitas weakness in
Easy to get Service and Stands Behind Products (Table D, The Black
& Decker Corporation case study).Action - Opt for DeWalt
Serviced and Distributed by Black & Decker messaging in
advertising and product packagingWe can see from Figure 1 below
that there are relatively few options left on the colour spectrum.
Copying a competitors colour is not advisable because it could be
interpreted as imitation. Purple, dark blue and orange are all too
close to existing competitors colour palettes (examples of each
product line are shown in Exhibits of this report).
Figure 1 - Professional-tradesmen competitor colouringIn order
to differentiate our product from our competitors we recommend
choosing the distinctive industrial yellow for packaging and the
product itself. This is the natural choice for job sites where
yellow and black are often used for safety due to their high
visibility contrast.Action - Differentiate by using construction
yellow colour for power tools and advertising.The cumulative result
of these actions will provide our initial action plan for
introducing this brand to the tradesmen segment.
Exhibits
Makita power tools with distinctive teal branding Milwaukee
power tools with distinctive red branding
Hitachi power tools with distinctive green branding