Pioneer Electronics Essay Example for Free

innovator Electronics EssayIn 1975 introduce maintained relationships with approximately 3,500 franchise retail outlets, the retail outlets benefited from a 5% originate investment in local advertising, and attractive gross metes and credit terms. However, that same year, Pioneer and three competitors were forced to sign react decrees with the U.S. Federal Trade Commission promising not to engage in alleged anti-fair competition practices that is to say requiring distri thators to spend suggested list prices and punishing those distributors who didnt comply either through with(predicate) delayed shipments or revoked franchises.A grocery price war followed the signing of the consent decrees, cast downing franchises advances firearm increasing revenue for Pioneer. Pioneer followed with a immature commercialiseing strategy aimed at pushing its newfangled lower-priced accurate lots everyplace compacts or consoles, this further boosted Pioneers profit, continuing t o erode the franchise distributors profit margins. The final outcome was a select few distributors shifting from supporting Pioneer component gross revenue to pushing competitors products in order to make a larger profit.Central ProblemPioneer Electronics must determine how to move forward from franchise distributors complaints that they cannot make an adequate profit selling Pioneer components over the lesser tint, more(prenominal) affordable competitors components. The result is dissident behavior by the distributors including disparaging comments nearly the Pioneer sucker to potential consumers, poor product placement in franchise stores and bait and switch gross revenue tactics. These actions reflect a possible erosion of franchise distributor support, which might force Pioneer to spay its business model.Relevant FactsWith the repeal of the fair-trade laws, the market place changed drastically for Pioneer, gross revenue and market share increased significantly during thi s period, prices and margins dropped. As the target market for their products expanded, Pioneer changed their marketing strategy to focus on selling mid-priced hi-fi products. Pioneers sales continued to climb, but this strategy squeezed the dealers margins even more and made it ambitious for them to make a profit selling Pioneer products. Pioneer decision to reposition itself from a premium-priced discoloration into a mid-priced, mainstream firebrand affected the profit margins of its distributors negatively. At the same time, the companys profit margin increased dramatically. Based on 1976 data from Exhibit 13, an average retailer profit margin was about 3.4%. Pioneer had a comparable profit margin of 3.9% in 1975, based on Exhibit 14 data.This margin increased by almost 3 times in 1976 to 9.4%. This clearly shows how Pioneer benefited from its market repositioning strategy while its distributors profits declined. Although surveys showed customers were very satisfied with Pione er products, the sales force was disquieted and felt the lower margins were unacceptable. This drove a few dealers to speak disparagingly about Pioneer products and use bait and switch tactics to create profits for themselves. Mitchell knew the dealers support was critical to the current distribution chain, but he couldnt go back to the old incentives. To continue to be profitable and adapt to the new electronics market, Pioneer reconsider its current distribution network.Alternative Courses of ActionAlternative 1 Shift distribution to segment stores Shift retail distribution from military capability stores to department stores and catalog showrooms. 75% of U.S. Pioneers sales were from hi-fi specialty stores, 5% by department stores, and 7% by catalog showrooms. Advantages spacious credit facilities, strong consumer pull advertising, and lower prices. Industry sources predicts a substantial increase in the market shares of department stores and catalog showrooms. Disadvantage s Department stores and catalog showrooms do not offer the extensive customer black market provided by specialty stores, including professional sales assistance, demonstration, extended store warranty, on-the-premises repair, home delivery and installation, and loaner component programs.Alternative 2 Multiple Branding U.S. Pioneer would offer several product lines of varying quality and price points under separate brand names. Different product lines would be carried by different types of retail outlets. The department-store line would be of lower quality and price than the signature line. Advantages Multiple branding had been used successfully in other industries. It would enable U.S. Pioneer to adapt most effectively to future changes in retail distribution. Pioneer already sells compacts and car stereos to discount stores under the Centrex brand name. Disadvantages This strategy could tarnish Pioneers reputation for selling only top-of-the-line products. Pioneer may collect t rouble keeping their distribution channel distinct, and therefore be incurring too much cost on the low end products or being destroying the brand value of the high end products.Alternative 3 Company-owned Stores Another alternative is to operate its own retail stores. Some retailers in the low-fi market had been selling their own house brands for some time. field of operations brands are starting to make in-roads in the hi-fi market and the specialty stores are carrying house brands in increasing numbers. Advantages One way to protect Pioneer from the luck of large specialty store custody promoting house brands which would impact its sales. Disadvantages A large initial fixed investment for starting up is required. The risk of expanding into a non-familiar territory which Pioneer does not have good expertise in.Alternative 4 corpus Communication improvement Dealer support is crucial for Pioneer growth. From Table A Factors Influencing Purchase of high fidelity sound system Pr oducts in the case, it clearly shows that dealer recommendations, advertising and store displays accounts for 42% of the factors influencing consumers decisions. The company needs to hire more salespeople to increase the frequency of dealer visits, provide higher cash rebates or other incentive programs and organizing yearbook dealers conferences at different resorts. Pioneer needs to stop forcing its dealers to prominently display low-end components and push lower-priced components. Selling lower priced components affects the retailers profit margin.This results in placing higher sales emphasis on house brands or competitor products. Advantages Retailers salespeople are the companys point of contact with its customers. Happy and heart and soul dealers volition push Pioneer product which will increase companys sales. Disadvantage The brand is what sells the product. The company should not waste funds on dealer rebates and conferences. This will result in a rebate war between diff erent manufacturers.Plan of ActionPioneer should pursue a three-fold label branding strategy to capture sales in both the high end and missed cost market segments, which will increase total revenue and profits. The company is already implementing this through its Centrex brand name in Japan. This strategy will enable Pioneer, through the Centrex brand, to target the growing department stores market with its lower price product segment. The signature Pioneer brand can still be marketed through Hi-Fi specialty stores. Under this arrangement Pioneer will need to develop a customized sales and marketing plan for each brand and have separate sales and distribution channels. Pioneer will continue to contribute a component of sales to local marketing campaigns to assist local specialty retailers in maintaining local recognition within the community.The Centrex brand will be distributed through the larger department stores and because of the national recognition of these stores there wou ld not be a need to contribute a percentage of sales to assist in local marketing. These funds should be used for other promotional items in the large department stores, such as contests for the largest sales in a month or quartern or number of a specific product sold. The company should also simultaneously invest in improving its working relationship with their dealers.The first thing that Pioneer will need to do is to stop over printing ads in newspapers and/or journals to communicate to dealers about unapproved behavior. These types of conversations should be conducted behind closed doors, as incomplete side wins when they communicate in a public forum. Pioneer will need to begin to postulate their feedback and input on new market trends, consumer needs and product improvement suggestions and adjust the Pioneer products accordingly. Pioneer should implement the sales program from Exhibit 12 and shift some of the funds from the marketing campaigns to have local contests to spu r sales among local sales force.