Black & Decker HBR Case Study Analysis

Marketing Mid Term Assignment

Alex Scott Student no. 1920428 Marketing C105 Spring 2014 Stream E, MBA2015

1. What is the cause of Black & Decker’s 9% share versus Makita’s 50% in the tradesmen segment?

Explain your answer (20%). Black & Decker’s (B&D) low market share in the tradesmen segment is due to poor positioning. B&D’s current positioning in this segment does not account for the consumer psychology of tradespeople. B&D’s products are high quality and should theoretically provide tradespeople w ith

what they need but a psychological psychologi cal 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 company’s performance in this market?

(30%) The purchase process of tradespeople is the primary cause of the low market share in the tradesmen tra desmen segment. The contrasting purchase processes of each professional segment are contrasted in Table 1. Table 1 - Purchase process by professional segments

Segment Professional - Industrial

Purchase process Strictly based on objective criteria such cost, performance, and quality Biased towards “System 2” decision making

Professional – Tradesmen

Say 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&D’s market share in each segment. B&D’s products have been recognised by the Industrial segment

because of their objective high quality and durability. However in the t radesmen segment this quality has not been acknowledged because of the segme nt’s bias against B&D’s strength in the consumer segment.

3. Which of the three alternatives a lternatives presented at the end of the case c ase 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 in Table 2.



Table 2 - Options recommendations

Option 1

Description Harvest ProfessionalTradesmen Channels

Recommendation 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.  



2

Get Behind B&D Name with Sub-branding

 



3

Drop the B&D Name from the ProfessionalTradesmen Segment

 





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. Yes, choose this option. Best option because it removes the main barrier to penetrating this segment. Also limits any risks to the professionalindustrial 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): Makita’s arrogance in how it deals with di stributors 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 segment’s emotional tendencies and their pragmatic needs at work. Action – Conduct consumer research to better understand tradespeople’s receptiveness to promotions such as lotteries. Price: It is critical that we introduce the price of the D eWalt 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 launch

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Priority products Cordless drills Circular saws Corded drills Finishing sanders Scruguns Chop saws Impact wrenches

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Phase 2 Angle grinders Reciprocating saws Jig saws Hammers/drills

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Invest in R&D 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 launch Action - Invest in R&D for weak/undeveloped products for introduction in future product waves There is an o pportunity to address Makita’s 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 packaging We can see from Figure 1 below that there are relatively few options left on the colour spectrum. Copying a competitor’s colour is not advisable because it could be interpreted as imitation. Purple, dark blue and orange are all too close to existing competitor’s colour palettes (examples of each product line are shown in Exhibits of this report).


Alex Scott Student no. 1920428 Marketing C105 Spring 2014 Stream E, MBA2015 Milwaukee

DeWalt

Makita

Hitachi

Figure 1 - Professional-tradesmen competitor colouring

In 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


Black & Decker HBR Case Study Analysis

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