P T Segment B D example essay topic

Background Black and Decker (B&D) is a pioneer in portable power tools. In 1991, it is a $5 billion in sales company with 29% of these sales coming from Power Tools and Accessories. B&D is the world's larges producer of power tools and the U.S. market overall leader. Problem Statement B&D has a strong market share in the consumer and industrial markets, but is weak in the P-T market as it is currently experiencing decreased market share. In this segment, B&D is not generating profits and, at the same time, retailers want more advertising allowances and rebates. Analysis The U.S. power tools market is divided into three segments: Consumer (home use buyers), Professional-Tradesmen (P-T) (contractors who purchase their own tools), and Industrial (procuring professional buying in large quantities for industrial usage).

The P-T segment is the one experiencing the largest growth potential. B&D is one of the most powerful brands in power tolls. Its products are generally regarded to have high quality. B&D currently has 45% of the Consumer and 20% of the Industrial markets. However, in the P-T segment B&D holds only 9% of the market and is in near parity with Milwaukee Electric (10%) and trails Makita, which has captured 50% of the market. Makita was able to grow rapidly in the P-T market as its dominance was aided by the rapid development of a new type of distribution channel, the Home Centers such as Home Depot, which Makita actively sought.

B&D, however, was not able to grow quickly in the P-T market due to Tradesman's perception of its P-T Line. The Tradesman market perceives B&D as a "Consumer" product that is not on par to handle professional tasks. This is evident in that in studies of brand perceptions in the P-T segment, six manufacturers out-rank B&D, three tie with B&D, and only one is rated with lower quality. On blind trials the quality of B&D P-T products often outranked those of the manufactures whose quality was perceived to be better, implying that B&D's problem is not of having bad products, but of having a bad reputation. One factor contributing to the perceived higher quality of Makita and Milwaukee is that both are priced at a premium, and on average, are 5-10% more than B&D. This difference in price contributes to foster the perception by the P-T market that because the competitors' products cost more, they have higher quality. Another factor is related to the color of the product.

In the power tools industry, color is often used for product differentiation. Consumer tools in the market are Black or Charcoal Grey. B&D uses Black for Consumer and Charcoal Grey for Professional Grade tools, this lack of color differentiation makes it difficult for purchasers to determine which products are Professional and which are Consumer, which may have facilitated the use of B&D consumer grade products to professional tasks, thus generating an inordinate high rate of failure. Conversely, other manufacturers use higher color differentiation and use colors such as teal (Makita), red (Milwaukee), or green (Hitachi) to differentiate the P-T products from the black / charcoal grey consumer products. Research on Tradesmen's brand perceptions shows that De Walt, a B&D brand associated with "industrial yellow" has a 70% awareness rating and is ranked by 63% of those in the P-T market to be "One of the Best", which is much more than the 44% of people in this market who think the same of the B&D brand. Although the purchase interest in De Walt is 51% compared to 58% of "De Walt-Services and Distributed by Black and Decker".

Despite all of this, B&D strongest rival, Makita, exhibits a few weaknesses that can be exploited by B&D. Customers, in general, have been exposed to positive Makita interactions; retailers on the other hand have had a different experience. Makita, in general, did not support all of their retailers as it did not offer channel protection and was regarded by some as "arrogant and dictatorial". The "very knowledgeable" industrial segment buyers relegate Makita to second tier status, and in its home market (Japan) Makita was not the market leader. Alternative Options Given B&D situation, the firm currently have a few major options: 1: Harvest Professional-Tradesmen Channels; 2: Get Behind Black & Decker Name with Sub-Branding; 3: Drop the Black & Decker Name from the Professional-Tradesmen Segment- 3 a: New Brand Name with a New Color; 3 b: Use one of B&D's Established Brand Names (De Walt) with a New Color; 4: Increase Relationships with Retailers. Recommendations The recommendation is for B&D to use the De Walt name and the color yellow for the P-T market. It should also increase the retailer relationships with the Home Centers and Two-Step channels.

The justification for this recommendation follows below. Option 1 requires B&D to focus on the Consumer and Industrial markets, while ignoring the P-T market. Since the P-T market is growing at a larger rate than the Consumer or Industrial Markets, alienating the P-T market could imply larger losses in the future. As the home improvement market grows, so will grow the potential for increased home improvement instruction through Home Centers, the internet, or television.

Dropping from the P-T market will thus decrease brand awareness for B&D, and increase the sales of competitors' models as consumers may base purchasing decisions on what the expert uses. Option 2 may help to increase P-T Market share, but will not increase it as much as is potentially possible, since the negative connotations associated with the perceived quality of B&D P-T line may remain. The recommended Option 3 is that B&D should go with the established De Walt and Industrial Yellow. Marketing De Walt alone is a better choice, as there are negative perceptions of the B&D line concerning reduced quality. Increasing the De Walt brand awareness and improving the perceived quality will be easier and more successful to accomplish than increasing B&D's perceived quality at the P-T market.

The color of the new line should be "Industrial Yellow" because other power tool companies have not used this color. It is a bold color, and will stand out compared to the other P-T colors. In the early stages, the positive associations will be associated with the original De Walt Company's reputation and safety as this color is used to indicate safety. As the De Walt line's positive market perceptions grow, Industrial Yellow will be easier to identify the high-end P-T line and will automatically be associated with high quality goods. Although not sufficient by itself, Option 4 is also interesting for B&D, since Makita has already damaged relationships with retailers, and retailers "push" of products is an important element in driving sales..