In short, increased specialisation in power tools usage combined with the proliferation of applications, have caused manufacturers to establish more direct links to customers. In the case of B&D, they are no different from other manufacturers in marketing their products except that they do not employ membership clubs to market their products in the Tradesman segment.
2.3 The environment factors
B&D have a number of strengths that translate into competitive advantages in both the current and industrial market. It has been in the power tool industry since its inception in 1910. B&D’s brand name is well-known and has become synonymous with power tools. B&D is a global manufacturer of power tools and accessories, having manufacturing plants in 14 countries and sold over 100 countries worldwide, commanding a sizeable share of the world market, In fact, in America, B&D’s brand name ranks seventh among 6000 brands and is in the same league as Coca Cola, Kodak, Walt Disney – to name a few. This well established brand name will continue to be an asset to B&D.
In addition to its brand image and sheer size of operations, new product introduction was a high priority. The company launched 77 products in 1989 alone. Its products are known for quality and reliability. In fact, the company has set up a research team comprising employees from around the world to get the right product line to customers as quickly as possible. Another strength of B&D is its strategic acquisition of relates business such as DeWalt high performance industrial equipment, General Electric houseware division, Kwikset security hardware, Price Pfister plumbing products and Emhart fastening systems. These businesses had assisted in the power tool product development and transformed B&D into a diversified company. The above strengths are critical in today’s global market in order to stay competitive. Nevertheless, the business expansion may place the company in financial distress with the high gearing. A comforting fact is that for the last five years (1986-1990) the company’s revenue and net income were on the increasing trend, easing the burden of servicing the debts.
Besides the internal environment, the external environment also has a correlation in B&D’s performance. During the 1980s, the American economy was going strong. At the same time, the government was dismantling regulations that sheltered corporations to liberalise the whole economy. It was the era of “free enterprise”. The technology revolution during the 1980s brought new entrepreneurial culture to economy in general. During this period, the power tool industry also became increasingly globalised. This has resulted in companies looking for new markets. The US market, being one of the largest markets, attracted new competitors from other parts of the world, especially Japanese manufacturers. This change in the external environment affected B&D’s business; in particular the Tradesman segment.
3.0 Key Issues
Over the years B&D has not only established a name in the power tool industry. It has become a premium leader known for its creativity and quality products i.e. Dustbuster and Spacemaker, for the consumer market segments. However, B&D could not leverage on its strong market positions and brand name in the industrial and consumer segments into the Tradesman segments. The company was facing stiff competition from Makita, a Japanese manufacturer which dominates the Tradesman segment with about 50% of the market share compared to 9% by B&D.
There were various issues that contributed to the poor sales. One of the key issues was the wrong perception, B&D is generally known for its high quality products but in the case of tradesman power tool, it was otherwise. This could be due to the involvement of B&D both in the high-end and low-end market products. B&D are a popular name in the line of low-end power tools for the do-it-yourself market. By extending its name to high-end power tools in the tradesman segment had somewhat caused confusion. The consumers are not able to distinguish the difference in the power tools capabilities. When a cordless drill in the professional segments sell at $130 and the same brand name appears on a $30 drill in the ‘do-it-yourself’ segment, it resulted in a discrepancy which raised doubts concerning the product quality in terms of performance, reliability and durability. By extending a low-end product name to the high-end product, it inadvertently devalued the brand name equity. Besides its involvement in both the market, product difference in terms of colour is also a key issue for the poor sales. Charcoal grey is used for the professional tradesman segment. Other consumer tool manufacturers had consecutively followed B&D’s success in the consumer segments by producing their tools in either black or charcoal grey. This caused further confusion and misconception to the B&D’s tradesman power tools, rendering the high-end B&D market vulnerable to Makita who came in with its “high priced, high quality” position to win over the professional market.
The problem is further compounded with the lack of promotion. This is clearly seen as B&D was trying to capitalise on its consumer market position to sell tradesman tools, which incidentally belongs to a different segment in the power tools market. The marketing division of B&D was aware of the problem, and acknowledged that its strength as a consumer brand was not necessarily beneficial for the Professional Tradesman segment. Due to the lack of promotion, the product’s ability and quality was not effectively communicated to the tradespeople; the end-users of the tradesman segment. Therefore the perception of tradespeople towards B&D power tools turned negative. This is damaging because the product acceptance by tradespeople is crucial to B&D’s business growth in the Tradesman segment.
Besides the above, the distribution channel through which the products are marketed is also another area of concern. B&D products are only made available to the tradespeople via third parties in hardware stores, home centres, farm outlets and warehouses. The company relies on the third parties to interact directly with end-users in promoting their products. This dependency for disseminating information is a disastrous strategy for the tradesman segment. It may be more beneficial for the Professional Industrial segments as the people involved are product specialist who are able to provide detailed explanation on the products. However, the persons employed by the hardware stores, warehouses, retail wholesaler and home centres are not trained in the power tools industry and so are not able to promote the use and benefits of the products. The absence of direct relationship with end-users has created a communication gap in B&D distribution channels. As in the case of Makita, besides using the normal distribution channel, it also markets its products via membership club. Though this channel only brought in 10% of sales for the tradesman segment, the exclusive promotion is important as it covers the tradespeople who are the targeted end-users of the segment. The combination of issues detailed above, or rather the lack of foresight in B&D’s promotional strategies contributed to the poor sales of power tools in the tradesman segment for the company.
B&D is known to be among the powerful brand names in the world and its professional tools to be the highest quality in the industry. Despite the strong brand name and product quality, B&D only occupies the third position with a market share of 9% in the Tradesman segment. B&D determines to increase its market share by capturing Makita’s share. Therefore, B&D must reformulate its marketing strategies to challenge Makita for leadership in this segment.
First and foremost, the wrong perception of the company’s products needs to be addressed. One of the strategies would be in re-branding the product by reintroducing the power tools under a different brand name. B&D is a strong brand name in the DIY segment or low-end product market while the tradesman power tools are for the high-end. In order to prevent a wrong perception of product quality, it should be reintroduced under DeWalt brand name. The possible implication would be loss of revenue but the segment’s contribution in 1990 represents only 0.7% - a not so significant figure. Nevertheless, the risk could be mitigated by leveraging on DeWalt brand name as the company is also a manufacturer for power tools. In fact, the result from “One of the best” survey showed that DeWalt scored 63%, indicating a strong product acceptance among the trades people compared to 44% for B&D.
With the rebranding, the company should consider changing the colour of the product from Black or Charcoal Grey to some contemporary colour. The recolouring is important to distinctively differentiate the tradesman products from the consumer products. It would create a separate identity for B&D professional power tools. B&D could also adopt the Industrial Yellow for the Tradesman product, which incidentally is DeWalt’s colour. Furthermore, it is a familiar job site colour associated with safety where other power tool products are yet to be identified with. Still, rebranding and product changes alone will not revitalise the market. There should be aggressive advertisement and promotional activities launched to increase awareness that leads to brand loyalty. B&D is a household name that is fast associated with the consumer segment. Reflecting the success of brand retention as a long-term memory of a person is an indication of successful advertisement and promotional campaigns. The same brand awareness should be created for the professional tools. High cost is involved in advertising and promotional campaigns but they are worthwhile investments as they can assume an identity for their products that differentiates them from their competitors. In fact, a strong brand name is a valuable asset for a company, adding to its networth. The advertising and promotional campaigns could help update and educate the trades people on how to use the firm’s products – also another feature of customer service. Live demonstrations could be conducted by professional tradespeople at construction sites, on TV, at distributor’s outlets or even recorded on VCD to be made available for viewing by potential customers. This is an effective way to introduce the range of power tools available in the tradesman segment. Furthermore, B&D could sponsor TV shows such as the Home Improvement sitcom and promote its products as part of the show. Another suggestion would be to host tradespeople TV shows to introduce and demonstrate the use of the tools as avenues to disseminate information to the public and improve its image, differentiating its image from the rest as an effort to stimulate sales growth within the marketing segment.
The distribution channel is the connection between the manufacturer and the end-users. Since B&D products are only available to the customers via third party retail distribution, it is important that B&D create strategic alliance with the appropriate distribution channel operators in order to reach the end-users. B&D can benefit by leveraging on the strength of the distributors to create more value and sales. The products under the tradesman segment are high-end products. Therefore, it should choose distribution outlets geared towards professional power tools such as Home Depot, Home Clubs and hardware stores which are located across the country. The benefit here is that B&D could use the distributors or retailers to display the company’s advertisements at points of purchase. B&D could then provide for incentives to retailers to promote their products. B&D could also provide special discounts and gifts to their distributors to earn their loyalty. Smooth relationship will also ensure efficiency in delivering products to end-users. Hence, a close working relationship is paramount between distributors and the company.
B&D had not included membership clubs among its distribution channel of tradesman power tools. One of the reasons could be that the company is not willing to jeopardise its relationship with the other distributors. Nevertheless, B&D could establish a Tradesman Club as a communication channel. The club can be operated as a membership-based programme designed to provide customers with industry news, product information, special promotions, brand merchandise and other exclusive offers. Members of the club will be comprised of tradespeople. The B&D customers can enrol in the club through a specially created website. Newsletters can be sent via the E-mail or regular mail. The publication will provide trades people with a wide range of industry and job related news that impacts their profession with firsthand information on new products. Apart from providing information, B&D could also request feedback about its products. With the information collected, a database can be created. The data would then provide information about the purchasing habits and methods of each customer, the preferred distribution channels and other specific order information that would be relevant, thereby discovering future needs. These tactics create and enhance personal relationships with consumers which are essential in any marketing strategy.
Product development is recognised as an important method in achieving differentiation and continuity of business. In this respect, a Research and Development (R&D) team should be established to solely be involved in tradesman products. To minimise cost, the existing staffs could be used. At the same time, to generate new ideas, B&D could initiate programmes to get employees to contribute ideas. This is to provide a broader range of products for customers in order to retain them with the company. At the same time, this flexibility will improve productivity as well as reduce cost.
By embarking on the above-mentioned marketing strategies, Black and Decker would be able to remove the wrong perceptions of the product quality and build a distinctive image that would improve its market position. At the same time, the communication gap in its relationship with customers could be bridged. Going forward, B&D should be more sensitive in regards to the changes in customers’ needs. The company should also be fully aware of any new opportunities, emerging in the domestic (US) market.