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Tweeter Outlines New Business Strategy

5/17/2004 02:00:00 AM Eastern

Tweeter Home Entertainment Group unveiled a sweeping new business plan that emphasizes sales of bundled home theater products and services, targets its most profitable customer segments, and calls for a new brand campaign that conveys its home theater expertise.

Tweeter began developing the strategic initiatives last year with the aid of RetailMasters, a consultancy led by Wade Fenn and other former Best Buy executives in order to better differentiate itself from mass-market competitors, and detailed the plan for financial analysts last week.

According to a research note issued by CIBC retail analysts Dan Wewer and Vivian Ma, Tweeter's focus will be on selling pre-packaged home theater systems and attached installation services. To that end, the company plans to double the size of its in-house installer team to over 800 technicians within the next few years. The retailer expects that fully half of its profits will eventually be derived from installation and design services, maintenance contracts and other non-product sales, the analysts wrote.

The company will also concentrate on catering to and expanding the top 20 percent of its customer base, which generates 80 percent of Tweeter's profitability, the analysts reported. Further, in an echo of Best Buy's consumer centricity initiative, the chain has initially identified eight key demographics — including "maximum sensation seekers," "store trust seekers" and "cutting edge fans" — which it will target with more focused marketing.

Elsewhere, Tweeter will continue to improve inventory management through a number of measures. Those are: a further reducing its vendor base; cutting back on slower-growth categories like loudspeakers; and through a test of taking goods in on consignment. The company is also developing a new store format, based on a prototype store in Braintree, Mass., that features home vignettes, pre-packaged systems and a central flat panel TV wall. Some of those elements will be rolled out to some or all Tweeter stores later this year, the analysts observed.

To convey the changes and move away from a price-driven approach, Tweeter is developing a new advertising effort, expected to debut in September, that will emphasize its product knowledge, installation know-how and ability to provide complete home theater solutions, Ma and Wewer said.

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