Black & Decker's Marketing Problems

Executive Summary

This report analyzes Black & Decker's marketing problems and gives recommendations on marketing strategy in consideration of the possible implication and risks involved.

The focus will be on Professional Tradesmen market segment under the Power Tools Division. Growing at 9% in 1990, it is the fastest growing market in the Power Tools market segment. However, B&D only managed 9% market share as the market leader is Makita Electric of Japan, having 50% of the market share followed by Milwaukee at 10%. B&D research concludes that product quality is not the issue as its products in Professional Tradesmen are highly competitive with its competitors. The issue is perception of B&D brand, often perceived by trade's people as good only for Consumer market rather than Professional market. Moreover, B&D Professional Tradesmen products are not highly differentiated in color, black / charcoal grey, often the favorite color used by competitors in Consumer's market. B&D's also do not have big market share in all of Professional Tradesmen distribution channel especially the Home Centers. Home Centers like Home Depot and Home Club experiencing rapid development and one of the reason's of Makita's success for being the market leader.

The recommended strategy is to use a new brand name, DeWalt, one of existing B&D brand line in stationary woodworking equipment. B&D research shows the trades people are aware and receptive to the brand. Another recommendation is to multi brand existing B&O product line, focusing on strong product line. The risk would be using extra resource to promote new brand as well as promoting multi brands. It is recommended that B&D have strong color product differentiation between its Consumer products and Professional Tradesmen. B&D must also seek ways to improve its distribution channels, focusing on Home Centers and taking advantage on conflicts by retailers with Makita, the market leader to improve its sales in the distribution channels.

1.0 Introduction

The purpose of this report is to analyze Black & Decker's marketing problems and give recommendations on the marketing strategy in consideration of the possible implication and risks involved. The focus of this report will be on the tradesmen market segment under the Power Tools Division. "Tradesmen" segment are electricians, plumbers, carpenters, framers, roofers and general remodelers working in residential constructions.

This report are derived from information that are given, therefore the limitation would be on the data made available. As such, the competitor's financial and marketing performance is not taken into consideration and whatever data available are assumed correct and current.

2.0 Situation Analysis:

2.1 The Power Tools Market in United States (US)

In 1990, portable power tools for U.S market is $1.5 billion, offering products for consumers, professional tradesmen and professional industrial. Consumers market accounted for $530 million or 35% of the overall market, meanwhile professional tradesmen is $420 million (28%) and the professional industrial is $550 million (37%) Segmentation of the market was as shown in Figure 2.1.1

Figure 2.1.1: US Market Segmentation for Power tools in 1990

Among the three segments, Professional Tradesmen registered the highest growth, at 9% compared to 7% growth rate for Consumers and no growth for Professional Industrial segment. US Power tools market growth by segment was shown in figure 2.1.2

Figure 2.1.2- US Power Tools Growth by Market Segment for 1990

2.2 Black and Decker (B&D)

In 1990, B&D sales reached $4.8 billion with nearly 50% of product revenues are outside of United States (US). Out of the $2.4 billion revenues in US, the Power tools and Accessories division of B&D contributes to 29% compared to the other 4 main products group. B&D sales by products group was shown in figure 2.2.1

Figure 2.2.1: B&D 1990 sales by product group

B&D participated in all three market segment of power tools that is the professional industrial, professional tradesmen and consumer market. B&D brand of power tools hold 26% overall market share or $395 million of the $1.5 billion US power tools market B&D's Consumer's market registered the highest revenue of $250 million or 45% market share in 1990. In Professional industrial, B&D has $110 million in revenue or 20% market share and the lowest is Professional Tradesmen, at 9% market share or $35 million in revenue. Comparison between B&D market share in the three segments against US overall market segment was shown in figure 2.2.2.

Figure 2.2.2: B&D Revenue by Segment Compared to U.S Market Segment for 1990

2.3 Professional Tradesmen - Market Share

Professional tradesmen revenues of $35 million in 1990 for B&D translated to about $3 million in operating income. Gross margin is 35% but SG+A costs were about 25%. The market leader in Professional Tradesmen's market is Makita Electric of Japan, having 50% of the market share followed by Milwaukee at 10% and thirdly B&D with Ryobi having 9% each. The Professional Tradesmen, Power Tools market share for 1990 was shown in figure 2.3.

Figure 2.3: Power Tools, Professional Tradesmen Market Shares for 1990

*Manufactured in part by B&D and marketed by Sears

2.4 Professional Tradesmen - Distribution Channel

Two Steps recorded the highest sales percentage at 40% and in second place is Home Centers at 25% sales. Warehouse Home Centers were 15% and Membership Clubs were 10% with Farm Outlets having 5%. Home centers were growing importance in distribution of Professional Tradesmen's product. The largest single outlet of professional tradesmen tools sales in 1990 was the Home Depot at $5 million, second was Home Club at $3.5 million compared to the largest of the Two Steps, Ace and