In this case, Black & Decker Corporation (B&D) is facing a major challenge in the power tools market. The industry is segmented into three categories; Consumer, Professional-Industrial, and Professional-Tradesmen, and while B&D holds the biggest market share in the Consumer segment, they are trailing far behind in the Professional-Tradesmen segment, with a meager 9% market share. Though this is a growing market segment, B&D is barely making any profits from it, and a new strategy is needed if they are to be competitive and gain market share.
Market research revealed that Black & Decker had excellent market awareness; almost 98% of consumers were familiar with the brand. In the Consumer segment, B&D held almost 50% of the market, and in the Professional-Industrial segment, B&D was perceived to have “high quality, differentiated products, and excellent service”. In contrast, consumers in the Professional-Tradesmen segment perceived B&D tools to be of inferior quality compared to their competitors, even though field tests proved B&D tools are of comparable quality and durability.
This discrepancy suggests that Black & Decker is facing a brand image/perception problem, rather than a quality/service problem. Their brand name is strongly associated with consumer products; not good enough for professional, heavy-duty tradesmen work. To address this, Joseph Galli is faced with three options: harvesting the professional-tradesmen lines, sub-branding the products in that category, or dropping the B&D name in favor of a new brand name for that product segment.
While all these options are viable, each involves different risks that must be carefully weighed. Harvesting the segment may seem reasonable at first, but it is in fact an unwise decision, because it does not take into account that this market segment is steadily growing. Therefore, even if B&D is not doing well in that segment now, there is potential to grow and improve, especially considering the fact that B&D products generate a favorable response among consumers in the other segments. Harvesting the Professional-Industrial segment would shift the focus from improving brand equity, to making profits, which could be a risky and detrimental to B&D.
The second option, sub-branding, may work, but past experiences with this strategy were not entirely successful (Piranha by B&D). The fact is, the Black & Decker name would continue to project the same perception of lower quality among the Professional-Tradesmen segment. This strategy is also risky because its failure would compromise the B&D name in other product segments. Therefore, rebranding the product line seems to be the most appropriate plan of action to gain market share and improve profitability.
While dropping the B&D name entirely may seem radical, it creates an opportunity to benefit from another brand name owned by the company, DeWalt, and also leaves more room to be creative with product design and marketing. While DeWalt scored less than B&D in brand awareness, it scored significantly higher on perception of quality, or “being one of the best”. This lays down the foundation to create a seemingly new product, with a different marketing message and strategy.
B&D can now venture away from its traditional black and grey designs, and into the Industrial Yellow color, which is both familiar at job sites, and has never been used before. The ‘new’ product line would stand out from the competition because of its color, and also hold a different, established, brand name associated with good quality. The risks involved are also minimized; since DeWalt would not be associated with B&D, the company risks minimal damage to its brand name in the other two segments, in case the venture fails. Financially, the company has little to lose since they already have minimal market share and almost no profit in this segment as it is.
In conclusion, B&D must definitely take action to improve their position in the Professional-Tradesmen market segment, and the best strategy to accomplish that is by creating a ‘new’ line of products under a different, yet well-established brand name, and a fresh design. This gives Black and Decker the best opportunity to capture market share from their competition in that segment, while entailing the least risk for the company’s brand image and other product segments.