- Continue to avoid the home-center channel?
- What are the benefits of continuing with it?
- What are the concerns?
- What should be changed to go to market as Generation X and Generation Y mature into home-owning, tool-purchasing consumers?
- 3-5 years from now, does total reliance on dealers make sense?
- If a multi-channel system appears more suitable to market needs and Stihl corporate objectives, can they be achieved?
Yes, I believe that Stihl should continue to avoid home centers due in part to their company values. As a company who prides themselves on quality, customer satisfaction, and the overall buying experience, the facts show that entering home centers would diminish those values.
- Stores like True Value, Ace Hardware, Do-It-Best targeted local contractors like carpenters, plumbers, electricians, painters, landscapers. Stihl’s exact commercial target market.
- Sold replacement parts and accessories to products at higher margins, enhancing the value of the outdoor handheld category.
- Customer service is essential and sales staff members could explain totally different products in the same conversation to inform the consumer.
- Maintenance hurt these stores because they normally had to send back the product to the manufacturer or outsourced to local repair shops
- “We serve as an alternative to the big boxes”
Home improvement centers
- Customers don’t receive top service and support, Stihl’s number one priority.
- Stihl views big box as significant negative for their business. Floor staff were felt to be inexperienced, barely trained, and ill positioned to offer consumers guidance.
- The best a customer with a product needing attention could hope for was that someone at the information desk would know of a third-party repair specialist.
- Prices were good, but only if price was associated with the product alone, not tied to the larger offering of product plus buying assistance plus after sales support.
- Too many products in the store making it hard to find where and what type of product to purchase for the right job.
- “Finding what they were looking for could be exhausting, at times frustrating, for shoppers. Floor staff was overwhelmed by customers requests for information, guidance, or personal attention.”
- When customers needed to return products the customer service desk would get upset.
- More concerned with the continuity of their look between stores rather than the brand or customer experience differentiation.
- Too focused on price, striving to achieve the lowest price status to the exclusion of virtually all other differentiation.
- Price is easier to deal with than all the intangibles of improving and differentiating the customer experience. Dysfunctional retailers are draining manufacturer resources, over focusing on cost cutting while neglecting improvements that would add positive product and distribution value for consumers.
- No service no sale.
- Worlds largest retailer, $400 billion in sales (2008)
- Most equipment is low-powered, consumer-friendly, electric, low and narrow price band of $20-$80.
- Products sold in those price ranges were considered disposable.
- Use it till it drops, throw it away, buy another
- No service support, no sales staff expertise.
- Snapper lawn-mowers removed product from there in 2005 because price reduced, product content went up. Lost money on 20% of equipment sold through Wal-Mart. Expected Snapper brand would be degraded in the process, undercutting sales and margin potential for the remaining 80% of business in independent dealers. Bought out by Briggs & Stratton, appeared in Sears.
- Mass merchant, and a home improvement center.
- Old maintenance and replacement parts capability.
- Merchandised own own store brand, Craftsman, private label of Husqvarna.
Independent Specialty Dealers
- Small, tight focus retailer
- Customers need specific products and require someone who understood this area to help them find what they needed and ready it for use.
- Some retailers represent brands but don’t stock the products, some have parts and products in abundance.
- Overall quality of the store from products to service.
- Backed its products with highly specific knowledge of how items operated, when to use them and when to choose an alternative, which sizes and features were better suited for which applications, how a product might with with other products the customer already owned, which model would be the right fit for the customer.
- Information, selecting a product, payment, no need to visit the store
- Amazon was the largest and best known online retailer
- Restricted brands that were held in inventory
- Not a high-volume retail platform in outdoor power equipment
- Information, selecting a product, payment, no need to visit the store
What should be changed to go to market as Generation X and Generation Y mature into home-owning, tool-purchasing consumers?
I think the only approach that needs to be changed for Generation Y would be to utilize social media more. The generations preceding them did not utilize the internet as much making this a better strategy for targeting consumers.
- Begin targeting more Ethnic Americans, this population is rising and they are purchasing more handheld outdoor power equipment.
- Generation X is in their primetime for purchasing Stihl products.
- Generation Y would be coming in to their prime time for purchasing their own home and power tools.
- Stihl would be able to capitalize on this because Generation Y is projected to spend five times as much on power tools.
- Although they are projected to spend more, they are also projected to earn less money than their parents at that same age.
- Student loans would also hinder their buying patterns
- Social networking could help Stihl promote their products due to Generation Y being predominantly online
- Exhibit 8 shows how Generation Y has not taken on as many home improvement projects in the past 12 months but they are only slightly behind Generation X.
- Exhibit 8 also shows that Generation Y takes on 1-3 DIY projects a year on average and that they enjoy doing those projects.
- The majority of Exhibit 8 shows that Generation Y is following in the paths of generations before them because the same categories have similar numbers.
- Source of information for DIY projects, Friends, TV shows, Staff, Websites, Magazines, all of these categories for Generation Y follow Generations X and Baby Boomers.
No, but continuing to utilize the same distribution channels does. I do question if home centers will buy-out hardware stores or independent retailers to reduce competition.
- Exhibit 2 shows how High Performance products like Stihl, are much better with independent dealers than any of the performance categories.
- Exhibit 3 shows how Higher Performance products rate the highest among overall dealer satisfaction, business fundamentals and relationship variables.
- Consumers prefer to be informed about products rather than searching home centers wandering aimlessly for products they can’t find and sales members can’t explain properly.
- There are currently over 8,000 independent retailing establishments that Stihl uses to sell products.
- Stihl invests a significant amount of money to it’s dealers to help build, expand, and remodel their stores and showrooms.
- Stihl contributions sometimes reached as high as 30 percent of showroom construction costs.
- These contributions were rarely matches by other companies in the industry.
- Stihl also made information, reporting processes, and marketing materials available to the dealers to help with their daily business practices.
- The Stihl website directed shoppers to local dealers providing information and dealer prices.
- “How we service the dealer is critical. We always want to be sure he or she is financially successful.”- Peter Burton
If a multi-channel system appears more suitable to market needs and Stihl corporate objectives, can they be achieved?
Yes, I think that if Stihl is able to utilize Internet-based retailers, they can sell more products and help boost sales to Generation Y members.
- Staying out of home centers, there is still nearly 40-45% of sales that come from distribution channels that Stihl uses or can increase usage in.
- Internet-based retailers are able to suggest similar products to the product being purchased or complementary products to that product.
- This could help Stihl by suggesting products that otherwise wouldn’t have been purchased because although they are for different uses, the consumer may have an unrecognized need for that product.
I think that Stihl should continue to utilize the distribution channels they use and stay out of home centers and mass merchants. The larger stores stray from their core values and could diminish their brand image. Through research and consumer information, consumers prefer to be informed about the product they are purchasing and to be provided with excellent customer service. In larger stores, this is lost and the main focus for these stores is price, not satisfaction. Stihl continues to help their dealers financially and if they were to enter larger retail stores, the smaller stores may discontinue to sell their products or ask for more money to keep their products. At smaller stores Stihl has also ensured that their products are one of the main focuses of the store; with larger showrooms and featured products. At larger stores their products would be lost in the shuffle and customers would have a harder time finding their products.
In order to gain more sales and ensure that Generation X and Y will continue to purchase Stihl products, I would utilize social media to promote products and even create a YouTube channel solely devoted to teaching consumers about the products and how to properly utilize them. With a single video lasting no more than 5 minutes on each product, consumers could be easily informed about the products and the functions they provide. When consumers know more about the product and the brand, they tend to purchase what they have the most information about.