CASE SONANCE AT A TURNING POINT I. Introduction: Problem / General Issue

Sonance is a company at a crossroads, long established as the leader in high-end home theatre speakers, it is at an inflection point where it needs to decide whether it wants to be a high-end speaker producer served through customized dealer channels, or a mass market audio systems maker. The past decade has seen the rise of a new competitive threat, the demise of its dealer channel and the emergence of a highly informed and selective customer base which have all served to hurt the company’s prospects.

In the early 2000s, when price competition prompted Sonance to increase customer variability through retail channels Sonance sacrificed its brand identity. Having no …show more content…

Our primary assumptions for this analysis are below:

· Original Series Dealers

o Price per pair of $140 o Retention Rate of 75%, conservative estimate based on change in number of dealers from 2003 to 2004 (600 to 500) o Growth rate of 5%, below growth in consumer spending due to Dealers’ unhappiness with Sonance o Sales per Customer of 300, assuming 15 projects per dealer per year, with an average of 20 speaker pairs per project · Original Series Production Builders

o Price per pair of $90 o Retention Rate of 50%, below Dealers because of competitive bidding structure for larger scale projects vs. individual homes through Dealers o Growth rate of 10%, in-line with new home sales growth o Sales per Customer of 960, assuming 80 projects per Production Builder per year, with an average of 12 speaker pairs per project · Original Series Mass Retail Market

o Price per pair of $120 o Retention Rate of 20%, shares shelf space with all competitors’ products, smaller size projects o Growth rate of 10%, in-line with consumer spending o Sales per Customer of 83,333, divided BestBuy 2004 sales ($10 million) by average price per pair · iPort Dealers

o Price per iPort of $300 o Retention Rate of 75%, equal to Dealers’ Retention Rate of Original Series speakers o Growth rate of 15%, below iPod growth due to high price, but