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Timbuk2 Case Study

Timbuk2 Case Study

1. Mark’s goal was to grow the business. What risks was Mark taking with the decision to discontinue selling products through CompUSA?
CompUSA has numerous outlets throughout the country and the chain is familiar to many consumers. Selling through CompUSA was giving Mark broader audience and opportunity to raise brand awareness. The risk was that without CompUSA, the sales would drop dramatically and company would not use its full capacity, which means idle production time and laying-off workers.

2. What advantages does the specialty retail store distribution strategy offer Timbuk2? What risks does this strategy entail?
Selling in the specialty retail stores allows to price the products higher then in the big retail shops and receive higher profit margin. On the other hand, specialty stores do not sell to all groups of consumers, so there are less potential buyers. Nevertheless, specialty retail stores attract buyers looking for products with certain specific features that go beyond mass marketed products and are willing to pay premium for that. Specialty stores may attract customers, who are more concerned not with the price, but rather with the image of a product. Specialty retailers serve not such large target market as mass market channels, but still it can be quite sizable.

Mass market retailers offer a big variety of products and Timbuk2 bags had a chance to be lost among other products in CompUSA and in the specialty stores they have more chances to be noticed.

3. What role does pricing play in creating an image for a product or service? What pricing strategy do you recommend for Timbuk2? Explain.
Pricing helps to create the right image of the product – premium, more exclusive products have higher costs and create a quality image in consumer’s minds, while less expensive products may be perceived as having low quality.

Many customers are willing to pay premium for the special features they are looking for. Usually, paying a higher price, consumers expect that a product will last longer and its quality is more reliable.

When distributing products through CompUSA, Timbuk2 was pricing their bags low having low profit margin. To make profit, Timbuk2 had to sell high volume of the products, but did not have enough capacity to produce it. Usually companies that use discount pricing try to maintain low overhead costs by carefully controlling operational spending, for example, investing less in design of the products and offering fewer services to the customers. Discount pricing gives to the customers a feeling of bargain. This is not a very good idea for Timbuk2, since they want to sell creative products with the design appealing to the consumers.

An alternative to discount pricing would be competitive pricing. The objective of this strategy is not to compete on price level and also not to be seen as charging the highest price on the market. This is a good strategy for products sold through specialty stores. Timbuk2 should observe the market to make sure their pricing is still competitive, but not get involved into price wars with discount retailers, which will obviously ruin the business. When setting competitive pricing, all other elements of marketing mix are very important – Timbuk2 should create higher value for which the customers will be willing to pay more, for example, nicer design of the products and higher quality of the materials. Basically, these are the features that the brand already has, that is why competitive pricing is the most appropriate strategy for the company.

4. Visit Timbuk2’s Web site (http://www.timbuk2.com) and examine its product line. Work with a group of your classmates to brainstorm ideas for other products the company might consider offering. Explain the reasoning behind your choices.
People travel very often now and Timbuk2 could create a new collection for travelers, including not only bags, but suitcases as well.

The company does not seem to have yet line for kids and teenagers. It can include stylish backpacks for school, bags for sport and lunch boxes. Teenagers are very interested in design and image of their products.

The company can also come up with summer collection including bags for the beach.
Timbuk2 could introduce also bags or cases for cell phones, ipods, MP3 players and other similar mobile products.

Sport bags and bags for runners can be also very popular.

5. What recommendations would you make to Mark to monitor his success and direct the company’s strategy for the future?
Mark should continue invest in design and maintain high quality of his products and create a distinctive image in consumers’ minds in order to set the brand apart from the competitors. Online marketing is a very good strategy for Timbuk2, it should advertise more aggressively online. It can be a good idea for the company to expand to Europe, where urban style is very popular and consumer prices are usually higher.

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