Retailers Case

1. Was the decision to avoid "Big Box" retailers (e.g. Lowe's and Home Depot) a good one? Indicate why or why not. (25 points) Hint: In evaluating this you might want to consider the Service Output i.e. locational convenience, service assistance, fast repairs vs. service demands for Stihl's markets.

The decision to avoid "big box" retailers, or mass merchants, was not only a good strategy for Stihl Inc.; it had a significant and lasting impact on the success and prestige of the Stihl brand. Since its inception, Stihl Inc. vowed to provide customers with high-quality outdoor power equipment and superior after-sales service and support. To accomplish this goal, the company focused on product demonstrations, knowledgeable dealers, and expert on-site service. The high level of knowledge and after-sales service found in Stihl's retail dealers is inconsistent and rare at big box retailers. The company found that an expert was needed to explain the functionalities and differences in products as well as how to properly use the equipment in order for customers to be truly satisfied with their purchase.

Stihl determined that when shopping at big box retailers including mass merchants and home centers "customers were not receiving top service and support". While Stihl focuses on a specific and narrow category, the options available within each product line are vast. Without expert knowledge, a customer may simply purchase outdoor power equipment based on price or an ad and choose a tool that did not meet their particular needs. When purchasing a chainsaw, for example, price could easily vary between $150 and $1,000, leaving customers potentially confused by the price disparity and overwhelmed by the wide array of choices. If a customer intended to use the chainsaw to cut down mature trees, the less expensive chainsaw may not perform to that level and could require substantial effort by the operator. Without an experienced and knowledgeable sales person, and support and training for users on the equipment, customers would have difficulty selecting a product or make a purchase they were unsatisfied with. Moreover, big box retailers had significant authority over business costs by driving pricing and warrantee decisions. While Stihl was tempted by the lucrative order sizes provided by mass merchants, they ultimately decided that maintaining the brand quality and that providing their customers with great products and service was more important to the company. Stihl remarked "No service, no sale" when explaining the company's decision to stay out of big box stores.

In the mid-2000s, Stihl made the decision to stay out of big box retailers official by asking consumers, "Why is the world's number one brand of chain saw not sold at Lowe's or Home Depot?" The ad campaign, which explained that their network of dealers provided the expert service and support