INTRODUCTION TO MARKETING (MKT333)

Case Study

Snap-on Tools began its business in Milwaukee, Wisconsin, in 1918. The original business sold an interchangeable socket wrench set directly to auto mechanics. Snap-on Wrench was incorporated in 1920. They intended to grow the business in a typical fashion by offering its wrenches in an indirect marketing channel through distributors. The distributors, at that time, were less than impressed with the product and Snap-on had difficulty getting its product into the hands of end-users.

The founders developed a selling strategy that presented the tools directly to the mechanics with a demonstration and opportunity for the mechanics to try out the product. By 1927 the transition to direct selling-- "from factory-to-warehouse-to-you"-was completed. Although in the past 80 years the sales force dynamics have changed, the basic commitment to direct selling has remained the cornerstone of the Snap-on marketing strategy.

In 1939, the Teamsters Union attempted to organize the branch sales force. In direct response, Snap-on introduced a new distribution method by selling territories to individual sales representatives (dealers) and having them carry product inventory in their vehicles for immediate delivery to the customer. The final step in the marketing evolution was establishing each independent dealer as a franchised owner carrying a rolling stock of Snap-on small hand tools. In an effort to increase volume, Snap-on started a program (that still exists today) of selling to mechanics on credit with weekly time payments. The company backs this credit program as it proved to increase sales and generated customer loyalty.

Snap-on's growth since 1960 has been impressive. Despite rapid growth Snap-on has not wavered from its core marketing strategy. The company's basic purpose has remained unchanged - "the production and sale of quality hand tools and related items to professional mechanics and industrial users." Today Snap-On is a $3.1 billion company and is publically-traded on NASDAQ as SNA.

Snap-on concentrates on selling direct to end-users through a system of salesperson-franchisees and distributors. Today, there are 4,800 franchise dealers driving their independently-owned white cargo vans loaded with more than $100,000 worth of inventory to over 300,000 car dealerships, service stations, and independent repair shops around the U.S. and abroad. Snap-on is committed to quality. To tool-lovers, Snap-on is the "gold standard" similar to Rolex, Rolls-Royce, and Chivas Regal in their own markets.

Snap-on's target market is distinctively blue-collar, lower-to-middle income level with a limited access to credit. The market consists of 1.25 million automobile, truck, and airplane mechanics. However, Snap-on sees itself as an upscale retail operation disguised as a manufacturer of tools. For those who fix cars for a living, tools are like toys and entering the Snap-on van is like entering a toy-lover's fantasyland. However, Snap-on utilizes a pull strategy with the end-users built on trust rather than emotion.

Snap-on has stayed focused on its core customer avoiding expansion into other related areas like construction and home improvement. Snap-on charges premium prices - about 10% more than its direct competitors. To respond to new computerized components on vehicles, Snap-on has added diagnostic equipment under the name Snap-onDiagnostics and another van makes the circuit with a technical representative who backs up the dealers and their increasingly-complex product line with training and technical advice.

Snap-on utilizes four channels: mobile van franchises, company-direct, distributor and the Internet. The company-owner vans only comprise 3% of total business and are used to open new markets. A select number of distributors purchase products directly from Snap-on and then resell them to end-users. Snap-on markets its products and brands through multiple distribution channels in approximately 130 countries. It has replicated the franchised mobile van in several countries. Snap-on has always avoided huge advertising and promotional expenditures, relying instead on direct-selling and a product catalog (print and online) offering over 14,000 products.

Snap-on maintains a 60% share of the mobile-van tool business with their closest competitor, Mac Tools, holding just 13%. A single Snap-on van with approximately 160 square feet of cargo space typically $3.35billion--an increase of about 20% in the past 5 years.

Questions:

1. What are the four key components of the Snap-on marketing strategy?

2. What one element of Snap-on's marketing mix do you think separates it from its competition?

3. How would you describe Snap-on's marketing channels (distribution)?

4. Assume that average annual per-square-foot sales for specialty retail are approximately $400 per square foot. How does this compare to Snap-on's revenue generation per square foot? Why do you think there is such a difference?