SALES PROMOTION

CULINARIAN COOKWARE: PONDERING PRICE PROMOTION

HARSHIT KATHURIA (A031)SHIKHA PANDE (A041)MELVIN JOSE (B027)AARTI KHATWANI (B031)ADITYA NADIMPALLI (B038)PRAVEEN RAJAGOPALAN (B047)APOORV SINGHAL (B054)ANKUR SRIVASTAVA (B055)

Group 4

Q.1 Describe consumer behaviour in the cookware market. How is cookware bought? How is it sold? What are the implications for Culinarian’s marketing strategy?

Generated $3.36 billion in revenues in 2006 Could be classified on the basis of :

Price Quality Material(Aluminium, Stainless Steel, Porcelain – on – iron, cast iron, copper)

Copper was the most expensive and most preferred by professional chefs due to superior heat conductivity

Manufacturers had to balance the need for performance, time saving features, and aesthetics with price

Growing trend : Offering a coloured designer cookware that matched the kitchen decor and Product lines endorsed by and branded with a name of a widely recognized television

celebrity chef

Type of purchase – By piece(open stock) or In a boxed set( ranging from 5 to 14 pieces)

5 piece set comprised – a 10 inch fry pan, a 2 quart sauce pan wid lid, a 4 quart stockpot with lid

Q.1 Describe consumer behaviour in the cookware market. How is cookware bought? How is it sold? What are the implications for Culinarian’s marketing strategy?

Retail distribution outlets: Kitchen speciality chains ( Williams Sonoma) Local speciality stores, department stores (Macy’s) Mass Merchandisers (Walmart) Grocer Stores(Kroger) Direct TV Sales( Home Shopping Network) Online Retailers (Amazon) Catalogues(Manufacturers direct mailings)

Sales were seasonal – High during May-June(Weddings), November – December(Christmas)

Top players – Star Chef ( Mid level and low end products) – 18% Kitchen Select (Mid level and low end products) – 14% Culinarian(premium products) – 6.5 % Le Gourmand(premium products) – 4% Robusto(premium products) – 3%

 

Q.1 Describe consumer behaviour in the cookware market. How is cookware bought? How is it sold? What are the implications for Culinarian’s marketing strategy?

Some important findings from the Orion Market Research Study of households with income over $75000, June 2003:

50 % owned atleast 5 pieces, 25 percent owned more than 12 pieces Mass merchandiser – 32%,Department store – 29%,Kitchen Speacilty store –

24%,Others – 15% 30 % felt price as most important criteria, 10 percent felt price was the least

important criterion 25% looked for cookware that matched the current decor Most important – Quality, Features, Price, Brand Name Least important – Colour Asethetic Design, professional looking pieces,

shape 50% favoured a brand they recognized 30% - drawn to displays, 25% - drawn by well informed staff, 10% - drawn

by TV advertising 55% received cookware as a gift or purchased it as a gift 30% would be motivated to buy new cookware because of a price discount,

20% motivated to buy it because of a free gift with the purchase

Implications of Culinary’s marketing strategy

Widen distibution network :

( + ) Distribution partners need to be increased and they are bound to join and be loyal if

adequate trade support is provided Increase Market share of the premium segment :

( + ) Direct competitors like Le Gourmand and Robusto never ran price promotions; this could be a

differentiator and increase sales and thus market share Preserve prestigious image :

( - ) Even the VP of Marketing, Janus, had the view that price discounts would dilute the brand image

( + ) Customer and retailers believed that this would strengthen the brand and bring in new

customers to the premium category ( 15% customers were willing to upgrade as well ) Capture revenue growth of atleast 15% :

( - ) Price promotions will increase the number of orders significantly, most probably leading to

increase in revenue

( + ) There would be a significant dip in sales in

the months after the price promotions

CX1 Orders 2002 2003 2004

March-may 91247 7877818498

7% growth - -13.66 134.8

Q.2 What are Culinarian’s strengths and weaknesses? Why has the company been successful?

STR

EN

GTH S

Superior product quality and performance technologyStrong dealer support due to high marginsDesired brand perception of being a high quality productFavoured and endorsed by expertsFavourable market trends: Copper cookware, premium cookware matching kitchen décorAdvertising and marketing spend focussed and lean due to selective marketing channels

WEA

KN

ES

SES

Constant pressure of promotions from other manufacturers throughout the yearLow penetration in low to middle income customers due to premium image and selective channel distributionLow brand awareness in lower income households and low advertisement recallCannibalization amongst brands due to price differenceControl over advertising mediums: Culinarian products and promotions seldom advertised by the tradeOwned manufacturing unit; Difficult inventory control during promotion

Q.2 What are Culinarian’s strengths and weaknesses? Why has the company been successful?

Company success factors: Maintaining retail relationships:

Monthly field visits by the account managers for providing information and consultation

Retail merchandising incentive programs High retail margins

Creating a successful brand and marketing mix Premium cookware favoured by experts and chefs Focus on product quality, performance and durability Selective channel distribution and advertising to corroborate

premium brand image Skilled company personnel

Comprehensive training for retail sales clerks Experienced account managers with incentive-driven pay

Q.3 Was the 2004 promotion profitable? Calculate the profitability using Brown’s logic and then calculate profitability using the consultant’s model. How would you calculate profitability?

Net loss due to the promotion as per the consultants: $ 529,282 Profit due to the promotion as per Browns estimates: $2,397,994

Our calculation: We have considered the normal sales projection for the months of

Mar-May 2004 as 64834, based on the 17% decline in sales of aluminum cookware from 2003

We have considered the cannibalization costs and inventory savings(Consultants figures)

Profit due to the promotion as per our estimates: $2172637

Customer Profitability

LThe promotions in 2004, were profitable as they were able to shoot up the demand for CX1, which otherwise were projected to be less

Q.4 Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a promotion (e.g., product scope, discount rate, timing, communication)?

No, it should not run a 2007 price promotion Reasons:

1. Flaws in Brown’s analysis 24% dip in sales of Jan-Feb 2004 as compared to

2003 cannot be extrapolated to March-May because: November-December being peak-sales period, people

would have done their cooking-ware purchases then May being a part of wedding-season, sales are expected

to increase during this period rather than decreasing No quantitative data quoted for not accounting inventory

and cannibalization costs

Q.4 Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a promotion (e.g., product scope, discount rate, timing, communication)?

2. Trends in the premium products industry No price promotions done by competitors

3. In order to meet strategic objectives, price promotion of 30% is not feasible Damages the prestigious image Revenue growth becomes negative instead of a steady 15%

increase 0.5% loss ($ 529371/104152000) instead of 12% profit margin

4. Previously in May 2005 the plant was not able to handle the surge in demand during the 20% price promotion which was accompanied by trade overbuying during promotion period to pocket the difference later.

Q.4. If a price promotion is not suitable, think about another type of sales promotion (e.g., manufacturer rebate program, gift with purchase, sweepstakes, product placement, etc.) to recommend.

Gifts with Purchase: It should offer Gift Promotions for High end products or with a bundled

purchase (for example, 2 or more items on a cookware set purchase) as it would increase sales by an average of 15% without compromising on the margins

Because retailers do not appreciate the space wasted by the gifts, the gifts can be mailed to the customer after s/he returns his/her warranty card with a conveniently attached survey

Furthermore, gifts can be offered at non-peak time periods because retailers prefer non-overlapping promotions from the vendor lines they carry

Product placement in cooking shows, to increase awareness Vouchers can be given to customers on purchase of CX1 & DX1, which can be

redeemed on purchase of high end SX1 or PRO1. This will help in Upselling. Cooking events with chefs and customers in shopping malls, to induce trials Celebrity endorsements through high-profile chefs, to appeal to customers

through opinion leaders

THANK YOU