SALES PROMOTION CULINARIAN COOKWARE: PONDERING PRICE PROMOTION HARSHIT KATHURIA SHIKHA PANDE (A041) MELVIN JOSE (B027) AARTI KHATWANI ADITYA NADIMPALLI (B038) PRAVEEN RAJAGOPALAN APOORV SINGHAL ANKUR SRIVASTAVA (B055)
Group 4
(A031)
(B031)
(B047) (B054)
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, CX1 Orders 2002 most 2003 probably 2004 leading
to increase in revenue ( + ) There would be a significant dip in sales in
March-may % growth
91247 78778 184987 -13.66 134.8
Superior product quality and performance technology Strong dealer support due to high margins Desired brand perception of being a high quality product Favoured and endorsed by experts Favourable market trends: Copper cookware, premium cookware matching kitchen décor Advertising and marketing spend focussed and lean due to selective marketing channels
WEAKNESSES
STRENGTHS
Q.2 What are Culinarian’s strengths and weaknesses? Why has the company been successful? Constant pressure of promotions from other manufacturers throughout the year Low penetration in low to middle income customers due to premium image and selective channel distribution Low brand awareness in lower income households and low advertisement recall Cannibalization amongst brands due to price difference Control over advertising mediums: Culinarian products and promotions seldom advertised by the trade Owned 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:
Creating a successful brand and marketing mix
Monthly field visits by the account managers for providing information and consultation Retail merchandising incentive programs High retail margins 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) L Profit due to the promotion as per our estimates: $2172637 The promotions in 2004, were profitable as they were able to shoot up the demand for CX1, which otherwise were projected to be less Customer Profitability
Q.4 Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a promotion (e.g., product scope, discount rate, timing, communication)?
No, it should not run a 2007 price promotion Reasons: 1. Flaws in Brown’s analysis 24% dip in sales of Jan-Feb 2004 as compared to 2003 cannot be extrapolated to March-May because:
November-December being peak-sales period, people would have done their cooking-ware purchases then May being a part of wedding-season, sales are expected to increase during this period rather than decreasing No quantitative data quoted for not accounting inventory and cannibalization costs
Q.4 Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a promotion (e.g., product scope, discount rate, timing, communication)?
2. Trends in the premium products industry
No price promotions done by competitors
3. In order to meet strategic objectives, price promotion of 30% is not feasible
Damages the prestigious image Revenue growth becomes negative instead of a steady 15% increase 0.5% loss ($ 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
