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CULINARIAN

COOKWARE

Pondering Price
Promotion
By Group 10

D E SC R IB E C O N SU M E R B E H AV IOR
IN T H E C OO KWA R E MA RK ET. H OW
I S C O OKWA RE B OU GH T ? H O W IS
I T SOLD ? W H AT A R E T H E
IMP LI C AT IO N S F OR C U LI N A R IA N S
MA R KE T I N G ST R AT E GY?

Q. 1.

DESCRIBE CONSUMER
BEHAVIOR IN THE
COOKWARE MARKET ?
Consumer purchase either by the piece (open stock) or
in a boxed set (5-14 pieces)
In order of importance - Quality, Features and Price
were the top three criteria while making a purchasing
decision.
Brand Recall was also a major factor while making a
purchase
Sales increased during May-June (Wedding) and NovDec (Christmas) months. This shows a seasonality in
sales.
Cookware was given a high preference as a gift item
Professional chefs prefer copper based cookware due
to superior heat connectivity
A growing trend towards premium cookware, designer
cookware that matched kitchen dcor and endorsed
by celebrity chef

Where would
R
consumers
e
prefer
to
s
shop?
p
o
n
d
t
o
Stores
with
Attractive
Informed
Sales
Staff
T display
Wait
for sale
(20%)
(30%)
(25%)
V
,
r
a
d
i

HOW IS COOKWARE SOLD


?
Mass merchandise outlet (32%)
Department Store (29%)
Kitchen
Specialty
StoreRet
(24%)
ail
Ou
tlet
(15
%)

Points of Sale for


households with income
> $75000

Promotions work for


mid and low level
segment product.
Mid level and low level
segment producers ran
price promotions
several times a year
Premium products Customer feel a
deterioration in quality,
hence price promotions
is an inefficient way to
increase sale in this
segment
Premium produces

IMPLICATIONS FOR
CULINARIANS MARKETING
STRATEGY ?
Target Customers -

Majority of Culinarians advertising budget were on


magazines and newspapers, targeting high-income
audiences
70% of its customers had household income > $75000
Implication

Even though Culinarians market share amongst the premium


product producers was the highest (6.5%), it was way behind
the Mid-Low level producers

They were forced to give price promotion on CX1 product and


later on its DX1 and SX1 line of product.

From customer responses they realized that 70% felt price


discount played a major role in purchase decisions

WHAT ARE CULINARIANS


STRENGTHS AND
WEAKNESSES? WHY HAS THE
COMPANY BEEN
SUCCESSFUL?

Q. 2.

STRENGTHS
Strong Brand Equity
Strong brand awareness of providing unparalleled quality with highly advanced performance
technology

Robust Sales Force

Sales force included 8 experienced account managers who visited major accounts once every
month
Incentive-driven pay for account managers and Comprehensive training for retail sales clerks

Strong dealer support due to high margins


Selective marketing channels

Advertising and marketing spend focussed and lean due to selective marketing channels

Strong and clear management philosophy


Their management cares about the image of the company
Sensitive to consumer perceptions and hold their retailers in high esteem

Market Leader in Premium Segment and Strong Revenue Growth


Consistent marketing image and message

WEAKNESSES
Control over advertising and promotions
Constant pressure of promotions from other manufacturers throughout the year
Retailers demands of price promotions wasnt handled well by the company
Culinarian products and promotions seldom advertised by the trade
Infrequent campaigns and lack of consistent product promotion
Management differences over price promotions

Limited distribution channels


Low penetration in low to middle income customers due to premium image and
selective channel distribution

Loss of market share

Low brand awareness in lower income households and low advertisement recall

Poor inventory planning during promotion period


Failure to develop a strong direct mail/on-line presence
Cannibalization amongst brands
Seasonal sales swings

REASONS FOR SUCCESS


Strong Retailer Relationships
Monthly field visits by the account managers for providing information and
consultation
Retail merchandising incentive programs
High retail margins
Maintained relationships where each dealer carried all of its product lines

Strong Brand Equity


Focus on product quality, performance and durability
Selective channel distribution and advertising to corroborate premium brand
image
Highly advanced performance technology
Leader in metallurgy innovation and provided benefits of copper cookware

Skilled company personnel


Comprehensive training for retail sales clerks
Experienced account managers with incentive-driven pay
Extremely robust sales force with monthly visit to major accounts

WA S T H E 2 004 P R O MOT I ON
P R OF I TA B LE ? C A LC U LAT E T H E
P R OF I TA B ILI T Y U SI N G B R OW N S
LO GI C A N D T H E N C AL C U LAT E
P R O FI TA B ILI T Y U S IN G T H E
C ON SU LTA N T S M OD E L. H OW
W O U LD YOU C A L C U LAT E
PR OF ITA BI LI TY ?

Q. 3.

CALCULATION OF
PROFITABILITY
Category

Consultants view

Sales Forecast

Variable Cost

Cannibalization Loss

Forecasted sales for


2004 should have
been 119504 units
using the computer
generated model
Variable costs includes
labor, raw materials,
manufacturing
overhead, 5%
advertisement, 7%
selling expenses
Products in DX1 line
were cannibalized and
loss was calculated to
be $99,332 and

Victoria Browns
view
Forecasted sales for
2004 should have been
24% below the 2003
sales which would have
been 59871
Variable costs must
include only labor and
raw materials which
totaled 38.64

Cannibalization
calculations are
erroneous and so are
unreliable

CALCULATION OF
PROFITABILITY

The consultants sales projection was based on 10 years


forecast model, which seemed more reliable than a simple
comparison of first two months sales by Brown.

The Variable cost should include only raw materials and labor.
Advertising cost should be treated as a fixed cost. Hence,
variable cost estimated by Brown (which is $38.64) is correct.

Regarding cannibalization of DX1, we cannot say that the


decrease of sales in DX1 are not completely because of the
promotions on CX1. Hence, we should not use these costs.

CALCULATION OF
COSTS

Microsoft Excel
Worksheet

Consultant
Victoria Brown
Actual Estimate
No
No
No
20%
20%
20%

Promotio
Promotio
Promotio
Promotion
Promotion
Promotion
n
n
n
Units
119504
184987
59871
184987
119504
184987
Price
72
62.4
72
62.4
72
62.4
11543188.
11543188.
11543188.
Total Revenue 8604288
4310712
8604288
8
8
8
Variable Cost
52.05
52.05
38.64
38.64
38.64
38.64
Total Variable
9628573.3 2313415.4 7147897.6 4617634.5 7147897.6
6220183.2
Costs
5
4
8
6
8
Contribution
1914615.4 1997296.5 4395291.1 3986653.4 4395291.1
2384104.8
Generated
5
6
2
4
2

Profit/Loss
-469489.35
2397994.56
408637.68

Hence, 2004 promotion was profitable for Culinarian Cookware.

S H O U L D C UL I N A R I A N R U N A 2 0 0 7
P R I C E P R O MO T I O N? I F S O, W H AT
S H O U L D B E T HE S P E C I F I C S O F
S UC H A P R O M OT I O N (E . G . ,
P R O D U C T S C O P E , D I S C O U NT R AT E ,
T I MI N G , C O M MU N I C AT I O N )? I F A
P R I C E P R O MO T I O N I S N O T
S UI TA B L E , T H I N K ABO U T AN O T HE R
T Y P E O F S A L E S P R O M OT I O N (E . G . ,
M A N U FA C T U R E R R E BAT E P R OG R A M,

Q. 4.

NO !
Browns analysis may be flawed

24% dip in the sales of cookware in Jan-Feb from Nov-Dec cannot be


extrapolated for March-May. This may be because Nov-Dec is the
Christmas season when people shop more than the rest of the year.

There is lack of quantitative data for not accounting inventory and


cannibalization costs

Industrial Trends

The competitors do not prefer to give any discounts. Gifts are the
preferred mode of promotion

StarChef and KtchenSelect also provide discounts only during the


peak seasons i.e November-December (mainly due to the Christmas
season)

Inability to handle peak demand

In May 2005, the plant was not able to handle the surge in demand
when 20% price promotion was given. As a result there was trade
overbuying during promotion, the demand of which could not be

TYPES OF SALES
PROMOTIONS

Use gifts as sales promotion tools: 20% of the consumers would


still be motivated to buy because of a free gift with purchase

Use bundled packages. One low end product with a premium


end product for a limited time period

Offer gifts at non-peak seasons. Use slow-moving products as


gifts in these seasons to clear inventory

Promote the purchase of SX1 and PROX1 on purchase of CX1 or


DX1 by coupons, etc. to convert the users from CX-DX1 to SXPROX1

Offer in-store promotions to influence buying

Run volume discounts. This will ensure capturing a larger


market share

Product placements in cookery shows

Exchange offers on the lines of the Indian brand Prestige


cookware

THANK YOU

Group 10
ShwetabhG012 |TanayG0
Spandana G019|PurvaG02
Harsh G052