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Andrei Grechko Shane Johnston Nakia Lape Kyle McDaniel Kevin Niehaus
Prepared for Ned Jackson, MKT 625 March 28, 2010
Table of Contents
Executive Summary .
accessed March 13.g. 06/26/2009. However. Due to slow economy and unemployment. Thus. consumers have rediscovered their kitchen during 2009. 2010). Culinarian Cookware could serve its target markets by focusing advertising efforts on their less expensive product lines. it is reasonable to expect that consumers will try to either buy less of premium priced items. hence stipulating the company to re-evaluate its marketing mix. Environment I. http://www.businessweek. the US cookware market experienced growth by generating approximately $3.36 billion in revenues from 2002 to 2006.com/smallbiz/content/jun2009/sb20090626_938025. which reduced the purchasing power of many US households. The following developments appear to create several opportunities for cookware manufacturers. many economists predict higher inflation in the coming year (primarily due to increase in the monetary base. Potential threats to the cookware market include growing unemployment and prospects of higher inflation in the near future. This fact could burden some companies in the industry that rely mostly on manufacturing and distribution of premium priced products. Gene . the demand for cookware products would not move in the same direction for all price ranges. e. In the foreseeable future. This trend highlights the possibility of increased demand on cookware products. Economic conditions and trends As evidenced by the case material. start to move in to newly bought houses. economists predict growth in private and commercial real-estate markets (by 2013). current and future economic environment provides potential opportunities for players who could adjust their marketing strategy to meet changing demands of consumers. due to economic recession of the recent years (2008-present). Additionally. “Staying Cool If Inflation Heats Up”. According to Cookware Manufacturer’s Association (CMA). and underfunded liabilities) that will further reduce the purchasing power of consumers if the wages and salaries do not keep up with the pace (Marks. Despite slow economy. visits to restaurants. DX1 and CX1. These potential threats could signal to Culinarian Cookware that consumers might be more price-conscious in the near future. consumer price index (inflation) has grown pretty steadily in the recent years (see Exhibit 2). However.Situational Analysis A. cookware market faced new challenges and opportunities. Bureau of Labor Statistics. consumers cut back on dining out and defer back to home meals. .S. carry-outs and frozen entrees have been replaced by meals prepared in the home kitchen. This potential development could boost demand for cookware when consumers. Due to elastic demand for high-end and luxurious products. According to the U. for example. Business Week. high deficits. or try to shift their preferences to less expensive models altogether. Current unemployment has climbed over 10% in 2009 (see Exhibit 1).htm.
4 9.8 10.9 6.7 4.7 5.7 8.S.9 3.3 5.2 6.4 5.0 5.8 5.1 5.5 4.8 5.6 5.6 4.1 6.9 4.8 5. 2010 http://data.0 4.6 4.1 4.4 9.6 4.Exhibit 1 Labor Force Statistics from the Current Population Survey Series Id: LNS14000000 Seasonally Adjusted Series title: (Seas) Unemployment Rate Labor force status: Unemployment rate Type of data: Percent or rate Age: 16 years and over Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 4.7 5.6 4.4 5.9 5.0 4.1 6.4 5.0 4.8 4.2 4.7 5.7 5.6 4.1 6.0 3.0 4.7 4.5 9.6 4.0 4.0 5.bls.5 4.7 5.7 9.0 5.0 10.8 5.0 5.7 5.6 5.4 5.5 5.1 3.9 4.6 8.7 5.0 9.4 4.7 9.0 5.3 4.4 7. Bureau of Labor Statistics.3 6.2 5.9 6.2 4.4 4.4 4.3 5.8 6.4 4.7 4.9 7.6 6. Data extracted on: March 13.5 4.2 6.7 4.6 4.7 4.1 6.7 4.6 5.4 5.5 5.0 4.4 4.0 6.1 10.9 5.9 3.7 4.3 4.5 5.9 9.8 4.2 5.9 5.7 5.7 5.0 5.4 5.9 5.9 3.0 5.0 5.8 5.7 Source: U.5 4.0 4.8 5.6 5.7 5.5 5.1 5.2 8.5 4.8 5.gov/PDQ/servlet/SurveyOutputServlet .
consumers have become more environmentally friendly over the recent years. the demand for cookware would increase. Thus.bls. Customers continue to scrutinize the quality and health hazards of many products. Cultural and Social values and trends A few trends in the cultural and social areas have become visible in the recent years. Cookware industry needs to recognize the fact. 2010 http://data. These changes are and will continue to affect the cookware market.S. This change results in the emergence of numerous diet and health plans. Consumers are increasingly becoming more interested in products that are exhibiting environment-friendly traits.S. Data extracted on: March 13. Most diets emphasize the importance of and reliance on home cooking as the means of achieving successful results and as a consequence leading to a better health. as more consumers opt to cook more meals at home as part of a diet plan or other reason. Due to increasing obesity epidemic in the country and rising healthcare costs. and those products that are deemed or proven to be less harmful to one’s health.gov/PDQ/servlet/SurveyOutputServlet II.Exhibit 2 Consumer Price Index Series Id: CUUR0000SA0 Not Seasonally Adjusted Area: U. the nation as a whole has become more health conscious. Bureau of Labor Statistics. and focus on providing consumers with products that satisfy their health and environmental standards. including cookware. . city average Item: All items Base Period: 1982-84=100 Source: U. Also. There is no new information that could suggest that these trends will not continue into the future.
Even though the studies of this chemical are still continuing.php. EPA is investigating sources of human exposure to these chemicals because of some claims of various harm to human’s health. a chemical used in manufacture of fluoropolymer resins which in turn are used in non-stick cookware surface applications. If consumers continue to cut back on restaurant dining and prefer to prepare more meals themselves. Environmental Protection Agency (EPA) is reviewing available information on PFOA.nsf/68b5f2d54f3eefd28525701500517fbf/fd1cb3a075697aa4 85257101006afbb9!OpenDocument). EPA Administrator Stephen L. Implications for strategy development Current state of the economy makes it difficult to predict how exactly consumers are going to react to the prospects of higher inflation or unemployment. it is important to continue utilizing safe materials in the manufacturing process and promoting the quality of its products to satisfy increasingly health conscious and environmentally aware consumers. Those companies that find a way to capitalize on those opportunities and to reduce potential threats. May 26. Culinarian because of its focus on higher-end premium priced goods. significant opportunities and threats are floating in the future of the cookware industry in the coming years. It is important for the cookware industry to continue full cooperation (as has been the case) with FDA and EPA evaluations of all materials with questionable safety records. FDA conducts safety evaluations of all materials that are proposed by the industry for use in food contact applications. For Culinarian. accessed March 05. . 2010). Summary of environmental opportunities and threats As indicated above. The U. http://yosemite. Overall.gov/opa/admpress. current state of the environment and future prospects will pose challenges to Culinarian and will require adjustments in company’s marketing mix. 01/25/2006.cookware. is this also going to mean that due to decrease in disposable income consumers will try to seek value versus quality and brand image? If so. V.epa. This is especially true when it comes to materials that are used in contact with food.III. 2006 http://www. Johnson stated that “. Cookware Manufacturer’s Association (CMA). However. United States Food and Drug Administration (FDA) is responsible for regulating these materials. . Political and legal issues The political and legal environment in the cookware market is characterized by the presence and enforcement of laws and regulations imposed on the use of certain materials in the cookware manufacturing process. One of the most frequently cited investigations is the one related to safety of nonstick coatings used on cookware (EPA Seeking PFOA Reductions. should be able to maintain or grow their revenues and expand their market share. to date EPA is not aware of any studies specifically relating current levels of PFOA exposure to human health effects” (Short Statement on Nonstick Cookware Safety. .S.org/safety_statement. IV. might find itself in a difficult situation where tradeoffs might need to be made between its brand image and pricing/promotion. it would present a clear opportunity to Culinarian to capture more customers.
S. They also have appealed to consumers by selling product to big box stores (e. III. to endorse their products and appeal to consumers. while US manufacturing output grew 35 percent. From 2000 to 2005. The 80 manufacturers in this industry employ over 6. Competition from 42 countries imported $600 million of supply in 2008 compared to U. Slow Growth in Prices Cookware prices have increased only modestly in the past decade. Cheaper imports are attractive to consumers with less discretionary income. exports of $25. cookware and cutlery production fell 20 percent.g.have blunted industry growth. The cookware industry has seen an increase in substitute products due to the increase in small .3 million to 86 countries. with increasing demand coming from Southeast Asia. pot & pan. Culinarian is one of 80 manufacturers in this industry. Porter’s Five Forces Threat of Substitute Products . The industry's revenue for the year 2008 was approximately $1. wholesale cookware prices increased 11 percent. This has resulted in declining longterm demand.7 billion USD.B. Slow demand and foreign competition have kept wholesale price increases below the inflation rate. From 1995 to 2005.000 employees with aggregate annual payroll exceeding $216 million. Industry Trends Declining Long-Term Demand U.73%. The recessionary effects on consumer consumption play a large role making strategic pricing and marketing decisions.S. Wal-Mart and Target) and reduced prices to fit into consumers’ budgets. and kitchen utensil manufacturing industry.2 billion. The NAICS code for this industry is 332214. II. Industry Overview Culinarian Cookware is in the fabricated metal product. who have become cooking show hosts. several points below the inflation rate. Foreign competition and the increasing complexity of autos and other devices .which discourages consumer tinkering . with an estimated gross profit of 31. Industry Information I. competing for projected domestic demand of $2. Analysis of this industry also reveals a large dependency on personal consumption. forcing cookware and cutlery manufacturers to increase automation. Similar Operating/Marketing Strategies Cookware manufacturers have used TV famous chefs.High Demand for small appliances is connected to the growth in the economy and housing. kitchen utensil and cookware production has lagged the rest of the economy.
This association has served both the public and its members with information.g. The case states that demand increases seasonally due to holiday and wedding gifts.High Buyers have ultimate buying power with no switching costs numerous options from competitors and substitute products.appliances over the past five years. There are several key associations many manufacturers in this industry are members of: • • • • Cookware Manufacturers Association Home Furnishings International Association International Interior Design Association National Home Furnishings Association V.Low There are 80 manufacturers in this industry with a declining long-term demand. Bargaining Power of Buyers . This threat of substitution for cookware manufacturers is currently high. Threat of New Entrants . Lifetime Brands Meyer Corp. Buyers then may be more likely to look give more consideration to cost vs. declining demand. steel. Industry Associations Key competitors in this industry are members of several professional organizations. Eagleware Manufacturing Co. Key Competitors • • • • • • • All-Clad Metalcrafters Calphalon Corp. increased imports) are causing increasing rivalry among competitors. The primary association is the Cookware Manufacturers Association. Nordic Ware Tramontina USA Inc. Inc. Rivalry Among Competitors – Intense The competitive forces (downward pressure on prices. We would not expect to see new entrants but would rather look for mergers and acquisitions to dominate the competitive landscape moving forward to generate increased economies of scale. Given this understanding of the products being supplied we can asses that supplier power is low. . Bargaining Power of Suppliers – Low The inputs to manufacturing are basic commodities (e. brand preference. we would expect a decrease in substitution threat as the recession lingers. including foreign competition. however. IV. statistics and standards for cookware. bakeware and kitchenware. copper) and are not specialized or technologically advanced. Buyers also only buy cookware sporadically and are therefore not typically loyal to one brand.
Individually. and (4) continue to capture revenue growth of at least 15%. (2) increase its market share of the premium cookware segment. fearing that it would cheapen the products’ image. There are several constraints that could limit Culinarian from developing a price promotion and ultimately its ability to meet its strategic priorities. Finally. which limits the market in which the products are sold. Perceived negative impacts from a price promotion offered in 2004 are heavily influencing the decision.• T-Fal C. Organization I.1% of total market revenue. (3) preserve its prestigious image. the company is very selective in how merchandise is distributed. representing approximately 3. in reanalysis it may be found that the promotion was in fact beneficial. Total Market Revenue 2006 3. The achievement of these objectives depends profoundly on Culinarian’s marketing strategy. The most vital goal is to determine if a price promotion is necessary and then to develop the details of a price promotion policy that is consistent with the company’s overall strategic objectives. The marketing department is exploring the risks and opportunities of price promotion as a strategic and tactical marketing tool in 2007. Objectives and Constraints Culinarian Cookware has four strategic priorities in 2006: (1) widen its distribution network. Culinarian Cookware has generated more than $1041 million in revenue in 2006. The preservation of brand equity could prevent Culinarian from considering a price promotion. Financial Condition Culinarian Cookware is in a market that experienced attractive growth from 2002 to 2006 when it generated more than $3.5 million. .10% Culinarian Cookware Competition 96. while maintaining pretax earnings of $12.36 billion in revenues. however. as 2006 was the current year for this case study. Through quantitative analysis they hope to evaluate the financial impact of a price promotion using different cost and sales assumptions.90% 1 Revenue amounts for 2006 were estimated. II.
this will fulfill one of the strategic priorities for 2006.59% 18.00% 10. Conversely. The following organization chart can be inferred from those individuals identified in the study: .64% annually.00% 15.00% 20. this structure can also make it difficult to get quick answers. The manger however makes the actual decisions. This structure makes efficient use of specialized resources and makes supervision easier.Culinarian Cookware has shown inconsistent annual revenue growth rates from 4. Everyone engaged in one activity or several related activities are brought together in one department. IV. Organizational Structure Culinarian’s departments are formally structured by function. III. Annual Revenue Growth 30. Management Philosophy The management philosophy at Culinarian Cookware seems to be paternalistic. If this forecast is successfully met. This management style brings more two-way communication which in turn motivates workers. Management (Donald Janus) consults employees (Victoria Brown) over issues and listens to their feedback and opinions.00% 0.59% to 25. this philosophy does tend to slow down decision making and still be quite dictatorial.97% 21.97% with an average growth rate of 17. For example.96% 25. determine accountability.04% In 2006. Unfortunately. Culinarian has forecasted to capture revenues of $104 million with pretax earnings of $12. sales.00% 5.5 million and has allotted $4 million (4% of sales) for advertising expenses.00% 2003 2004 2005 2006(E) 4. Culinarian has separate departments for marketing. and it can be difficult working with other departments in a unified way to achieve the organization’s goals. and manufacturing.00% 25.
• Good management philosophy. • Employees are motivated. • Management is cautious to pursue bolder price promotion. Summary of Strengths and Weaknesses Potential Resource Strengths and Competitive Capabilities • Clear strategic direction. • Strong brand name image/company reputation. In fact. • Losing market share because of attachment to brand name image. • Core competencies in quality and performance technology. • Business decisions are highly scrutinize before implemented. the most advanced performance technology and strong dealer support.V. • Proven product innovation capabilities. • Stronger dealer relationships than key rivals. • Limited distribution channels. Organizational Culture Culinarian Cookware has a strong organizational culture. VI. • A strong financial condition. Implications for Strategy Development The following issues could cause complications for strategy development: . Potential Resource Weaknesses and Competitive Deficiencies • Weak advertising and promotion. • A distinct competence in utilizing internal and external consumer research. VII. • Flawed data analysis by a third-party consultant. The company has been built on brand equity and has no intention of lowering its status. almost every decision takes into account the preservation of Culinarian’s prestigious name and image. • Leader in metallurgy technology. The culture takes pride in having unparallel product quality.
If they want to stay solely a premium cookware supplier. they will be competing for a very small portion of the cookware market share. (2) increase its market share of premium cookware segment. Roux’s final two priorities. Marketing Constraints A major constraint that Culinarian Cookware needs to be cautious of is market over saturation. new customers are more likely to make a purchase. such as Star Chef and Kitchen select offer mid-level and low-level cookware and utilize the same means of distribution. They need to make sure they are sending the correct lines through the correct channel of distribution (i. PROX1 through William Sonoma). The company is very selective in how merchandise is distributed. . Roux’s priorities for Culinarian Cookware fall in line with the organization’s objectives. If they want to compete for the larger market share. and continue to capture revenue growth at 15%. the consumer could go from a higher end product (PROX1 or SX1) to a lower end product (DX1 or CX1) because of the cost difference. II. they will have to introduce either a low-level or mid-level product to compete with the leaders of the cookware market share. will increasing the product exposure for new customers. With a target market that wants the best quality and most features. they run the risk of competing against themselves. Increasing the number of stores that product lines are offer. Marketing Objectives Culinarian Cookware’s marketing objectives were set by CEO Audrey Roux roll out of the four main priorities for the company: (1) widen its distribution network. than they must focus on more than just premium cookware.• • • • The preservation of brand equity could prevent Culinarian from considering a price promotion. When price is an active variable in the decision process of the target market. Marketing Strategy I. The first of Roux’s objective is to widen its distribution network. in reanalysis it may be found that the promotion was in fact beneficial. To have the greatest success.e. preserve its prestigious image. With more than half of the 2003 purchases being given as gifts or purchases for the intent of being a gift. however. DX1 and CX1 through wall-mart. Culinarian Cookware should turn to venues that offer a similar setting as the mass merchandise outlets and department stores. if Culinarian Cookware wants to gain more market share in the over all cookware arena. leading to a loss in sales. To increase market share of premium cookware segments must look at what competitors are doing and adapt a similar strategy. By over expanding their distribution. D. Weak advertising and promotion policies. and (4) continue to capture revenue growth at 15%. Perceived negative impacts from a price promotion offered in 2004 are heavily influencing the decision. while maintaining pretax earnings margin of 12% are realistic with the company’s growth and brand. (3) preserve its prestigious image. Culinarian Cookware has the opportunity to widen their distribution network by expanding the number of mass merchandise outlets/department stores they offer their different lines of box set/open stock cookware products. while maintaining pretax earnings margin of 12% (1). the new exposure of increase distribution. Major market share holders. fearing that it would cheapen the products’ image. for the best price. with majority of distribution coming from mass merchandise outlets and department stores. which limits the market in which the products are sold.
Though. and then Robusto at 4%. when men.5%.Along with over saturation.e. IV. the target market is more likely to purchase cookware at a large mass merchandise outlet or department store where they are able to see cookware displayed along side other competing products. From a distribution standpoint. what the consumer could perceive as a lower end retailer. They are likely to purchase more if there is a promotional price for products. the target market. so they prefer stores that display products for easy comparisons. Amazon) when they need to purchase in an open stock fashion (purchasing cookware piece by piece) From a price standpoint. The target market is likely to turn to specialty stores (i. Culinarian Cookware should make sure that their celebrities are going to win when compared to competing products Another constraint would be the distribution center as partners. Market Share Analysis Culinarian Cookware at a premium level is the leader in premium cookware.e. purchase they tend to make decisions about what line of cookware products they want to “arm” themselves with when cooking(2). Rated number three behind quality and features on the 2003 Orion Market research study.000 plus. women were identified as being the majority purchaser of Culinarian Cookware. distributing them through mass merchandiser outlets such as Wal-marts. Culinarian Cookware should be cautious about how many celebrity chiefs they associate their cookware with. when it comes to other competing players. like many want to have the biggest “bang” for their dollar. low-level or mid-level). Price of products. With offering premium products.e. William Sonoma) and online stores i. Culinarian Cookware should be careful not to exclude their consumers that are more likely to purchase products through a mass merchandiser outlet or department store as a gift for someone else. indicates that the . consumers could become confused due to the disconnect between high end products being sold through. Who is better? Though. Culinarian Cookware is at 14% of the cookware market share. Though. The leaders in over all cookware market share offer different levels of cookware (i. The group also has a large likely hood of watching cooking shows and then purchasing cookware with familiar names of cooking celebrities or brands used by those seen on shows. Culinarian Cookware must make sure that their celebrities are able to compete against the celebrities of other companies. The group tends to care more about what the product can do rather than how it looks. Having too many faces on boxes could confuse a consumer during their decision making process. Their claim for purchasing the cookware was that cooking was a number one hobby of theirs. The closest player to Culinarian Cookware is Le Gourman at 6. In the results of the 2004 company questionnaire. The age range of the target group tends to be between ages 30 to 55. Target Market Analysis The Culinarian Cookware target market is a mix between men and women of households that have an income of 75. With the consumer identifying they are more likely to purchase a product they recognize. Though to some it may appear that all of Culinarian Cookware’s products are top notch since many celebrities choose their products. Majority of the group received their products as either a gift from someone or purchased the product as a gift for someone else. it leaves the consumer wondering which celebrity to listen to. and/or if there is a free promotional item given away when a purchase is made. III. The target preferring to purchase the highest quality with the most features is most likely going to compare competing brands. making up thirty percent of the purchases.
Culinarian Cookware actually hurt them. (A slow down in growth is forecasted for 2006) The Culinarian Cookware sales also follow a seasonal sales trend. hit their mid year high during June’s wedding season. the Stainless Steel line continues on at an average of 15% (Also expected in 2006 forecasts) The aluminum line made a 15% recovery in 2005 trying to recoup from the large decline during 2004. and then begin to peak during the second quarter. During the first quarter sales sit between 6-7%. Culinarian Cookware’s aluminum product sales took a 17% hit due to the 6 month of disrupted shipments. some of the target market will not make a purchase till a discounted/promotional price is offered. Sales & Profitability Analysis The sales for Culinarian Cookware have an average of 15% growth per year since 2002. The line-up. V. and should not offer a price promotion (discounted sales price) unless their growth falls below the average. sale quickly increases as customers begin shopping for the holiday seasons. The PROX1 uses a proprietary copper construction. If they want to attack new or returning customers they should offer a free gift with the purchase of a certain amount of product. Near the end of the fourth quarter sale hit the annual high. This will satisfy their customers. aligning themselves as quality cookware makers whose users would proudly display their products on their stovetops. and an average growth increase of 15% for the Stainless Steel products. during the spring of 2004. while all relatively high-end. includes the Tyro Collection (CX1). While everything else stayed at a constant growth. VI. and the Professional Grade Collection (PROX1). and the CX1 lines.target market considers price a major factor when making a decision to purchase or not. then during the 2005 fall period (after the promotion) growth dropped off for the PROX1. and represents the most . The only delineators between the value propositions of each line are the materials used in construction. and made them purchase from the CX1 or DX1 line instead of the PROX1 or SX1 lines. consumers purchased a higher quantity of CX1 products. are reasonably distributed in price and technology. still below average at a percentage of 5%. With the average growth of 15% Culinarian Cookware has had a track record with increasing the need for their product. POI. Marketing Mix Variable Analysis Products The products that Culinarian offers. Finally starting off the fourth quarter at averages close to the first quarter. while the DX1 line’s growth slowed. During the promotion trade resellers bought up product and then resold the product a normal cost for a gain. SX1. the Classic Collection (DX1). In 2005. and sway the customer to buy now. The price promotion caused confusion in the consumers. In case exhibit 4. Culinarian Cookware since 2002 seen a constant 15% growth in sales. With increasing unit orders each year and increasing their advertising spend to ensure they are reaching their target market. With the 2004 price promotion. While the 2004 promotion gave a small boost. Culinarian Cookware’s price promotion hurt their sales growth. During the start of the third quarter the sale begin to decline back to the 67% range. With the target market purchasing majority of products through mass merchandising outlets and department stores. who want to see the most for their money. They have carefully designed their line to appeal to the amateur. the Advanced Chef Collection (SX1). novice and expert chefs. and then return to the 6-7% average at the beginning of a new year. which consists of four lines. and Cooper). to the Premium (Cast Iron. the premium line begins to increase at a rate of 48% (A continuous expectation is inferred in 2006 forecasting).
This. This is certainly represented in the sales data as the $200 DX1 line sold 236. Lastly. these account managers became the face of Culinarian. attentive and caring for those charged with distribution of its products. The findings also show that many (55%) have received or purchased Culinarian cookware as a gift. key findings indicate that more people buy (or would be willing to buy) Culinarian cookware in catalogs and online retailers (15%).expensive/advanced product offered. a successful relationship with its retail partners because of the high margin it offers (52% versus the 48% average from Le Gourmand and Robusto). The strong relationship between retailers and Culinarian is most certainly due to the expertise of the personable and intimate sales force employed by Culinarian. Janus believes that Culinarian is a strong brand producing quality products and should stand by its retail price. He cites . Upscale department stores also represent a relatively high proportion of trade orders at 32% and 27% coming from local specialty retailers. in cognitive science circles is known as the decoy effect (asymmetric dominance effect). costing on average (2006) $300. at the bottom most tier of Cunlinarian’s product offering is the CXI. both are made of aluminum except with the SX1. This additional %41 percent in sales can be directly attributed to both promotional initiatives (as it did not exist prior to the promotion) and to the cost/benefit analysis of customers when shopping. Donald Janus. However. Only 5% of orders came from the company’s on-line store and direct mailers. It would stand to reason that the PROX1 and CX1 exist for the thrifty and profligate alike but they also serve the purpose of driving sales to the middle of the road. This presents a unique opportunity for Culinarian to expand its distribution into those areas and at a potentially greater margin (direct sales). Next down the list. the CX1 at 166. Distribution Retailers are the backbone of Culinarian’s distribution chain. benchmarking the customer’s decision for them. Expanding distribution into the boom online retailers are experiencing (Amazon has seen 276% sales growth from 2004 – 2008 alone) would be the forward thinking thing to do without compromising brand equity in the process. The force. a stainless steel exterior is used. This phenomenon was triggered when an influx of consumer perception for Culinarian products was activated by the promotion offered in 2004. Thus. for the most part. 36% of trade orders come from a network of three upscale kitchen chains that specialize in high quality products that perfectly match the brand equity of Culinarian. in the study by Orion Market Research. Culinarian has. Average cost in 2006 is $250 and $200 respectively.600. There is however a variance in the types of retailers Culinarian conducts retail activities through. The CX1 offers the least amount of technological features and the average cost of $150 reflects it. consisting of 8 experienced account managers who had all been with the company for a considerable amount of time (7+ years). and the Senior sales Manager.350 units compared with its cheaper brother. giving it the personality of one who is passionate. would routinely visit major account holders to offer hands on training and inventory management suggestions (the direct competition made account visits around half as much). and appealing to those customers who do not have the penchant for fine copper cookware is the SX1 and DX1. Victoria Brown are at an impasse regarding the success of a 2004 price promotion and whether to move forward with another promotion for 2007. Promotion and Advertising Promotions are a bit of a hot topic at Culinarian as the Vice President of Marketing. All four products offered are bracketed $50 apart yet an overwhelming percentage of sales are carried by the lowest of the two offered.
It would serve Culinarian well if they were to align advertising strategy with their promotional activities as those that would have purchased the CX1 line while on promotion do not regularly purchase or follow the offering of Culinarian. They felt the 2004 price promotion had an overall negative affect on profits. However. is a . The majority of Culinarian’s ad budget went towards advertising in magazines that targeted high-income markets (Bon Appetit. More importantly. the interaction affect between the lines should be considered when making an assessment on the effectiveness of any promotion.000.overall sales for 2006 showing 21% growth in revenue and a 2004 consulting report. This was not the opinion of the consultants brought in to analyze the effectiveness of the promotion. Brown also felt that the margin for statistical error on cannibalization costs for the DX1 line was too high and thus should not have been included in the study. momentarily. newspapers or other magazines that were not already advertised in.) and newspapers (USA today. projections for March – May orders should be rolled back by 24%. they believed that the DX1 was “cannibalized” as sales did not meet forecasts for the spring period (Spring sales were off around 5. indicating sales figures that fit with the sort of lift associated with price promotions.) Culinarian’s cooperative advertising only targeted retailer catalogs and direct mailers. Kitchen Select and Star Chef. These figures also are representative of the subsequent promotions offered by Culinarian in 2005 and the yearly promotion. cheapen the brand and advertise in those areas that Kitchen Select and Star Chef.70% in 2006. Martha Stewart Living. competitors at the lower end of the product spectrum. The free gift directly reflect marketing data indicating that %20 would be motivated to buy if offered a free gift. Brown felt that the study was flawed in its assessment of the losses in three ways.489. If this adjustment were made. and a broader spectrum of people are aware of the promotion. Also. to devote the better portion of $4. it becomes apparent that CX1 did underperform after the promotional period but sales for the DX1 more than made up for any deficit in sales. none went to supporting retailers advertising on TV. Sales would have exceeded projections. etc. They concluded that during the promotional period sales underperformed by $469.000 to those advertising mediums. The trend coming off of the promotional period indicates a sustained lift in the DX1 sales with all other lines flat lining with moderate increases intermittently.000 units). thus. She saw that the first few months of 2004 underperformed the first few months of 2003 by %24. which are slowly fading from the public consciousness. Also. Brown on the other hand felt they needed to embrace promotions as a method of brand building.” Browns contention is that promotions and discounts “increase commitment and support from the trade and will boost overall brand awareness. which offered a free Dutch oven with the purchase of more than $500 of merchandise. If the price is right. both out-spent Culinarian by 50% . which shows that the promotion had a negative affect on profits. She felt that Culinarian needed to be bolder with promotional offers as feedback from sales teams indicated that retailers were unhappy that there were no “consistent and meaningful price discounts. Culinarian may then drive sales towards its products and away from low-end competitors. in all.” When looking at the data regarding the 2004 promotional. Cook Illustrated. It would then appear then that the promotion was successful in creating brand awareness. Advertising by Culinarian follows a steady trend of spending (around %4 of revenue) statistically identical to their competition. They should. Brown. felt strongly that promotions had a negative affect on the brand and cheapened their reputation as a high quality cookware company.
Plenty of companies have successfully brought their products to the online market through reputable retailers like Amazon. Their management cares about the image of the company. This. The perception on Culinarian’s part would be that make a large portion of its sales online would be analogous to selling in a Wal-mart of sorts and they would ultimately loose the ability to regulate the prices. all else aside. This same strength is. One method of growing as a business without changing its brand strategy is to develop a new product line aimed at lower . Culinarian may do well to follow suit. Year over year they are growing and. in turn. Even a partnership with popular cooking television shows would fulfill the need to diversify ad spending while keeping the Culinarian brand “elite”. Culinarian also has a strong sales force that makes more retailer visits during the year than their competitors and. spending more on advertising ($4 million in 2006). Culinarian is keenly aware of their dominance and its management wishes to maintain the brands reputation.com while maintaining their brand’s image (LL Bean. in turn. They are so incredibly trepidacious in regards to maintaining brand equity. where many people (%55 according to the market study) are giving cookware as gifts. They are sensitive to consumer perceptions and hold their retailers in high esteem. Culinarian’s greatest weakness.) Culinarian overall suffers from over-protective-mothersyndrome and would do well to diversify itself in promotions. This is about %55 more than their closest competitor LeGourmand who holds %6. Allen Edmonds etc. they would in fact be able to regulate prices to their liking and may even be able to eliminate the trickery that retailers have employed (over stocking during a promotional period then selling items bought during the promotion at a regular price). who holds %4 of the cookware market. Implications for Strategy Development As Culinarian goes forth and develops future market strategies it may be wise to consider the following ideas before developing new growth strategies. They are hesitant to make a move that would potentially cheapen the brand or one that would increase sales at the expense of brand equity. Bodum. We have seen thus far that Culinarian is very protective of its brand. Thus. These characteristics are completely in line with the market that they dominate (the high end cookware market) with an overall %14 cookware market share. they fail sometimes to meet fundamental retailer and consumer desires. VIII.misallocation of advertising resources. The report by Orion Marketing has shown that %30 of consumers would be motivated by a price discount (a figure reflected in sales data during the promotion) and it’s own retailers have expressed frustration. They have a decent spectrum of products. they should be making more price promotions during those times. all on the higher end of quality and pricing in the market. If anything. is a great strength for Culinarian. The competition at the lower end of the market are running promotions during this period. VII. To do so would be the equivalent of ignoring a major potential market (and a rapidly growing one) and subsequently missing a major growth opportunity as well. Summary of Marketing Strengths and Weaknesses Despite the promotional dispute within the company.5 of the cookware market and Robusto. around November and December. paradoxically. This all comes from a strong and experienced management team. advertising and distribution. Culinarian is in a relatively strong place. Culinarian has strong relationships throughout its distribution network. A failure to develop a strong direct mail/on-line presence is also a major weakness for Culinarian. Culinarian should be looking into advertising outlets targeting the mass market with lower placement costs and higher visibility. Their consumers equate the Culinarian name with quality and high technology. However.
The three alternatives consist of Culinarian Cookware creating new opportunities for market share. This would go against the instinct of any experienced marketer but the most important thing a promotional does it create awareness for the brand and respect from the consumer side that a prestigious brand. there are three alternatives that should be considered. such as Culinarian. The price of the promotion (%20) indicates that this is simply an opportunity. Problems in Situation Analysis Strategic Alternatives for Solving Problems In reviewing Culinarian Cookware’s current problem. else. It says that we care and want you to experience our wonderful products. is that promotions. and finally. Websites are perfectly capable of maintaining the standards of Culinarian’s ad needs while also giving them a more ad impressions and (something that may be new for Culinarian) interactivity. do not hurt the Culinarian brand but actually enhance it. the implications for future development of marketing strategy are huge. They have many opportunities to reevaluate their position but are not pressed to do so as they dominate the high-end portion of the market. not a blowout fire sale. Whatever move Culinarian makes should be done thoughtfully but boldly. A creative approach must be used to market their products effectively in a rapidly changing media environment. when used correctly.5 of the market they do not currently serve while preserving the equity of the Culinarian name. introduce a brand extension. Create Market Share . In essence. This is very powerful from the consumer’s perspective. They are behind in the times in the mediums they choose to advertise in and are unnecessarily stringent in choosing which avenues of brand communication to use. They are still diverting the majority of advertising resources to magazine advertisements and cooperative retail pieces.markets which it does not serve (those currently served by Star Chef and Kitchen Select) but marketed under a different name. They could essentially have a conversation with their consumers rather than a linear relationship with them and develop a lasting loyalty with those who have bought Culinarian products in the past. Another point. where Culinarian Cookware could introduce other cookware items needs for culinary success under the Culinarian Cookware name. create and introduce a lower level of cookware under a different name. becoming stale. the advertising strategy of Culinarian is in horrible shape. and possibly an answer to the question posed by the case. would give “me” the opportunity to purchase their products. This would give them the opportunity to tap into the %83. they run another risk. Along the same lines.
McDonalds. In this case. Currently. they lead the premium market. with the introduction of a lower quality brand. small restaurants/catering companies. The espresso drinks would be offered during all hours the restaurants were opened. This alternative fall logically with the company’s marketing priorities and would be the easiest for Culinarian Cookware to adapt. Then Culinarian Cookware could gain market share in the culinary cookware market. McCafe was introduced in Canada as a coffee shop. This multibranding method has been adapted by other companies (I. Currently. McDonalds wanted the McCafe to be seen as a premium brand and wanted to appeal to those consumers that would see McDonalds as a lower brand.Culinarian Cookware has an opportunity to find untapped target markets to create need for their current products. this would add to the brand image. These areas also play into Culinarian Cookware’s high quality specialty brand image. and packaged in a way that is better suited for the commercial needs. they target a more private/public consumer market. They would also have to market the brand in a new light. to introduce different products under different brands. Later. Culinarian Cookware could introduce a new line of cookware of a mid/lower level quality to offer consumers under a new brand name. Multibranding has worked for companies such as McDonald’s. Culinarian Cookware has an opportunity to cross over into a more commercial market. . Culinarian Cookware would have to identify the needs of the commercial market and focus marketing material in a way that display the products as the best solution for the commercial needs. With product features as a major qualifier for decision making. To take advantage of this alternative. The new areas would also allow the sales team new opportunities to distribute the products. Possible areas consist of school cafeterias. or small hotel restaurants. areas that currently have a need for high quality cookware. The current product lines could be offered. If the commercial areas used Culinarian Cookware products. The costs to Culinarian Cookware would include more than market research. Culinarian Cookware could try to gain up 30-40% as the competitor who offers multiple levels of cookware do. Culinarian Cookware would have to ensure that commercial areas are a viable market to try to enter. Create new product line under new name/brand (Multibranding) Culinarian Cookware second alternative to consider is the creation of a new level of cookware (Med or lower) to offer consumers under a new name/company/brand so that premium image is not hurt. but McCafe as a premium coffee worthy of a stop.e. Culinarian Cookware would also have to ensure that the sales team would be able to cover the new areas and demand the expansion would require. Culinarian Cookware would only have to research the need of the possible new areas. McDonald’s created the McCafe brand to offer espresso style drinks in competition to the standard black coffee offered with breakfast. Culinarian Cookware could further position their products as favored by the new commercial areas. GAP). Creating new market share would allow Culinarian Cookware to gain market share in other areas of the cookware industry. verse the image of regular coffee (to whom most consumers only consume during the morning hours). McDonald’s marketed the espresso drinks as something offered in standard restaurants.
Consumers will be more likely to purchase complementary products under the same premium brand. The cost of the brand extension is similar to that of the multibranding alternative. than a complementary item to go with premium cookware. The organization wants to reach new markets and give people what they want. With price as one of the top three deciding factors in consumer decision making. but has the biggest chance to have high returns for the company in the end. . Culinarian Cookware does not have the knowledge of the proper resources. Culinarian Cookware would also need to expand their knowledge of the materials needed to produce the other support items and where best to purchase said materials. Yes. Knives. could be exactly what Culinarian Cookware needs to succeed in the future. cutlery. This alternative offers new challenges for Culinarian Cookware. Culinarian Cookware has success in the premium cookware market. Culinarian Cookware would become a more complete solution such as the Kitchen Aid brand. Unlike the second alternative. This brand extension strategy would allow Culinarian Cookware to expand upon their premium brand name and break into a larger market to compete in. With the proper research and development Culinarian Cookware should be able to create such a line. the McCafe brand has the legendary ‘Mc’ in the brand names telling people that the item is a McDonald product. Like the two previous alternatives. or how to market it as a lower product. The major concerns consist of Culinarian Cookware’s abilities to create the new level of products. The extension would also allow Culinarian Cookware to compete in newer markets and free them of the very tight cookware market. This alternative would have heavier front loaded expenses. Introduce other culinary needs (Brand extension) Similar to introducing a new lower level cookware product. and measuring bowls). the brand extension plays into Culinarian Cookware marketing priorities. Culinarian Cookware could create a lower quality cookware line that has many features similar to mid/lower level lines of competitors at the price consumers want to pay for their cookware. Culinarian Cookware would have to do intensive research to ensure they understood how to produce the other culinary products. but the idea of creating the McCafe brand to promote and market their coffee house style espresso drink as a premium brand. and the adaptation into the newer lower markets could prove to be difficult. Culinarian Cookware could tap into the culinary needs market and begin to offer premium cookware items that complement their premium cookware (i. The brand extension idea would allow for Culinarian Cookware to market them as a complete culinary solution. the Multibranding idea of creating a new product under a new brand works with Culinarian Cookware marketing strategy. Culinarian Cookware would be able to offer both premium cookware but also premium support items to complement the cookware items they purchased. but it will cost the company a large amount of funds in consumer market research so they can ensure a success. the engineering of the new product.Like The previous alternative. not to hurt or lower the premium feel of current products.e. Culinarian Cookware would have to understand even more about the different industries and how to produce products that can compete within those different industries. a new mid/lower level product line with a new brand name.
Selection of Strategic Alternative and Implementation Summary .
Work Cited .
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