Culinarian Cookware: Pondering Price Promotion

Should Donald Janus take a decision of running the price promotion in

2007?
Cookware market background
Between 2002 and 2006, the U.S. market saw an impressive increase ($3.36 billion market). On the
basis of price, quality, and material, the cookware market is divided. A manufacturer can be
recognised by the variety of goods they provided, such as high-end or low- to mid-range goods.
Stainless steel, copper, cast iron, and aluminium were the other materials that sold the most
cookware.

Competitors Product type Market Share

Star Chef Mid-level to Low-end 18%
Kitchen Select Mid-level to Low-end 14%
Le Gourmand Premium 4%
Robusto Premium 3%
Culnarian Premium 7%

Consumer Behaviour for the Cookware market

The buying pattern was seasonal in nature, with peaks evident during May-July (Wedding Season)
and November-December (Holiday Season). When it came to purchasing cookware, quality and
features were prioritised over cost and brand name, and brand recognition was crucial.

Selling Pattern in Cookware market

Consumers of high-end cookware were now gravitating toward colourful designer options that
complemented their kitchen furnishings. Celebrity chefs' endorsements had a favourable impact on
consumer behaviour as well. The majority of customers came from households earning more than
$75,000 each year. Women naturally constituted the main customers of fine cookware.

Retail Distribution Outlets

Department stores Local Speciality Stores
Mass Merchandisers Grocery Stores
Kitchen specialty chains Direct TV sales
Others Online Retailers and Catalogue

Culinarian Company Background

Culinarian Cookware is a manufacturing, designing, distributing, and marketing premium cookware’s
for professional cooks. Cookware’s are sold by the piece or in boxed sets of 5 to 14 pieces. They
focus on advanced performance technologies cookware and their cookware line up goes as In the
premium market segment, they are at 6.5% of the total cookware market.

Culinarian Market Mix

Culinarian holds following product lines with their company
Product Line Exterior Price Intensity
The Tyro Collection CX1 Iron Lowest Priced
The Classic Collection DX1 Aluminum Mid-Range
The Advanced Chef SX1 Stainless steel Mid-Range
The Professional Grade Collection PROX1 Copper Most Expensive

Culinarian Sales & Distribution

Culinarian uses the following distribution channels

Distribution Share
75 Local Stores 27% of Trade Orders
Specialized Chains 36% of Trade Orders
Direct Sales 5%
Bloomingdale and Neiman-Marcus department stores 32% of Trade Orders

Culinarian Competition in market

Culinarian is facing the following competition

Competitors Product type Market Share

Star Chef Mid-level to Low-end 18%
Kitchen Select Mid-level to Low-end 14%
Le Gourmand Premium 4%
Robusto Premium 3%
Culinarian Premium 7%

Promotion requirement
The urgent and important decision is whether to execute a rate promotion in 2007 and, if so, which
products and under what conditions. The bigger question is how Culinarian should go about
achieving its goal of sales development and what function, if any, rate promotion should have.
Clearly, a cost promotion programme has both enticing benefits and negative aspects that have
major effects. But Promotion is very helpful in attaining Culinarian’s goal.
Following are the goals of Culinarian set by its CEO

 Widen its distribution network

 Increase its market share of the premium cookware category
 Preserve its prestigious image
 Continue to capture revenue growth of at least 15%, while maintaining pretax earnings
margins of 12%.

Evaluation of Alternatives
1. No Price Promotion: In this option, there won't be any official price  reductions;  instead,
consumers occasionally receive free presents when you buy things at their regular price. Alth
ough this solution carries the fewest risks, the business will still need to find additional strate
gies to stay competitive.
2. Discount on Slow-moving Items: Similar to what the business did in 2006, apply a 30%
discount pricing to the slow-moving items.
3. Price Promotion Campaign (Discount on Selected Premium Items): Make a significant
investment in a thorough price promotion campaign. Discount prices will be applied to a
number of items from all lines, not only the least expensive and fastest-growing ones.
Innovative marketing strategies will be used to support the campaign and build anticipation
for the price reduction.

2004 Price Promotion Analysis

Janus believes that price promotion cheapens a product’s image and is unnecessary. It is because of
the analysis done by the external consultants, and they found a negative impact on profit with a
promotion loss of $469,489.

Brown disagrees with Janus and does want price promotion for the product and he explained how
important is to stay consistent with the sales force and allowable 30% discount to customers who
can’t afford premium products. He also states that 2004 analysis by external consultant was wrong
and that too company was in profits during that time.

Following is the comparison of Consultant and Brown promotion.

Consultant based calculation of cost and Profit Column1 Column2

No Promotion Promotion(20% discount)
Unit sold 119504 184987
Manufacturing S.P 72 62.4
Total Revenue 8604288 11543188.8
Variable cost 52.05 52.05
Total Variable cost 6220183.2 9628573.35
Unit contribution 19.95 10.35
Total Unit Contribution 2384104.8 1914615.45
Overall loss -469489.35
 Victoria Brown based calculation of cost and Profit Column1 Column2
No Promotion Promotion(20% discount)
Unit sold 59871 184987
Manufacturing S.P 72 62.4
Total Revenue 4310712 11543188.8
Variable cost 38.64 38.64
Total Variable cost 2313415.44 7147897.68
Total Unit Contribution 1997296.56 4395291.12
Overall Profit 2397994.56

Recommendation of Price Promotion Campaign

2004 Price Promotion analysis summarizes that retailers did not pass the entire discounts to the
customers. During price promotion, they overbought and gave only a portion of that at discounted
price and pocketed the difference. Culinarian Cookware should be cautious of price promotion in
2007

Also, higher profit margin to the retailers is one of the core strengths and the differentiating factor
for Culinarian. In fact, in 2004, the retailers were made to accept a profit margin of 48% as against
52%. Price Promotion Campaign The recommendation to pursue the third alternative was made
based on a decision matrix with the following set of criteria: risk; ability to widen distribution
network; positive impact on brand image; ease of implementation and financial return.

For minimal risk and maximum profit:

• Price promotion for low end product lines (CX1, DX1) in order to preserve the premium image
of the Brand.
• Reduce Trade Margins from 52% to 48% only on fast moving product lines (SX1 and PROX1)
• Keep the promotions in the months that comes before the peak sales months.
• Communication channel should not be only targeting high income audience but also mid-level
income audience for low end product lines.