CULINARIAN COOKWARE

PONDERING PRICE
PROMOTION
A Marketing Management-I Case Analysis

Submitted By: Team AC2

Ankit Baranwal
Ashish G Gyanchandani
Charu Pandey
Natesh Bhardwaj
Surya Bakshi

Introduction
Culinarian Cookware was considering the option of providing a price promotion to its consumers on its
premium cookware. The companys Vice President, Marketing, Donald Janus was against this option as
he thought it diluted the brand value. He felt that given the products quality technology and
performance the price was apt. On the other hand the companys senior sales manager Victoria Brown
opines that the price promotion strategy was going to be profitable as it will extend the companys
reach and increase the brand awareness. With these arguments and facts Victoria Brown had to come
up with a detailed analysis and recommendation whether price promotion should be provided or not.
Problem Statement
Should the company offer a price promotion for the companys line of premium cookware in the coming
year?
Consumer Behavior:
The consumers in the cookware market could be split into 2 income groups with one containing those
earning over 75000$ and the other containing less than 75000$. In the case, cookware consumers
earning more than 75000$ were surveyed and the results were presented in Exhibit 4. Based on this,
some inferences can be drawn about the behavior of consumers. Consumers of cookware prefer brands.
And for this income category of consumers, price was not a major deciding factor but they were driven
by lower prices. They prefer buying in mass merchandising outlets and kitchen specialty stores. Also
they prefer buying at stores with attractive displays and stores that provide good service. These suggest
that the consumers prefer quality and better service and were ready to pay an appropriate price for it.
Most of the consumers in this prefer to buy premium cookware.
How it was bought and sold?
Culinarian sold its products through retailers, specialty stores, and through internet. Most of the sales
were through retailers and specialty stores while a small portion accounted for sales through their web
site. Culinarians channels involve sales force, selective retailers and specialty stores. 32% sales suggests
a huge potential in mass merchandising outlets. The cookware sales were price sensitive owing to 30%
respondents selecting price as the most important criterion. 55% Cookware sales as gifting items
suggest that seasonal purchases and offerings help draw customers. There was an increased clamor to
cookware that matches the dcor in kitchen. Brand awareness through celebrity chef were widely
recognized and impactful for sales conversion. Sales were usually done through kitchen, local specialty
chains, departmental stores, mass merchandisers, grocery stores, TV, online sales, catalogues.
Implications of Culinarian marketing strategy:
Given that the consumers perceive this as a premium brand, making the product available at selective
locations was a good strategy. It helps keep up the brand value. And the survey conducted by Culinarian
shows that the unaided brand awareness of Culinarian among cookware customers was lesser that
those of Le Gourmand and Robusto. And to increase the awareness among consumers, Culinarian would
need to advertise. Currently they were using 4% of their sales on advertising expenditures and this
strategy was sensible. And advertising in selective magazines and newspapers based on the target
audience was also a right strategy as Culinarian expects to maintain its brand value. However Culinarian

does not subsidize the advertising of trade organizations in magazines and newspapers other than those
recommended by it. This restriction can be subjective as in certain cases the trade organizations know
the advertising vehicles to be used better. This might be the reason for low awareness amongst
consumers despite good advertising spending by Culinarian.
With the premium segment competitors never running price promotions, Culinarian cookware
marketing strategy helps boost its brand awareness and sales as it serves as a differentiator. However,
this comes at the cost of reduction in prestige image.
Marketing strategy should be non-cannibalizing. Increase in sales of CX1 during 2004 price promotions
led to decrease in DX1 sales. CX1 recorded 57% increase in sales while DX1 sales reduced by 17% during
the spring sales promotions. Price promotions in 2005 augmented DX1 sales at the cost of CX1 sales. CX1
sales have declined by 25% while DX1 recorded 60% sales growth.
Sales fluctuations from spring to fall in CX1 series during 2004 indicate the promotions transferred sales
from fall to spring. Only DX1 saw an increasing trend in sales despite promotions in 2005, CX1 line
promotions were evident only in 2004 and have consistently dropped in later years thus creating only
short term sales momentum.
Sales through catalogues were only 5% indicating direct sales force sales will tremendously help
Culinarians sales. Price promotions have not been advertised at national level leading to price variations
offered by various retailers. As a result, only 50% received/benefited fully from price promotions. Also,
ad policy restricting co-op retailers limited aggressive ad promotions.

2. What are Culinarians strengths and weaknesses? Why has the company been successful?
Strengths
Weakness
Strong image because of its product quality Lack of consistency and meaningful discount
and its advanced performance technology
events
Wide range of products; offering from a high
priced, advanced performance technology
product to lowest priced with the least advanced
technology product, there by catering to the
different set of consumers ranging from normal
buyer to a serious cooks.

Since the advertising budget was spent

mainly in national advertising. This led to low
brand awareness in lower income
households.

Market leader in metallurgy technology. POD

such as copper cookware with effortless
cleaning and maintenance and patented
copper construction
Its strong relationship with retailers helped it
in offering all its variants thus establishing a
broad network

The company had imposed strict restrictions

regarding the type of the publication the
trade could use
Highly priced products of Culinarian, which
largely targeted the premium segment of the
market. This eventually resulted in to a low
penetration & selective channel distribution

High margins compared to its competitors Difficulty in handling inventory control during
leading to greater retail participation
the promotion, shows that the company was
still not ready of handling the sudden surge in
the orders. This could have strained the
relation with retailers
Favorable trends in the market for its Difficulty in maintaining the excitation of the
premium segment. Copper cookware, retailers in pushing the programs that offered
premium cookware, matching kitchen dcor
a gift with purchase
Favored and endorsed by chefs and experts
Cannibalization among brands due to price
difference
Experienced managers to provide inventory
management suggestions

Culinarian was successful owing to seasonal promotions, having the first mover advantage over
its premium copper segment. The company was successful largely on exploiting the
opportunities and exhibiting its core strengths. The company had a clear picture of its target
audience and offered a wide range of products with its main focus on premium segment of the
market. Strong retail distribution outlets, healthy relationship with the retailers and high
offering of 52% margins as compared to its competitors and also the highly efficient &
experienced sales force made the company to increase its revenue and profits year on year.
The success could also largely be attributed to the offering of advanced high priced
performance technology products (for highly informed consumer) to low priced least advanced
technology product to mid-level and low-end consumers.
3. Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a
promotion (Egg: Product scope, discount rate, timing, communication)? In case you feel a
price promo was not suitable, come out with another type of sales promotion (Manufacturer
rebate program, gift with purchase etc.) to recommend
No, Culinarian should not adopt price promotion.
The general trend in the industry, especially in the segment in which Culinarian operates was
higher middle class segment. Customers from this segment prefer quality and features over
price as shown by the Orion Market Research. Moreover the competitors of Culinarian in this
segment were not offering any discount. The price discount in this situation to garner untapped
market would weaken the positioning of Culinarian.
The price discounts would directly affect the revenue and distributor margin which would result
in falling short of achieving 15% YOY increase in growth and also takeout the advantage of a
supplier with high margin image among distributors. Which will not only discourage

distributors but also removes the only edge Culinarian had when compared with its
competitors.
The capacity of the plant to handle the surge due to increase in sales when prices were
discounted was questionable. From the past experience (in 2005) Culinarian was not able to
handle the surge in sales. Hence Culinarian should not go for price discounts unless it was
prepared to handle the demand.
The price discount given by Culinarian may not reach the customers. Form the previous
experience in 2004 it was known that most of the distributors did not pass the benefits of price
discounts to the customers.
If we see compare the profitability calculations of the consultants analysis and that of Victoria
Brown, we can find how the assumptions of the senior sales manager, Brown were irrelevant
and showed the flawed image of the price promotions.
Consultant
With
Without
Promotion
Promotion
Total Units Sold
Selling Price
Variable Costs
Profit Contribution per
Unit
Profit Contribution
Loss
due
Cannibalization

184,987
$62.4
$52.05
$10.35
$1,914,615.5

to

$99,332

Saving in Inventory Costs

Profit Increase/Decrease
due to Promotion

$39,540
$(529,281.4)

119,504
$72
$52.05
$19.95

Brown
With
Without
Promotion
Promotion
184,987
$62.4
$38.64
$23.76

59,871
$72
$38.64
$33.36

$2,384,104.8 $4,395,291.1

$1,997,296.56

$2,397,994.6

The difference in profitability due to promotions according to the calculations done by

Consultant and Brown are because of the total sales volume which are considered erroneously
by Brown as 24% yoy growth directly from the previous years monthly data. Also in Browns
calculation, the variable costs include only labor and raw materials which totaled $38.64. Brown
also did not consider Cannibalization costs and inventory savings. Because of these differences
in consideration, there is Profit in Browns calculation and loss in the calculation done based on
Consultants logic.

Recommendations
Culinarian should adopt consistent and meaningful price promotions to avoid cannibalization of
CX1 due to DX1 sales. Culinarian should adopt a promotion strategy that should not enforce a
trade discount. Culinarian has poor brand awareness in its target market than its competitors
who never run price promotions. Hence to increase the brand awareness, Culinarian should
invest in marketing to improve its business. Following steps can be taken in this regard:

Sponsoring cookware for national TV featuring its product line

Cooking events with chefs and customers in shopping malls, to induce trials
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 gift vouchers can be mailed to the customer after the
customer returns the warranty card with a conveniently attached survey
Gifts can be offered at non-peak time periods because retailers prefer non-overlapping
promotions from the vendor lines they carry
Vouchers can be given to customers on purchase of CX1 & DX1, which can be redeemed
on purchase of high end SX1 or PRO1
Celebrity endorsements through high-profile chefs, to appeal to customers through
opinion leaders can be helpful
Increasing manufacturing capacity will help in dealing with increased sales during
promotions