CULINARIAN COOKWARE:

PONDERING PRICE
PROMOTION
Group 2
V. SHARADA (058) | MANASH (091) | POOJA (102) | SONIA (114) | RAMZI (IE/17/034)


Introduction
Culinarian Cookware designs, manufactures, distributes and amrkets premium top performance cookware for
serious cooks
Cookware is sold by the piece or in boxes sets that range from 5 to 14 pieces
They focus on advanced performance technologies for cookware
In the premium market segment, they are at 6.5% of the total cookware market
Sales in 2006 were approximately $ 3.36 billion in revenues
Widen the
distribution network
Increase market
share in premium
cookware segment
Preserve the
prestigious image
Continue to capture
revenue growth at
15% while still
maintaining pretax
earnings at 12%
Strategic Objectives
Was 2004 promotion at Culinarian
profitable?
Donald Janus, VP of Marketing, believes price promotion cheapens a products
image and is unnecessary
The assessment of the price promotion conducted by the external consultants
found a negative impact on Culinarians profit with a promotion loss of $469,489
in contribution
Victoria Brown, Senior Sales Manager, disagrees with the negative outlook on
price promotion and believes it to be profitable
Profitability calculation by
Consultants and Browns logic
Particulars
With
promotion Without Promotion
Sales Units 184987 119504
SP ( per unit) 62.4 72
VC 52.05 52.05
Contribution pu 10.35 19.95
Contribution total 1914615.8 2384104.8
Profit increase due
to promotion -469489
Cannibalisation -99332
Savings in
inventory cost 39540
Promotion
Contribution ( $) -529281
Consultants
Model
Particulars With promotion Without Promotion
Sales Units 184987 59871
SP ( per unit) 62.4 72
VC 38.64 38.64
Contribution pu 23.76 33.36
Contribution total 4395291.12 1997296.56
Profit increase due
to promotion 2397994.56
Cannibalisation
Savings in inventory
cost
Promotion
Contribution ($ ) 2397994.56
Browns logic
Our estimate of profitability
Particulars With promotion Without Promotion
Sales Units 184987 119504
SP ( per unit ) 62.4 72
VC 38.64 38.64
Contribution pu 23.76 33.36
Contribution total 4395291.12 3986653.44
Profit increase due to
promotion 408637.68
Cannibalisation -99332
Savings in inventory
cost 39540
Promotion
Contribution ( $) 348845.68
Rationale:-

Since reason for decline not given , we can't assume
that 24% decline will continue in coming months.
Since the promotion was announced by Culinarian
in advance it could be that the decline is due to
postponement of purchase. Besides , shipments
were disrupted in 2004 due to transfer of
manufacturing operations by a major aluminum
Since no data about manufacturing overheads that
vary directly with product given separately,
allocated overheads are ignored
We have considered cannibalisation cost and have
gone ahead with the consultants estimate though
this correlation has to be monitored over time


PROS AND CONS OF PRICE PROMOTIONS
PROS
Addresses the primary complaint from the
sales force: consistent and meaningful
price discount event
Overall brand awareness gets a boost
Encourages current customers to get more
for same price
Highly profitable 2004 price promo
CONS
Premium producers had never had a price
promotion
Dilutes the product image while trying to
compete with the premium products
Star Chef and Kitchen Select had a
regular price promotion
High sales run during the price promotion
was not sustained
Recommendations : Price Promotions
for Low End Product Line
Based on financial analysis and pros and cons assessment, we recommend to continue price promotion but
only limiting it to its low end product lines
Price promotions for low end products will not affect the quality image of the products thereby resting the
Januss concerns
Price promotions should be offered during seasonal peaks months rather than in the spring
Strengthen advertising to increase brand awareness with potential advertising of well-made commercials on
food channels and magazines as 2005 telephone survey reflected that unaided brand awareness for
Culinarian is low, and only 4% of survey participants positively recalled having seen Culinarian advertisement
Recommendations : Gift Promotions
for High End Product Line
Gift Promotions for High end products or with a bundled purchase (for example, 2 or
more items on a cookware set purchase) would increase sales 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
Revenues increase will also satisfy the strategic objective of Culinarian Cookware
Other Suggestions:
Product placement in cooking shows, to increase awareness
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

THANKYOU