Culinarian Cookware: Pondering Price Promotion Essay

As a market jumper lead grass in the main focusing in designing, manufacturing, distri exactlying and marketing bonus cookware, Culinarian cooking utensil takes pride in its outstanding product quality, good performance technology and the strong dealership with retail stores established throughout the years, which Donald Janus, the VP of Marketing believes makes Culinarian stands strong in its competitive indus act. In regardless of Culinarians rough-cut practice of avoiding terms cuting, an authorized cost forwarding program was launched in 2004, which was later concluded by a consultant firm that these progressions had a oppose tint on profits. There are disparate views toward the wrong onward motion strategies and the corresponding report in the senior concern Janus felt expense promotions were unnecessary, potenti totallyy damaging to the brand reckon, and possibly encouraged retailer hoarding dark-brown believed the promotions strengthened trade support, a lter brand awareness, and stimulated cut-rate sales from both(prenominal) bare-assed and subsisting customers. While Janus trusted the report results, Brown believed the study assumptions were flawed and required further analysis, guess the promotions had actually produced positive results. In November of 2006, debates among the senior management aggroup had been going on regarding the pros and cons of price promotions for the accompanys amplitude cookware products. A finis is needed to be made in toll of how price promotion can be employ in Culinarians marketing strategy.Key effThe urgent and key question is whether to run a price promotion in 2007 and, if so, to determine what swap to promote and on what terms. The broader issue is what strategy Culinarian should dog to achieve its sales growth objective, and what role, if any, price promotion should play. Clearly there are lureive advantages and draw-backs with crucial consequences for a price promotion program. Th e final tribute allow need to be in aviation with the four strategic objectives of the company (1) Widen its diffusion network (2) Increase its market role of the amplitude cookware segment (3) Preserve its prestigious image (4) Capture itsrevenue growth of at to the lowest degree 15% while maintaining pre-tax earnings margins of 12%. executable Alternatives(1) No worth advanceThis alternate would promoter there pull up stakesing be no official price promotion, only occasional free gifts would be given out with purchase of items at level(p) price. There are least risks associated with this option but the company will need to research otherwise ways to maintain their competitiveness.(2) dissolve on deadening Growing ItemsThe second option would be to carry a 30% discounted price to the slow development items like what the company did in 2006. (3) Price publicity Campaign (Discount on selected grant items) To invest in a comprehensive price promotion charge. Disco unt price will be applied not only to the cheapest and slow increase items but to selected items from all sources. The campaign will be assist with jolty advertising methods to create a hype to the price cutting.The RecommendationAlternative 3 Price Promotion CampaignThe pass to pursue the third alternative was made meniald on a end matrix with the undermenti one(a)d set of criteria risk competency to widen distribution network positive impact on brand image ease of murder and financial return.The RationalePrice promotion is superordinate to a gift incentive in the following ways.As Culinarian is heavily relied on retailers for distribution, their opinions carry a certain weight of burning(prenominal). Many of the retailers expressed that a free gift approach often bewilder them as to how many gifts to order. These 0 value-carrying gifts also contract valuable inventory spaces and thus are broadly not welcomed by these distribution channels.When looking at the company strategies, one should realize that the current really low brand awareness among the target groups (HHI $75,000+) is a big issue (Exhibit 4). Discounting merchandize can effectively attract attention and rising awareness, broaden its customer base and stimulate excitement for the brand among the customers.When looking at the analysis of Culinarians target group the households with income oer $75,000, 30% cited price as the most important criterion in selecting cookware 30% of these consumers would be do to buy new cookware because of a price discount versus 20% be motivated by a free gift 20% would intentionally wait for a sale and Price is ranked trespass 3 in the criteria of choosing a cookware. These study result show that the customers value a price promotion and even actively seek these promotion out. Clearly a cut in price will generate change magnituded sale volume.Indeed it is true that there are uncertainties in whether the price promotion in 2004 was profitable or n ot. A report by a consultant firm concluded that the promotion program was not profitable. nevertheless, one group in the management team including Brown believes there are significant flaws exist in the analysis due to the following errors the shape sales figures being too high variable cost including overhead cost incorrectly the cannibalization costs and inventory savings which, instead of being left hand out of computations, were included and estimated inaccurately.Another argument being that when you look at the figures provided in the case exhibit, one could see that sales volume drop even off after the price promotion in both 2004 and 2005, thus easily hurry to conclude that a price promotion does not benefit the company. However it is possible that the failure of these programs is due to other factors touch on the profitability including the level of discount rate, the ordering coat allowances etc. execution considerations. Thus, these calculations cannot serve as a p roof against a price promotion.Because of the above rationale, a price promotion would be appropriate to be run in 2007. Januss worries of the disadvantage of a price promotion couldbe counteracted by the recommendation of the second alternative, which were recommended with two major objectives in fountainhead raise brand awareness (while maintaining a leading prestige image) and widen distribution network (which potentially serve as a gateway to increase market share and profit).The major concern of Janus was the potential negative impact to the brands premium image especially when the two rate competing premium cookware brands do not use price promotion. However this generally happen only when discounted items was focussed on the cheapest line or the slow growing ones (which exactly was what happened in 2004 and 2005). In the new price promotion campaign, a limited number of premium items will needed to be selected for a discount to maintain the prestige and premium image of th e brand while specific communication campaign will be employed to increase customer enjoyment on buying the premium product with a discount price. Expanding the discount to more expensive line could alsoThe next question would be how the promotion will be executed.The ImplementationAgain a limited number of premium items (eg. PROX1) combine with cheaper lines (eg. CX1) will be selected for a discount. In fact, the selection will cover specific items of all 4 lines. A communication campaign will be employed to call out the message to the public present is the premium brand, and we are selling it for a take down price so that YOU can also try out these high-quality cookware (Quality remains the top motivator for choosing cookware).The discount period will legato be around April and May to avoid direct competition with the other big cookware brands. In terms of the problem of retailers placing over-size trade orders and eating up the difference, Culinarian can counteract this by p re-print or attaching a discount notification on the product furtherance and limiting each order size during the pre-discount period.In conclusion, Culinarian should implement a price promotion campaign in reaction to the demand of customers. Discount price will be applied to items based on the direction of boosting relationship between the company and retailers, and raise consumer awareness to the prestige brand name. With the appropriate calculation of discount rate and promotion tactics, market share is likely to increase and the profit margins will be brought to the new height.