Culinarian Cookware: Pondering Price Promotion Essay

As a market leading blur primarily focusing in designing, manufacturing, distributing and marketing premium cookware, Culinarian Cookware takes pluck in its come forwardstanding product quality, advanced 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 warring industry. In regardless of Culinarians usual practice of avoiding worth discount rateing, an official expense packaging program was launched in 2004, which was later concluded by a consultant firm that these promotions had a nix impact on profits. There are different views toward the m anetary value promotion strategies and the corresponding report in the ranking(prenominal) management Janus felt monetary value promotions were unnecessary, potentially damaging to the brand image, and possibly encouraged retailer hoardingBrown believed the promotions strengthened trade support, im proved brand awareness, and stimulated gross revenue from both new and existing customers. While Janus trusted the report results, Brown believed the study assumptions were flawed and required further analysis, suspected the promotions had very produced positive results. In November of 2006, debates among the senior management team had been going on regarding the pros and cons of cost promotions for the friendships premium cookware products. A decision is necessitate to be do in terms of how price promotion foot be utilized in Culinarians marketing strategy.Key IssueThe pressing and key question is whether to run a price promotion in 2007 and, if so, to determine what merchandise to promote and on what terms. The broader issue is what strategy Culinarian should pursue to reach out its sales growth objective, and what role, if any, price promotion should play. Clearly there are attractive advantages and draw-backs with significant consequences for a price promotion program. Th e final recommendation pass on need to be in line with the four strategic objectives of the company (1) Widen its distribution network (2) Increase its market share of the premium cookware segment (3) Preserve its prestigious image (4) Capture itsrevenue growth of at least 15% turn maintaining pre-tax earnings margins of 12%.Possible Alternatives(1) No Price PromotionThis alternative would means there will be no official price promotion, only occasional free gifts would be apt(p) out with purchase of items at regular price. There are least risks associated with this option but the company will need to seek other shipway to maintain their competitiveness.(2) Discount on Slow Growing ItemsThe second option would be to apply a 30% discounted price to the slow growing items care what the company did in 2006. (3) Price Promotion Campaign (Discount on selected premium items) To invest in a comprehensive price promotion campaign. Discount price will be applied not only to the cheapest and slow growing items but to selected items from all lines. The campaign will be assist with edgy publicizing methods to create a hype to the price cutting.The RecommendationAlternative 3 Price Promotion CampaignThe 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 useation and financial return.The RationalePrice promotion is superior to a gift incentive in the following ways.As Culinarian is heavily relied on retailers for distribution, their opinions carry a certain weight of important. Many of the retailers expressed that a free gift approach often confuse them as to how many gifts to order. These 0 value-carrying gifts also occupy valuable inventory spaces and thus are generally not welcomed by these distribution channels.When looking at the company strategies, one should realize that the current very low brand awareness among the target groups (HHI $75,000+) is a big issue (Exhibit 4). Discounting merchandize can effectively attract worry and raise 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 over $75,000, 30% cited price as the most important criterion in selecting cookware 30% of these consumers would be motivated to buy new cookware because of a price discount versus 20% being motivated by a free gift 20% would intentionally wait for a sale and Price is ranked top 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 increased sale volume.Indeed it is true that there are uncertainties in whether the price promotion in 2004 was profitable or not. A report by a consultant firm concluded that the promotion program was not profitable. f urther, one group in the management team including Brown believes there are significant flaws exist in the analysis due to the following errors the normal sales figures being too high variable costs including overhead cost incorrectly the cannibalization costs and inventory savings which, instead of being left out of calculations, 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 right later on 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 affecting the profitability including the level of discount rate, the ordering size allowances etc. execution considerations. Thus, these calculations cannot serve as a proof against a price promotion.Because of the above rationale, a price promotion would be appropriate t o 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 mind raise brand awareness (while maintaining a leading prestigiousness 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 direct competing premium cookware brands do not use price promotion. However this generally happen only when discounted items was focused 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 check number of premium items will needed to be selected for a discount to maintain the prestige and premium image of the brand while specific dialogue campaign will be employed to increase customer satisfaction 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 Here is the premium brand, and we are selling it for a lower price so that YOU can also try out these high-quality cookware (Quality remains the top motivator for choosing cookware).The discount period will still 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 pre-print or attaching a discount notification on the product packaging and limiting each order size during the pre-disco unt 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 committal 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 presumable to increase and the profit margins will be brought to the new height.