Culinarian Coookware Case Essay

I.Consumer BehaviorCulinarian cookwargon is sold through stagers and mailly to consumers. Culinarian has care replete(p)y cultured kins with its limited retail interlocking, comprised of three upscale kitchen specialty chains, two department store chains, and 75 local specialty stores. Direct-to-consumer sales are made through Culinarians website or its catalogs. Because Culinarian relies on a motley of intermediaries to sell its products through retail channels (see prove A for details), it must be careful how some(prenominal) planned promotions will change incentives for those intermediaries. For example, value discounts offered by Culinarian may not be passed on to block users. Thus, although end users ultimately drive sales of Culinarian products, Culinarian must take care to protect the interests of retailers and their salespeople in clubhouse to remain successful. The Orion Market Research Study reveals a great deal of useful t severallying regarding Culinarians target demographic.Despite the many options to purchase remotely (via online vendors or mail order catalogues), purchases from retail locations account for 85% of total sales. See Exhibit B for details. This is unfaltering evidence that consumers want to tax the quality and style of the cookware at the time of purchase. 75% of consumers in the test already cause more(prenominal) than 5 pieces of cookware. See Exhibit C for more details. The majority of households in the Orion study had either given or received cookware as a gift, which aligns with evidence suggesting that cookware sales are seasonal purchasing peaks occur in May and June (wedding season) and November and December (the holiday season).Because cookware is a durable good (i.e. it is not consumed and carries forward from one period into the next) it may be especially tippy to sales discount cycles. Details on pre-sale blemishes and post-sale losses due to cannibalization are marchn in Exhibit E. See Exhibit F f or details on variation in cookware purchases by month. If consumers are purchasing in anticipation of annual events, they may be especially sensitive to promotional offers. This means that any analysis of cannibalization due to promotions or price discounts must be received to analyze the full impact of pre and post-sale cannibalization.II.Culinarian success factorsCulinarian has built a premium brand by producing innovative, high-quality cookware and developing strong relationships with retailers. Culinarians products are trusted by consumers who consider cooking to be their number one by-line (60% of Culinarian customers), and by professional chefs. The company meets the needs of these different segments by offering four product lines, each varying in terms of the level of technology and features involved, but all high quality. Culinarian has also been a leader in terms of metallurgic improvements in the cookware industry. Most important to Culinarians success, however, is its relationship with retailers. The companys focused retail strategy allows the Culinarian sales team to visit retailers more a good deal than their competitors, keeping retailers abreast of new products and training sales clerks as necessary. In addition, Culinarian products are more utile for retailers than competitors products, creating additional warmth for their cookware among retailers.III.Evaluation of 2004 promotionCulinarians senior sales manager, Victoria Brown, maintains that the 2004 promotion was profitable, fleck a team of consultants believes it lost Culinarian money. The tables in Exhibit G depict each viewpoint on the effectiveness of the promotion, in addition to our own midrange analysis. Differences in the estimation of projected vs. actual sales more often than not accounts for the difference in profitability estimates. The consultants included cannibalization estimates in their model, while Brown argued that different normal estimates should be used when calc ulating sales. However, we find Browns belief that there is no reliable itinerary to calculate cannibalization costs (case p.6) to be unconvincing while the consultants numbers may not be perfect, they bumpy the results of customers and retailers being able to plan purchasing around the price promotion due to the January notification.We included cannibalization in our midrange estimate for this reason. Brown and the consultants also disagree on the calculation of variable costs. Brown states that only direct labor and raw materials should be included, while the consultants include a much more comprehensive great deal of SG&A expenses and overhead. Either could be considered correct, but as a check we calculated a midway point in addition to the consultants perspective and Browns perspective. Browns numbers show strong profitability of $2.4 million due to the 2004 sales promotion, while the consultants numbers show a loss of $409,697 due to the promotion. Our intermediate scenario, incorporating cannibalization costs but splitting the difference between the consultants and Brown on some(prenominal) sales figures and variable costs, shows a weak profitability of $106,594 from the promotion. This weak profitability must be held against the negative side effects of price promotions in general, and particularly with regard to premium products.IV.2007 promotion recommendationsWe do not recommend that Culinarian continue offering price promotions. The fluctuations in demand for Culinarian products around the promotional period in 2004 indicates the likelihood that cannibalization occurred we found that much of the growth in demand as well as the jibe decline in demand forward and after a promotional period had little to do with the typical monthly demand in the market. It seems very likely that the decreased demand we see before and after the promotional periods can be attributed to the cannibalization of full price sales by the discounted units sold during pro motions. another(prenominal) strong reason why we recommend against price promotions is that no other premium cookware manufacturer engages in these promotions. Part of cultivating a high-end brand image is making sure that products are priced accordingly, and making sure that consumers are able to distinguish between lower-end and premium products.Price can be an important forefinger of quality, desirability, and status in this regard. Culinarian is extremely careful about maintaining its premium brand image, and offering regular price promotions along with lower-end producers such as Star Chef and Kitchen Select would likely erode the brand positioning that Culinarian had developed. However, we lease developed two alternative recommendations to price promotions that may help strengthen Culinarians distribution network and increase sales. First, we recommend that Culinarian strengthen the point system currently in place to reward retail salespeople with Culinarian cookware. Emph asizing this alternative incentive would help maintain good retailer relationships, and would increase the motivation of salespeople to sell Culinarian.Second, we recommend that Culinarian continue its free gift promotion in slightly altered form. Qualifying customers should be provided with a coupon that directs them to Culinarians website, where they can enter their information and have the gift shipped to them. By footrace the promotion through its website, Culinarian will remove the burden of free gift inventory costs for retailers and, more importantly, drive traffic to Culinarians underutilized website (currently less than 5% of sales are made through the website). superfluous web traffic could increase the proportion of direct purchases (with the attendant higher margins), as well as keeping customers more connected to the company and more likely to purchase Culinarian products in the future.