PRICING STRATEGIES AND MODELS
Case Solution
Culinarian Cookware: Pondering Price Promotion
Group Members:
Kinza Tariq
Minal Khan
Saima Kazmi
Maimona Bukhari
Date: 28th March 2020
Muhammad Zayan
Faculty: Sir Ali Ammar
Q1. Describe consumer behavior in the cookware market. How is cookware bought? How
is it sold? What are the implications for Culinarian’s marketing strategy?
Ans. U.S Cookware market is an immensely diversified market according to the different
customer segments and their needs. Primarily, the cookware market can be dissected into two
categories i.e price and material quality. Different material that available cookware are made of
are
- Aluminum
- Stainless steel
- Porcelain-on-iron
- Cast iron
- Copper
Consumer Behavior
As per professional chef’s preferences, due to super heat conductivity, copper is the most
expensive category among all the categories of cookware. Consumer prefer to make combination
of their kitchen color theme with their cookware accessories, endorsed by recognized television
celebrity chef. This makes manufactures to keep a balance of price, features, performance and
aesthetics.
Sales of cookware were somewhat seasonal due to the purchase of cookware for weddings and
Christmas gifts.
Market Place for Cookware
- Standard Product Offerings:
Cookware was purchased either open stock or in sets, ranging from 5-14 pieces per set. A
standard set included a 10-inch fry pan, a 2-quart sauce pan with, and a 4-quart stock pot
with lid.
- Distribution Channels:
Cookware’s retail distribution channels included kitchen Specialty Chains (e.g Williams
Sonoma), Local specialty stores (e,g Kroger), Departmental stores (e.g Macy’s), mass
merchandise (e.g Wal-Mart), grocery stores (e.g Kroger), Direct tv sales (e.g Home
shopping Network), Online retailers (e.g Amazon), and Catalogs (e,g manufacturers’
direct mailing)
Implications for Culinarian’s Marketing Strategy:
Culinarian targeted socio-economic class C, and positioned itself as a premium elite brand in
cookware category. That’s the reason they use to advertise through selected media channels life
magazines and newspaper that targets high income audience.
Keeping in line with the competition, Culinarian offered 4 different product lines which targeted
professional chefs and elite class customers. Whereas products also differed in quality and
material.
Most of the sales were generated from retail outlets but they had a doubt that it could damage
their brand image of ‘elite brand’.
Q2. What are Culinarian’s strengths and weaknesses? Why has the company been
successful?
>Strengths:
Culinarian designed manufactured, distributed, and marketed premium performance
cookware generally defined as pots, pans and similar non-electric tools.
Culinarian was the leader in metallurgy technology and was the first manufacturer to
provide the benefits of copper cookware with effortless cleaning and maintenance.
The company had a strong relationship with retailers, and therefore each retailer carried
all four product lines. Retailers were enthusiastic because they could capture a higher
level of profitability with Culinarian products versus competing products.
Account managers visited major accounts once per month to highlight new products,
offer retail sales training on product technology and features, and provide inventory
management suggestions.
Offering price promotion twice a year.
>Weakness:
The company was critical in delivering the USP of performance, durability and quality.
The Culinarian’s advertisement recall was only 4%.
Due to strict limitations of company’s requirement regarding the type of publication trade
could use, Culinarians’ products and promotion programs were rarely advertised by the
trade.
Retailers were often confused about how much gifts unit to order during promotion of
gift with purchase, and they felt the gift products took up too much valuable space
without generating any revenue.
Q3. Was the 2004 promotion profitable? Calculate the profitability using Brown’s logic
and then calculate profitability using the consultant’s model. How would you calculate
profitability?
A)
CONSULTANT
20%
Promo No Promo
Units 184,987 119,504
M.f cost 62.4 72
VC 52.05 52.05
REVENUE 11543188.8 8604288
COST 9628573.35 6220183.2
PROFIT 1914615.45 2384104.8
Incremental profit -469489
Cannibalization
cost -99332
Inventory saving 39540
LOSS in profit -529281
BROWN
20%
Promo No Promo
Units 184,987 59,871
M.f cost 62.4 72
VC 38.64 38.64
REVENUE 11543188.8 4310712
COST 7147897.68 2313415.44
PROFIT 4395291.12 1997296.56
GAIN in profit 2397994.56
According to our analysis, Consultants method seems more reliable then Browns. As per brown
the VC should not include overhead cost while we disagree as until and unless you don’t entirely
calculate your additional costs incurred the total profit can be blurred. The results of both show
us how Culinarians are facing a loss compared to Browns method.
Consultants have also incurred Cannibalization and inventory saving cost which Brown
disagreed to include.
If we were to calculate profits, we will be taking VC as how consultants did and also take sales
units as forecasted but the only difference would be of not including cannibalization cost and
inventory saving cost, as there is no absolute way to find it and we are still unsure of whether the
calculations are right or not.
OUR WAY
20% No
Promo Promo
Units 184,987 119,504
M.f cost 62.4 72
VC 52.05 52.05
860428
REVENUE 11543188.8 8
622018
COST 9628573.35 3
238410
PROFIT 1914615.45 5
Loss in profit -469489
Q4. Explore potential promotion strategies for 2007.
Based on the current situation, Culinarian should consider sticking with high-end products and
maintain its prestigious brand image by not offering price promotions except for slow-moving
products only.
In order to create brand awareness, Culinarian could offer punch card system to new customers
so that after buying a certain number of cookware products, customers can attain a free product.
This would ensure customer loyalty, create further awareness and positive brand image.
Culinarian could also consider increasing the amount it spends on advertising and should target
to capture a larger audience by developing stronger relationships with merchandise retailers.
