Culinarian Cookware Case

Study
Describe consumer behavior in the cookware market. How is cookware bought? How is it
sold? What are the implications for Culinarian’s marketing strategy?

Consumer Behaviour:
➔ Product Classification:
Could be classified on the basis of: price, quality, material
(Aluminum, Stainless Steel, Porcelain, cast iron and copper)
➔ Customer Material Preference:
Copper was the most expensive and most preferred by professional chefs due to superiors heat conductivity
➔ Customer Value Offering:
Balance performance, time saving features, and aesthetics with price
➔ Growing trend:
Offering colored designer cookware that matched the kitchen decor and Product lines endorsed by and branded with
a name of a widely recognized television celebrity chefs

Culinarian’s customer files:

➔ Research shows that 75% of its customers are 30 to 55 years old, 82% are women and 70% have household
incomes over $75,000, and 60% consider cooking to be their number one hobby
➔ Customer playing the three distinct roles of user, payer and buyer. In this case, since more than half of the
consumers consider cooking to be their first hobby, they are more likely to play roles of users
➔ This may indicate customers are less sensitive to price, or they seek quality and brand
How it was bought:
➔ Cookware was bought by piece or in a boxed sets ranging from 5 to 14 pieces. 5 piece set comprised a 10 inch fry
pan, a 2 quart sauce pan with lid, and a 4 quart stockpot with lid.

How it was sold:

➔ Kitchen specialty chains (Williams Sonoma)
➔ Local specialty stores, department stores (Macy's)
➔ Mass Merchandisers (Walmart)
➔ Grocery Stores (Kroger)
➔ Direct TV Sales (Home Shopping Network)
➔ Online Retailers (Amazon)
➔ Catalogues (Manufacturers direct mailings)
Implications:
★ The data says that majority of the consumers were passionate cooks and they preferred quality as the most important
attribute. The consumers in the cookware market comprised of a majority of middle aged people, and majority were women.

★ When it comes to buying, a large chunk (55%) of customers bought it for gifting. This means it was not bought as a usual
buying for their homes. They found cookery utensils to be gift items on occasions like wedding, Christmas, etc. Hence, there
is a reasonable increase in sales in the month of May-June as well as December. Hence, the cookery items were also
believed to be seasonal items.

★ If they were to buy it for their homes, customers bought those which matched the interiors of their homes. So they preferred
aesthetics of the cookwares.

★ Whenever the discounts were given, a significant increase in sales was observed.

★ Half of the people bought only those brands which they knew about. So this left a lot to do for promotions and advertising
team of all companies. This is due to the fact that the customers preferred quality, features and price of cookware the most
among the other factors.

★ Culinarian focused more on channel promotions and hence did not spend much on the mainstream advertising as in TVs and
other mainstream media.

★ They promoted their premium products mostly through the Magazines which targeted higher class people. This led to a low
popularity of the middle and lower range of products of Culinarian and lower awareness among people. Since most of the
customers felt brand is a very important factor while buying these products, Culinarian lost out on many of the customers.
But, since Culinarian advertised itself through some cookery shows, it had created its own space.
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?

• Given below is the profitability of the sales promotion using Brown’s logic and the consultant’s
logic
Profitability Analysis
Actual Sales Normal Sales
Consultants Brown Consultants Brown
A CX1 Unit Sales (March-May 2004) 184987 184987 119504 59871
B Average Unit MSP 62.4 62.4 72 72
C Average Unit Variable Costs 52.05 38.64 52.05 38.64
D Average Unit Contribution 10.35 23.76 19.95 33.36
E Total CX1 Sales Contribution (A*D) 1,914,615 4,395,291 2,384,105 1,997,306

Consultants Brown
F Actual Sales Contribution less normal sales contribution (469,489) 2,397,985
G Cannibalisation impact (99,332) -
H Inventory carrying costs 39,540 -
I Net Profitability Impact (F-G-H) (529,281) 2,397,985
• Promotion is appears to be profitable according to the Brown’s logic and loss making if we use
consultants logic
Brown assumptions
Assumption Justification
Normal sales for 2004 is 24% The assumption does not account for annual trend- an increase or decrease
less than sales for 2003 in sales from one year to the next.
The assumption that the sales for Jan and Feb in 2004 is 24% less than 2003 is
valid only for those 2 years.
Comparing 2002 and 2003 the relationship does not hold true
Sales in Jan 2003 for the CX1 is significantly higher and the reason for this
must be identified as it could be an outlier
Variable costs include labor Manufacturing overheads, selling expense and advertising should not be
and wage included as a per unit cost as they are fixed overheads and will be incurred
whether the promotion is conducted or not.
Exclude cannibalization and These costs should be included – a price promotion could impact the
inventory holding costs purchase decision.
Profitability Calculation
• We compute the profitability with variable costs based on labor and
material, normal sales based on the computer generated model and
including the costs of inventory and cannibalization
Profitability Analysis Promotion is profitable
Actual Sales Normal Sales
based on these updated
A CX1 Unit Sales (March-May 2004) 184987 119504 calculations
B Average Unit MSP 62.4 72
C Average Unit Variable Costs 38.64 38.64
D Average Unit Contribution 23.76 33.36
E Total CX1 Sales Contribution (A*D) 4,395,291 3,986,653

Consultants
Actual Sales Contribution less
F normal sales contribution 408,638
G Cannibalisation impact (99,332)
H Inventory carrying costs 39,540
I Net Profitability Impact (F-G-H) 348,846
Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a
promotion (e.g., product scope, discount rate, timing, communication)? If a price promotion
is not suitable, think about another type of sales promotion (e.g., manufacturer rebate
program, gift with purchase, sweepstakes, product placement, etc.) to recommend.

We keep the following things in mind:

• Retailers earn a 48% and 52% margin through our competition’s
products and ours respectively - Reducing our margin to 48 doesn’t
give them the incentive to push our product.
• It is proven that the free gifts promotion model works - But retailers
are hesitant owing to planning and space constraints
• 70% customers felt that price discount was very important in their
decision of purchasing Culinarian products
• Offering price promotions on premium products doesn’t have a
large impact, and providing price promotions on all products leads
to arbitrage and dilution of brand image - especially since other
premium companies do not offer price promotions
• Price is the third most important factor during consideration -
Quality and features take precedence.
• 60% of our customers consider cooking as their #1 hobby, people
are willing to indulge when it comes to hobbies
Keeping the aforementioned in mind, we suggest offering free gifts of
complementary products with the current packaging (so that extra
floor space and order planning isn’t an issue. This will not only appease
existing customers but also pull new customers in and increase sales
since it has shown good results in the past.
Timing - First quarter of the year to counter the post holiday season
drop.
Communication - Direct mail, Magazines