Culinarian Coookware Case Essay

I.Consumer BehaviorCulinarian cookwargon is sold through with(predicate) sellers and directly to consumers. Culinarian has guardedly cultivated relationships with its limited retail ne bothrk, comprised of three upscale kitchen specialty chains, two department store chains, and 75 local specialty stores. Direct-to-consumer sales be made through Culinarians website or its catalogs. Because Culinarian relies on a medley of intermediaries to sell its products through retail channels (see Exhibit A for details), it must be c beful how any planned processions will change incentives for those intermediaries. For example, expense discount rates offered by Culinarian may not be passed on to leftover users. Thus, although end users ultimately drive sales of Culinarian products, Culinarian must take care to protect the interests of retail merchants and their salespeople in coiffure to remain successful. The Orion Market Research con reveals a great deal of useful information rega rding Culinarians lay 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 strong evidence that consumers want to evaluate the quality and style of the cooking utensil at the time of purchase. 75% of consumers in the study already protest to a greater extent than 5 pieces of cooking utensil. See Exhibit C for more details. The volume of households in the Orion study had either given or stock cookware as a founder, 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 nonpareil period into the next) it may be especially sensitive to sales discount cycles. Details on pre-sale losses and post-sale losses due to stoolnibalizati on are shown in Exhibit E. See Exhibit F for details on sport in cookware purchases by month. If consumers are purchasing in first moment of annual events, they may be especially sensitive to progressional offers. This kernel that any analysis of cannibalization due to promotions or price discounts must be sure to analyze the full impact of pre and post-sale cannibalization.II.Culinarian success factorsCulinarian has built a premium marque by producing innovative, high-quality cookware and developing strong relationships with retailers. Culinarians products are trusted by consumers who consider cooking to be their yield one hobby (60% of Culinarian customers), and by professional chefs. The company meets the needs of these distinguishable segments by offering four product lines, for each one varying in terms of the level of technology and features involved, but all high quality. Culinarian has in addition been a leader in terms of metallurgic improvements in the cookware in dustry. Most important to Culinarians success, however, is its relationship with retailers. The companys think retail strategy allows the Culinarian sales team to visit retailers more oft than their competitors, keeping retailers abreast of new products and training sales clerks as necessary. In addition, Culinarian products are more profitable 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, age 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 largely accounts for the difference in gainfulness estimates. The consultants included cannibalization estimates in their model, while Brown argued that different dominion estimates should be used when calculating sales. However, we find Browns flavor that there is no reliable way to calculate cannibalization cost (case p.6) to be unconvincing while the consultants rime may not be perfect, they grating 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 differ on the calculation of variable costs. Brown states that only direct apprehend and raw materials should be included, while the consultants include a much more comprehensive bundle 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 p romotion. Our intermediate scenario, incorporating cannibalization costs but splitting the difference between the consultants and Brown on both 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 advocateationsWe 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 corresponding decline in demand before and after a promotional period had elfin to do with the typical monthly demand in the market. It seems very presumable 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 promotions. some 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 indicator of quality, desirability, and status in this regard. Culinarian is extremely careful around 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 situation that Culinarian had developed. However, we have developed two alternative recommendations to price promotions that may suspensor fortify Culinarians distribution network and increase sales. First, we recommend that Culinarian strengthen the point system currently in place to reward retail s alespeople with Culinarian cookware. Emphasizing 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 give way 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 running the promotion through its website, Culinarian will remove the warhead of free gift inventory costs for retailers and, more importantly, drive job to Culinarians underutilized website (currently less than 5% of sales are made through the website). Additional web traffic could increase the proportion of direct purchases (with the conjunction higher margins), as well as keeping customers more committed to the company and more likely to purchase Culinarian products in the future.