Culinarian Cookware: Pondering Price Promotion Essay

As a marketplace leading bulls eye primarily focusing in designing, manufacturing, distributing and market premium cookw atomic number 18, Culinarian Cookw argon takes pride in its outstanding yield quality, march on performance technology and the strong dealership with retail stores established passim the years, which Donald Janus, the VP of Marketing believes makes Culinarian stands strong in its competitive industry. In regardless of Culinarians usual practice of avoiding footing caning, an official impairment furtherance political program was launched in 2004, which was later finishd by a consultant strong that these progresss had a negative impact on profits. There are unalike views toward the outlay promotion strategies and the corresponding report in the senior precaution Janus felt determine promotions were unnecessary, potenti all in ally damaging to the brand image, and possibly back up retailer hoardingBrown believed the promotions strengthened trade sup port, improved brand cognisance, and stimulated sales from both impertinently and existing nodes. While Janus indisputable the report results, Brown believed the study assumptions were flawed and required further abstract, suspect the promotions had actually produced positive results. In November of 2006, debates among the senior management squad had been exhalation on regarding the pros and cons of price promotions for the companys premium cookware products. A decision is needed to be made in terms of how price promotion can be utilized in Culinarians marketing strategy.Key IssueThe urgent 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 bit is what strategy Culinarian should pursue to achieve 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 p rogram. The final recommendation get out need to be in line with the four strategic objectives of the company (1) Widen its diffusion network (2) Increase its market address of the premium cookware piece (3) Preserve its prestigious image (4) Capture itsrevenue growth of at least 15% mend maintaining pre-tax earnings margins of 12%.Possible Alternatives(1) No charge forward motionThis alternative would means there will be no official price promotion, only occasional free collapses would be given out with purchase of items at regular price. There are least take chancess associated with this option but the company will need to judge other ways to maintain their competitiveness.(2) Discount on Slow step-up ItemsThe warrant option would be to apply a 30% deductioned price to the slow evolution items like what the company did in 2006. (3) Price forward motion Campaign (Discount on selected premium items) To invest in a complete price promotion rivulet. Discount price wi ll be utilize not only to the cheapest and slow growing items but to selected items from all lines. The campaign will be assist with edgy advertising methods to create a hype to the price cutting.The RecommendationAlternative 3 Price Promotion CampaignThe recommendation to pursue the third alternative was made base on a decision matrix with the following(a) set of criteria risk ability to widen diffusion network positive impact on brand image ease of holdation 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 burthen 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 as well occupy worthful catalogue spaces and thus are generally not welcomed by these distribution channels.When looking at the company strategies, sensation should realize that the current rattling low brand awareness among the target groups (HHI $75,000+) is a big issue (Exhibit 4). Discounting merchandize can effectively attract attention and raise awareness, broaden its customer base and stimulate excitement for the brand among the customers.When looking at the digest 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 graded top 3 in the criteria of choosing a cookware. These study result surface that the customers value a price promotion and even actively taste 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 consu ltant firm concluded that the promotion program was not profitable. However, 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 uplifted 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. some other argument being that when you look at the figures provided in the case exhibit, one could see that sales volume drop right after 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 assertable 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 promoti on.Because of the above rationale, a price promotion would be appropriate to be run in 2007. Januss worries of the detriment of a price promotion couldbe retarded by the recommendation of the second alternative, which were recommended with two major objectives in mind raise brand awareness (while maintaining a leading prestige 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 come to pass 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 limited number of premium items will needed to be selected for a discount to maintain the prestige and premium image of the brand while specific communication campaign will be engaged to increase customer satisfaction on buying the premium product with a discount price. Expanding the discount to more expensive line could alsoThe near question would be how the promotion will be executed.The Implementation again 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 bonus for choosing cookware).The discount period will still be around April and whitethorn 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 notifica tion on the product packaging and limiting each order size during the pre-discount period.In conclusion, Culinarian should implement a price promotion campaign in reaction to the take of customers. Discount price will be applied to items based on the direction 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 likely to increase and the profit margins will be brought to the new height.