Marketing Challenge for Culinarian Cookware - Case Study Example

? Case Study - Culinarian Cookware Table of Contents Table of Contents 2 ment of the Marketing Challenge 3 Vice President of Marketing’s View 3 Senior Sales Manager’s View 4 Industry Trend 4 Analysis of the Current Situation 5 Strength 5 Weakness 5 Opportunity 5 Threat 6 Target Market Analysis 6 Identification of Alternative Solutions 6 Recommendation 7 8 Works Cited 9 Statement of the Marketing Challenge According to author of this case primary marketing challenge for Culinarian Cookware is to decide appropriate pricing strategy and discount offer for existing product line. In the previous years the company has adopted price promotion for their product line and got mixed response. Variation in the previous market research data increased the perplexity of the situation and marketing managers presented their view point on pros and cons of price promotion strategy. The company has conducted previous price promotions of 20% discount in the year 2004 (for CX1 Tyro collection line), in the year 2005 (for CX1, DX1 line) and in the year 2006 (CX1 and DX1 line). Vice President of Marketing’s View Vice president of marketing for the company believes there is no need for adopting price promotion because that can hurt the premium brand image of the company. He took help of research report prepared by consulted to show that price promotion in 2004 impacted negatively to the profit margin of the company. The company hired external consultant to analyze profitability of 2004 price promotion. The consultant pointed out price promotion has caused of loss of $469, 489 as contribution during 2004 period. Time series analysis shows that unit sales for DX1 line decreased by 4800 units during price promotion hence external consultant concluded that $99,332 was lost as contribution DX1 product line due to brand cannibalization. Taking support from above mentioned statistics marketing vice president of the company concluded that price promotion for a single product line might increase sales revenue for that particular brand but it would eat the revenue of other brand. Price promotion for a particular product line will encourage customers to switch from purchasing other product lines offered by the company in order to purchase discounted products and as a result total revenue earned by Culinarian Cookware would be decreased. Senior Sales Manager’s View Senior sales manager is in support for price promotion and she pointed out that report of external consultant is apocryphal due to following reasons. Sales revenue for first quarter of 2004 was 24% low in comparison to sales revenue for the same quarter in 2003 hence due to external reasons. She concluded that company should not blame price promotion alone for the low sales volume of second quarter in 2004 and sales data for the year should be judged by lowering the margin by 24%. Inclusion of elements other than labor and raw material in variable cost calculation in the report was questioned by her. Cannibalization cost calculation method was also questioned by her. Industry Trend Research data shows offering gift with purchase is more successful push strategy in comparison to price promotion strategy. Competitors of Culinarian Cookware such as Robusto and Le Gourmand offer gifts with purchase. Multi dimensionality of the condition forced Culinarian Cookware to rethink about implementing price promotion strategy to increase sales revenue. Major marketing challenge for the company is to select a pricing strategy which can help them achieve sustainable growth in near future. Analysis of the Current Situation Strength Culinarian Cookware sells premium range cookware products and also the market leader with 6.5% market share in the premium product segment. They offer four product lines complemented with Tyro Collection (CX1), Classic Collection (DX1), Advanced Chef collection (SX1) and Professional Grade collection (PROX1). Variety of product line helps the company to cater multidimensionality of customer’s demand. Sales and distribution channel for the company is strong complemented three upscale kitchen specialty chains, two department store chains and seventy five local specialty stores. The company offers 52% margin to retails which ultimately encourages retailers to push all the four product line of the company to customers. Weakness Pain areas for the company include vulnerable pricing strategy and variable sales growth for their four product lines. CX1 and DX1 product line were not performing well for the company for last few years and ultimately hampering total growth for the company. Opportunity The company has the opportunity as market leader to improvise new products in future to outsmart their competitor. They can eliminate unprofitable product line such as CX1 in order to focus more on other profitable segment. The company can increase promotional investment (currently it is 4% of sales revenue) in order to increase brand visibility among customers. Research report shows the cookware industry is showing negative growth rate for last few years hence to survive in this tumultuous situation Culinarian Cookware needs to decrease cost of value chain. Top three players in the USA cookware industry contribute 41.2% of total revenue while Culinarian Cookware has the opportunity to increase their market share in future (“Kitchen & Cookware Stores in the US: Market Research Report”). Threat Taking help of two elements of Michael Porter’s five forces the author of this report can conclude in cookware industry retailers are and customers play significant role to decide market direction. Company’s price promotion strategy is dependent on retailer’s activity (it is clear from the case study that many retailers sold company’s product at an average of 10% discount while company instructed them to sell product with 20% discount) hence success of the discount strategy depends on goodwill of the retailer. In future retailers might force the company to increase margin from existing 52% to higher percentage. Target Market Analysis Target market for the company is mix between men and women with an average household income of 75,000 plus. Age range of the target customer group lies in between 30 to 55. Majority customers give importance on functionality of cookware rather than external style and looks. Identification of Alternative Solutions The company should think about offering gifts with purchase to customers in order to push the brand. This strategy will help the company to avoid confusion of implementing price promotion strategy while this strategy will indicate that they are imitating Robusto and Le Gourmand’s gift offering policy. The whole scenario might give their business competitors to promote against Culinarian Cookware. The company needs to do customer profitability analysis on each product line and they can remove unprofitable product line in order to get better control over existing product line. This process might decrease their overall sales revenue (Kotler 126). The company can use By-Product Pricing to earn revenue from byproducts of cookware. By products for cookware equipment is nylon, wood and plastic. These are low value products and company can earn extra revenue by selling them. Recommendation The author of this report believes offering gift on purchase will enhance the brand image among customers (Shimp 511). The company has crafted the brand as prestigious buying option for customers. Pricing the product at premium range creates a perception among customers that Culinarian is giving them opportunity to purchase company’s products. This is very significant from consumer’s perspective. Price promotion will decrease the customer perspective of brand quality offered by the company. Lowering the price will build a perception among customers that quality of the product has dropped hence the company is decreasing the price to push the brand. Offering gift with purchase will build long term relation with customers. From the case study it is clear that no premium cookware makers (Le Gourmand and Robusto) follow price promotion due to negative impact of the strategy. The author will suggest that the company should experiment with gift offering strategy during Christmas season and based on the result of the experiment they should decide future strategy. Pilot phase implementation will be part of their marketing strategy. Works Cited “Kitchen & Cookware Stores in the US: Market Research Report.” IBISWorld, Oct. 2011. Web. 13 Oct 2012. Kotler, Philip. Marketing Management. 13th. ed. New Jersey: Pearson Education, 2009. Print. Shimp, Terence. Advertising, promotion, and other aspects of integrated marketing communications. Stamford, Connecticut: Cengage Learning, 2008. Print. Read More