Marketing of Chicago Cutlery, Dexter-Russell, Cutco,and Emerils Cutlery - Research Paper Example

Marketing Analysis Table of contents Introduction………………………………………………………………………………3 Market segmentation……………………………………………………………………..3 Product positioning……………………………………………………………………….5 Pricing…………………………………………………………………………………….6 Distribution channels……………………………………………………………………..7 Marketing communications………………………………………………………………9 Conclusion………………………………………………………………………………10 References………………………………………………………………………………12 Marketing Analysis Introduction Chicago cutlery was established way back in 1930. The business venture offers knife conditioning service to professional butchers and packing plants. Initially, knife conditioning was their main specialty, but when the demand for sharp knives increased, the business venture (Chicago cutlery) introduced a knife manufacturing business for the meat and poultry industry. Back in 1969, Chicago cutlery also ventured in the retail market with professional cutlery. They designed knives to cater for increasing demands of professional knife users. The knives were also available for home use. At the present, Chicago cutlery brand is owned by world kitchen, LLC. The company continues to market the same type of quality products that had made Chicago cutlery one of the most valued and trusted well known movers in knife industry. Dexter-Russell is the largest US manufacturer of cutlery. Cutco and Emerils cutlery are some of the leading cutlery industries in United States (Warner, 1997). Market segmentation Market segmentation is to identify and profile distinct groups of knife users who might be having homogenous characteristics or needs, and hence, prefer varied genres of knives. Market segments are identified by Chicago cutlery by identifying, notifying and examining demographic, psychographic and behavioral differences among buyers. The firms then decide which segments present the greatest opportunity and whose needs the firms can meet in a superior fashion. The cutlery firms also aim at one or more market segments to cater for their needs. For each chosen target market, the firms develop a market offering. To satisfy the needs of the consumers more successfully and reach them in the most effective and efficient way, the cutlery firms identifies groups of customers or potential customers with homogeneous characteristics or behaviors, and try to adapt their service as much as possible to the unique needs and desires of the segment members. They identify and profile distinct groups of knife lovers who might have same needs, and hence prefer varied genres of knives. Having defined their market that: they need to supply knives to meat and poultry industry as well as house holds, the cutlery firms then go a head to design knives for specific usage. The company has segmented the market according to the needs of the customers. The world kitchen manufactures and markets branded consumer bake ware, dinnerware, kitchen, and house ware tools. Their cutlery products include well known brand such as Corelle, Pyrex, Corning Ware and Chicago cutlery. There are several possible reasons as to why the cutlery firms engage in market segmentation. Market segmentation is done by the firms so as to be content to stay competitively in the same sector of knife industry for some considerable time (Wedel and Kamakura, 2000). For these cutlery firms, however, a well thought out policy of segmentation plays a key role in the determination of success. It is the recognition of this that has led to the suggestion in recent years that the essence of strategic marketing in knife industry can be summed up by segmentation, targeting and positioning. The policy of customizing products (knives) for marketing a smaller number of products could prove profitable to the firms. The firms have also recognized the fact that undifferentiated marketing is becoming increasingly rare, largely because of greater degrees of competition and the increasingly sophisticated and fragmented nature of the majority of the developed markets. In these circumstances, the scope that exists for marketing a product aimed at abroad sector of the market is reduced significantly. Product positioning This is the creation of an image or identity of quality products in the minds of the customers’ for the firms’ products, brands and the organizational structure. The cutlery firms have been involved in repositioning of their products by changing the identity of a product so as to be in line with other competing products, and in the collective minds of the target market. On the contrary, the cutlery firms have also been involved in de-positioning. This is where they change the identity of a product to be in line with other competing products. Product positioning is crucial to the survival of the cutlery firms. Positioning of the product is about how they get into the mind of the prospective customers (Ries and Trout, 2001). They must first get into a prospect’s mind and then occupy that space by providing sharp and high quality designed knives to meet daily needs of customers. Each of the knives produced by these companies invokes an image that is forever stored in the mind of the customers. For successful product positioning, the cutlery industry has developed product ambition, the ideal client, a look at the whole product, the unique selling points, leading analysts, market segmentation and market attractiveness and positioning statement. The image of their products is one of the first things that their prospect customers feel attracted to. This has an impact on the margin and the volume, on advertising and packaging, on their customer service and distribution. Product positioning is an important output of the knives, not only during the phases of the new knives’ planning, but across the entire life cycle. The companies use it as away to describe how they want their products to be perceived by the target customer, allowing comparison with other available products offered by their competitors. Their main emphasis is on the competitive differentiation. Product positioning also provides a solid foundation for consistent communication about the knives, whether it is internal to the firm or used externally in marketing communications. Their product positioning programs is often recognized by a slogan or saying. This is really a great success for their advertisers, but not necessarily for all product managers. Useful product positioning has been established through these foundational pieces: the market segment; motivations or problems of customer targets; the environment of the industry and the competition on how each of their products is positioned. Positioning, according to the firms, involves determining consumers’ perceptions of a product and also implementing marketing strategies to achieve a desired position. Product, price, distribution, and promotional ingredients are all potential tools for positioning a company and its offerings. The firms start with the process of selecting a target market and then trying to develop a suitable position, or by selecting an attractive product position and then identifying an appropriate market segment. Positioning has been key ingredient for achieving successful market results for the firms. Pricing Cutlery companies often make their own pricing decisions based on the perceived pricing strategies of their competitors. Their competitors often determine prices for them to use. The key three basic pricing strategies that the cutlery companies use are skim, neutral, and penetration. In a skimming strategy, cutlery prices are set high relative to mainstream competitors. The companies use this strategy to maximize revenues generated from the high end of the market. In neutral pricing strategy, the cutlery companies set prices close to those of their chain competitors. Neutral pricing strategies are an important tool when they want to take the focus off of price such as a product in a mature market or in a later stage of its life cycle. Finally, cutlery companies that use a penetration pricing strategy set prices quite low relative to the competition. Their objective is to make price a driving force in the purchase decision (Daly, 2002). An essential precondition for skim pricing is an offering that customers believe is clearly differentiated from the competition. In general, this means that skim pricing hinges on their ability to demonstrate that their offering provides significantly greater financial benefits than the competition. This occurs in the introductory phase of the cutleries’ life cycle with early adopters who are generally price sensitive because they see the potential benefits of being the first to deploy a new product. Since cutlery products move through life cycles, the only suitable basis for skim pricing then is the level of differentiation or added value created by the offering. If the level of differentiation declines as more competitors enter the cutlery industry and match their offering, skim pricing is no longer appropriate since it will price the cutlery company too high for comparable offerings in the market (Daly, 2002). Pricing is given a great deal of attention because it is considered by the cutlery companies to be the only real means of differentiation in mature markets affected by commoditization. When customers see all competing products as offering the same features and benefits, their buying decisions are primarily driven by price. Having a solid understanding of these issues is important because far too many cutlery firms and their managers use a seat-of-the-pants approach to pricing by guessing the best price for their products. Guessing is never a good strategy in marketing; it can be downright deadly when it comes to setting prices for cutlery products (Daly, 2002). Distribution channels For their customers, distributors fulfill a number of core roles in the cutlery industry, all of which are aspects of being a one-stop shop. For the most part their customers are smaller, independent traders, dealers, and retailers. As such customers can not afford the complexity and cost of products their stocks and supplies from the hundreds of suppliers whose products are integral to their own offer to end customers (Dent, 2008). The cutlery industries use broad line distributors to avail their products to customers. These distributors provide the mainstream market coverage, both in terms of the product range they carry and the proportion of the market their service. Market access is their core offering to the supplier, covering most or all of the channels a supplier need to reach through established trading relationships and with long standing marketing and communication tools with proven response rates (Dent, 2008). In the cutlery industry, there will usually be several distributors competing in the market, creating amore price competitive environment, leading to lower margins on cutlery sales. Suppliers expect to pay for replacement in the marketing tools or for running sales promotions as these costs can not be absorbed by the normal trading margin. As a result, market share leaders tend to be better served by the broad liner as their scale of business ensures high visibility and share of mind among the distributor’s sales and marketing teams. Some brands, however, will go further and may seek greater influence over the distributor’s resources such as by financing a dedicated product manager (Dent, 2008). Smaller suppliers tend to have to work hard to ensure there is sufficient focus on their products and may have to offer one distributor in the market exclusive distribution rights in order not to dilute their focus. As markets mature, consolidation among broad liners reduces the number of distributors available to suppliers, increasing the distributors’ power in extracting significant discounts and rebates from the supplier. Further, the cutlery industries also use fulfillment distributors. These distributors operate in markets where products are bought rather than sold. No marketing is involved in respect of the products and sales are driven by price, availability and convenience. In effect, these distributors are logistics engines for the supplier, who will have to make all the running to create brand awareness and preference in the end customer market. Margins are very low, so the distributor runs a high volume, highly efficient operation, doing all it can to eliminate unnecessary activities and complexity. The distributor needs massive volume at these tiny margins to be able to cover its infrastructure and operating costs. Cutlery orders are increasingly being received through the website rather than call center and warehouse are highly automated centralized operations (Dent, 2008). The distributors bear stocking risk, balancing demand and supply through their inventory management skills. In addition, they bear the credit risk, leveraging their local market expertise. Suppliers may compensate fulfillment distributors either through the trading margin or, more recently, by negotiating a fee per transaction as the cost of distribution tends to be the same regardless of the selling price. Marketing communications Marketing communications helps create brands which provide functional and symbolic meanings to consumers and help in ensuring long term customer loyalty. The companies try to do this by informing, reassuring and persuading consumers of the appropriateness of cutlery in matching their needs and wants. As a means of differentiating an organization’s offer or communicating to a consumer, branding, applies to most cutlery companies. The purpose of marketing communications is to develop a continuing dialogue with target audience to build brand quality, brand dominance, and brand prospects. Branding gives cutlery products meaning and defines their identity in space and time (Smith, 2004). The cutlery companies carry out their marketing communication through advertising, sales promotion and public relations. Their main aim of advertising is to persuade the customers to buy a particular product. Advertising is done through their4 various websites as well as media advertising. In addition, the cutlery also gets involved in sales promotion. This involves giving incentives to most loyal customers by offering discounts on the products. Cutco cutlery often engages in marketing communications by engaging independent sales representatives who in most cases are college students (Smith, 2004). Conclusion Many of the most successful cutlery dealers evolved out of an era when they introduced a good product or service onto a market which was ready to accept the product. Growth was achieved by expanding to new geographical markets and later by adding new products to build a complete line of products rather than concentrating on a single product. In many cutlery companies, growth just appeared to happen with little or no formal thought about the management processes which were bringing forth the growth in company operations. However, with significant shifts in economic, environmental, and competitive forces, most cutlery managers have now realized that for survival and growth to occur, they must be much more aware of the impact of the decisions they are making and the management processes used to make these decisions. A switch to strategic planning is replacing the more intuitive decision making approaches used in prior years. The key to success in cutlery business is strategic planning and the key to strategic planning rests on the matching of market needs to corporate capabilities. Out of a large number of decisions made by managers in cutlery industry, there are few critical ones that can significantly impact the future of the organization. Strategic decisions require identification and thoughtful consideration. In the past several decades, major American cutlery companies have focuses on short term results relative to market position and profitability. Achieving competitive advantage in cutlery marketing requires designing and production of excellent cutlery products. Engaging in same type of products that other companies had already established can lead to massive losses. Most importantly, the cutlery companies should aim at delivering the best services to consumers. Customer satisfaction is the only way of winning other potential customers as well as maintaining good public relations with the existing customers. Cutlery companies should not be worried of competition. The solution to competition is by being ahead as well as being innovative when coming up with new products. References Daly J (2002). Pricing for profitability: activity based pricing for competitive advantage. London, John Wiley and Sons. Dent J (2008). Distribution channels: understanding and managing channels to market. New York, Kogan Page Publishers. Ries A and Trout J (2001). Product positioning: the battle for your mind. New York, McGraw Hill Professional. Smith P (2004). Marketing communications: an integrated approach. New York, Kogan Page Publishers. Wedel M and Kamakura W (2000). Market segmentation: conceptual and methodological foundations. Springer. Pp 17-31. Warner K (1997). Knives 98. DBI Books/Krause Publications Read More