1) Was the previous promotion effective in achieving the goals specified in the case. Most importantly was it profitable?
Given that Culinarian Cookware has established itself in the marketplace as an elite brand (advanced performance technology for serious cooks, leader in metallurgy technology and the first manufacturer to provide benefits of copper cookware with effortless cleaning and maintenance), my assessment of the case indicates that the previous promotion of price discounts was not successful in achieving the goals the company would have liked to go after. I want to highlight that there is no mention of what the company’s goals were in 2004 when it offered its first price promotion or at least it did not come out clearly in the case write up. It is not until 2006, that the company clearly outlines its strategic priorities, to inturn use to define its marketing promotions.
Even if Sr. Sales Manager, Victoria Brown, is right in highlighting that the outside consultants’ calculations are not correct and in turn revenue from sales of CX1 went up during the period of March-May, 2004, I chose not to focus on the mathematical calculations when deciding success of the promotion for following reasons.
(a) Sales of CX1 went up only during the promotion period and did not remain high after the promotion. Therefore, the brand excitement was built for a reason different from what Culinarian Cookware is trying to advocate.
(b) The discount did make the retailers happy as they were able to sell products to the customers, but only 30% of the customers who buy cookware shared that price is the most important criterion (Exhibit 3). The remaining 70% customers need to be found and better understood to sell quality cookware to.
(c) Price discount does dilute a company’s image when the company is interested in competing over superior product offerings.
(d) Since there is limited data on cannibalization and inventory cost savings, I did not include that in my assessment of the promotion’s success, but that is a critical factor to not ignore.
If the 2004 promotion’s goal was to sell more units without concern to revenue generated, customer loyalty built and brand image impacted, then I can agree the promotion achieved its goals. But I don’t think that is what the company goal was after learning about its priorities documented in 2006.
Second part of the question asks about profitability. I am not sure if profitability is asked about the promotional period only or for the year that price promotion was offered. The incremental contribution impact formula can be used to calculate whether price discounts on CX1 model resulted in increasing revenue for Culinarian Cookware. To calculate profitability of the promotional model, it is critical to evaluate sales not just for CX1 product line, but also for the other three product lines, DX1, SX1, PROX1 to identify if other product line sales were cannibalized due to increase in CX1 sales. If only CX1 sales are taken into consideration, then assuming there was decrease in 2004 March-May normal sales (not as much as 24% but between 15-20%) then, incremental contribution impact calculations indicate increase in contribution. But again, as mentioned above, sales of CX1 cannot be taken in isolation to find profitability numbers.
- What aspects of the promotion worked best and which were less successful?
Promotion offered some benefits but in my understanding of the case, it appears the side effects were more beneficial than the direct benefits that probably Culinarian Cookware was interested in. Following are the positives that can came out from the promotions.
(a) Promotion worked well for retailers especially the ones in the 50% category who chose to only transfer 10% of the offered 20% discount to the customers.
(b) Data gathered from the 2004 promotion highlighted that price discounts are useful to attract cost conscious customers but not necessarily brand conscious buyers.
(c) Price discount may have helped to advertise Culinarian Cookware amongst first time buyers.
As the answer to the first question highlights, there were several aspects of the promotion that were less successful or rather detrimental to Culinarian Cookware’s market place, key being dilution of elite brand image.
- Should Culinarian run a promotion prospectively? Why or why not?
Marketing promotions should be well-aligned with the company’s strategic objectives to achieve profitable and sustainable results. From the case, I could not gauge whether in 2004 the pricing promotions were aligned up with the company’s strategic objectives since there is no mention of the strategic objectives/priorities in 2004. It is not until 2006 that the CEO establishes the company’s strategic priorities which must be used as guiding principles when defining its promotional plans. In 2006, Culinarian’s CEO, Audrey Roux, took the right step of establishing the strategic priorities for the company, namely, (1) widen its distribution network, (2) increase its market share of the premium cookware segment, (3) preserve its prestigious image, and (4) continue to capture revenue growth of at least 15%, while maintaining pretax earnings margins of 12%.
From the 2005 telephone survey commissioned by Culinarian, it is evident that unaided brand awareness of Culinarian ranges from 15% respondents with household incomes under $75,000, and 25% for those with household incomes over $75,000. Therefore, definitely, there is room for running promotions prospectively. But the key is to run the promotions that align well with the company’s objectives. Following are few suggestions on potential promotions to run.
a) Well-made television advertisements in popular channels such as food-network that the most likely buyers of Culinarian watch. The ads should clearly highlight the differentiating values that Culinarian offers.
b) Relevant advertisements in online media such as Facebook, Twitter to target young working women who are looking for the right product to make their life easier and may not mind spending the extra dollars to get that additional value.
c) Continue the retail sales training on product technology and features, as this is an established program that is a good forum to spread product value to retailers.
d) Continue to conduct customer surveys, to identify what the customer is interested in. Existing methods such as warranty cards, telephone surveys and new methods such as online surveys maybe worth pursuing.
e) Remain connected with the market to identify what your competition is offering, you may learn something that your own promotions are not showing. Customer maybe willing to buy single cooking items in non-holiday season but may only buy bundled items in holiday sales.
Single item Vs Bundled set!
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