SEPTEMBER 22, 2009
JOHN A. QUELCH
Culinarian Cookware: Pondering Price Promotion
On November 6, 2006, the vice president of marketing of Culinarian Cookware (Culinarian), Donald Janus, and the senior sales manager, Victoria Brown, met to discuss whether or not the company should offer a price promotion for the company’s line of premium cookware in the coming year. These two executives had very different views on the value of a price promotion and the role it could play in the company’s marketing strategy.
Janus expressed his opinion first:
My gut tells me that offering a price promotion is unnecessary and cheapens our products’ image. We have unparalleled product quality, the most advanced performance technology in the industry, and strong dealer support—all of which argues for standing firm with our suggested retail prices and offering no consumer discounts. Look at 2006 so far: we are on track to grow overall revenue by 21% and we’ve limited price promotion to only our slowestmoving products. Look at the consulting study we commissioned that shows our 2004 price promotion had a negative impact on our profits. I know you feel price promotions are critical to our marketing strategy and that the consulting study had flawed assumptions. Help me understand where you are coming from.
Brown knew that Janus was determined above all else that Culinarian should remain known as a high-quality product and an elite brand—“an American icon” was Janus’s term—and that all good things would flow from that status. He grew wary when he perceived, rightly or wrongly, a hint of a threat to that status. Still, Brown was obliged to be candid. She said:
I believe we need to be bolder with our price promotions. The number one complaint that my sale force hears from the trade accounts is the lack of consistent and meaningful price discount events. Providing a 30% discount promotion will increase commitment and support from the trade and will boost our overall brand awareness. It’ll also provide us with new customers who would otherwise not purchase because they feel the suggested retail is too high and encourage current customers to immediately purchase additional pieces. And yes, I think if the data in the consulting study is re-examined, you’ll see the 2004 price promotion was actually very profitable.
________________________________________________________________________________________________________________ HBS Professor John A. Quelch and Heather Beckham prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration. HBS thanks Owen Mack of Kitchen Arts for his input.
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4057 | Culinarian Cookware: Pondering Price Promotion
After a one-hour discussion of the pros and cons of price promotion and validity issues surrounding the consulting study’s conclusions, Janus said: You’ve made some good points and I have a lot to think about. We need to put much more analysis into this decision. I’d like you to dig deeper into the consulting study and provide me with your version of...