Cutco

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Case #4|
CUTCO Corporation
|
BUAD 6300University of ToledoDr. Michael L. Mallin|
Meagan Frances Ayers
Spring 2011|

Strategic Issue

CUTCO must select a strategic focus for the decade ahead and must also make a decision as to whether to continue the retail sales pilot program, halt it, or expand it.

Analysis and Evaluation

Direct Sales Industry

While direct selling has proven to be quite effective for CUTCO, the industry has positives as well as negatives. Because there are no brick and mortar stores and very little advertising, the industry and subsequently the companies that operate within that industry are not well known at time and can be “invisible.” However, this type of selling does provide a more personal approach for the customer.

Direct sales companies do sometimes offer websites but they are generally limited to providing customer service and contact information versus many other websites that allow customers to shop and purchase products.

CUTCO/Vector Corporation Marketing Strategy

From the first product produced, CUTCO cutlery was designed to be the finest cutlery in the world. Cutco cutlery has always been historically marketed through direct selling primarily via Vector Marketing Corporation. He people actually selling CUTCO cutlery are independent contractors who effectively operate their own business. The sales representatives are paid a commission on the products they sell but do not receive a salary from the company.

These sales are made through in-home presentations in which sales representatives validate and prove the superiority of CUTCO cutlery through demonstrations. A former president of the company stated, “ I firmly believe that people buy from individuals they like, and there is no better way to make a solid first impression than face to face. There is no substitute for the personal touch that comes from sitting across from someone in his or her home and allowing them to actually try your product. Personal, professional demonstrations sell CUTCO cutlery, period.” Interestingly, while CUTCO is always gaining new customers, 1 in 6 sales are made each year to previous purchasers.

Acquisitions

In 1985, CUTCO (then named ALCAS) saw the need to have greater control over its sales efforts and took steps to create a nationwide in-house CUTCO sales and marketing infrastructure. They decided to acquire Vector Marketing Corporation, CWE Industries, and BrekMar Corporation which were all merged into Vector Marketing Corporation. Acquiring these companies gave CUTCO complete control over their major market and the greater control they desired.

Sales Representatives

CUTCOs most recent initiative was to target college students as their sales representatives (Vector College Recruiting Program). This was because college students who by virtue of their intelligence, trainability, and ability to present themselves well, made outstanding sales representatives. The approaches used to recruit college students has also generated more recruits that any prior recruiting approach. Moreover, the recruits also resulted in the largest number of candidates for management opportunities after graduation.

This initiative has been quite successful in recent years and has led to the company offering promotional activities, events, and competitions to drive sales numbers among the sales force. The company also makes their representatives eligible to receive trophies, bonuses, trips and even scholarships for achieving certain sales numbers. The only downfall to this method is that many of these college students join as a CUTCO representative to make money for on summers and the customers they create often lose contact with CUTCO products and the company afterwards.

Catalog Sales

For this reason, CUTCO created a small catalog mailing in 1985 that is now sent to 4 million customers around four times throughout the year. In 2008, this catalog generated...
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