Cutco Case Analysis

Cutco Case Strengths· Products can be purchased individually or as a package.· 20-cutlery items account for 60% of sales.· Prices have increased 5% every other year.· Every product has lifetime guarantee and free product sharpening.· Alcas acquired Vector Marketing to re-create nationwide in-house Cutco sales and marketing infrastructure.· Expanded internationally in 1990 to Canada.· Cutco International operating margin was 2.5% in 1991.· Vector employs promotional activities, events and competition to increase corporate revenues and motivate sales representatives.· No door to door selling. First sales are to representative?s parents, relatives or friends.· 4.4M customers have been added to Vector?s database of customers.· All representatives are commissioned based.· Catalog operating margins are 15% Opportunities· Web users in the U.S. are male 35-54 with average income of $50K.· U.S households are expected to grow 1.1% until 2010.· Consumer prices have been stabile, but rising at a rate of 3.0% per year.· Predictions for web purchases are to increase exponentially in the next few years.

Weaknesses· Sales reps are college student who sell Cutco during their summer vacations.· Commissions are given to area representative and Manager when purchased through a catalog.· Web costs range from $200K ? 500K.· Vector consumers prefer to order from web site.· Cutco has always marketed through direct selling.· Majority of sales are between May & August.· Top 500 sales reps earn $5,500= $2,750,000· Only 97K orders are received from 2.8M mailed catalogs.· Web selling is not a Cutco core competency. Threats· Competition markets through department stores and mass merchandisers.· Direct selling industry is relatively unknown.· Direct selling firms do little advertising.· Direct selling firms are small, privately owned firms and operated by entrepreneurs.· Most direct selling firms web sites are limited to customer service and contact information.· Henckels cutlery offers 30%