Culinarian Cookware: Pondering Price Promotion
As a market leading brand primarily focusing in designing, manufacturing, distributing and marketing premium cookware, Culinarian Cookware takes pride in its outstanding product quality, advanced performance technology and the strong dealership with retail stores established throughout the years, which Donald Janus, the VP of Marketing believes makes Culinarian stands strong in its competitive industry. In regardless of Culinarian’s usual practice of avoiding price discounting, an official price promotion program was launched in 2004, which was later concluded by a consultant firm that these promotions had a negative impact on profits. There are different views toward the price promotion strategies and the corresponding report in the senior management: Janus felt price promotions were unnecessary, potentially damaging to the brand image, and possibly encouraged retailer hoarding; Brown believed the promotions strengthened trade support, improved brand awareness, and stimulated sales from both new and existing customers. While Janus trusted the report results, Brown believed the study assumptions were flawed and required further analysis, suspected the promotions had actually produced positive results. In November of 2006, debates among the senior management team had been going on regarding the pros and cons of price promotions for the company's premium cookware products. A decision is needed to be made in terms of how price promotion can be utilized in Culinarian’s marketing strategy.
The urgent and key question is whether to run a price promotion in 2007 and, if so, to determine what merchandise to promote and on what terms. The broader issue is what strategy Culinarian should pursue to achieve its sales growth objective, and what role, if any, price promotion should play. Clearly there are attractive advantages and draw-backs with significant consequences for a price promotion program. The final recommendation will need to be in line with the four strategic objectives of the company: (1) Widen its distribution network; (2) Increase its market share of the premium cookware segment; (3) Preserve its prestigious image; (4) Capture its revenue growth of at least 15% while maintaining pre-tax earnings margins of 12%.
(1) No Price Promotion
This alternative would means there will be no official price promotion, only occasional free gifts would be given out with purchase of items at regular price. There are least risks associated with this option but the company will need to seek other ways to maintain their competitiveness.
(2) Discount on Slow Growing Items
The second option would be to apply a 30% discounted price to the slow growing items like what the company did in 2006. (3) Price Promotion Campaign (Discount on selected premium items) To invest in a comprehensive price promotion campaign. Discount price will be applied not only to the cheapest and slow growing items but to selected items from all lines. The campaign will be assist with edgy advertising methods to create a “hype” to the price cutting.
Alternative 3: Price Promotion Campaign
The recommendation to pursue the third alternative was made based on a decision matrix with the following set of criteria: risk; ability to widen distribution network; positive impact on brand image; ease of implementation and financial return.
Price promotion is superior to a gift incentive in the following ways.
As Culinarian is heavily relied on retailers for distribution, their opinions carry a certain weight of important. Many of the retailers expressed that a free gift approach often confuse them as to how many gifts to order. These 0 value-carrying gifts also occupy valuable inventory spaces and thus are generally not welcomed by these distribution channels.
When looking at the company strategies, one...
Please join StudyMode to read the full document