1. Culinarian Cookware Pondering Price Promotion
Group 6:
Aditi Sachdeva
Chandra Prakash
Devendra S Pal
Dinesh Kumar
John Topno
Sumita Das

2. Context
Culinarian’s leadership position in Premium segment of the US cookware market
Attractive growth in cookware market
Pride in being an elite brand – “an American Icon”
CEO’s clear objective of preserving prestigious image
Top management not too keen on price promotions

3. Culinarian’s Product Mix
The Tyro Collection (CX1)
Lowest priced
Least advance technology
The Classic Collection (DX1)
Aluminium exterior and centre
Advance Chef Collection (SX1)
Stainless Steel exterior with Aluminium centre
Professional Grade Collection (PROX1)
Most expensive line of products
Patented Copper Construction technology

4. Problem
Traders’ and sales force’s feedback to go in for price promotions
Differing opinions of Janus & Brown on the 2004 price promotion results
Janus’ apprehension that price promotion not resulting in new customer acquisition and merely going in trade overbuy, forward purchase by existing consumers 
What type of promotion to do in 2007?

5. 2007 Promotion Plan Alternatives : Go with Price promotion
No Go with Price Promotion
Search for third alternative
Analysis of 2004 price promotion necessary to decide 2007 promotion programme

6. 2004 price promotion – Analysis of ‘Bones of Contention’
Point of difference
Our comments
Calculation of normal sales figures
Normal sales figures are arrived at looking at sales figures for a number of years and not only immediately preceding year
Cannibalization of DX1 series during promotion
May or may not have been due to promotion as there was a problem on Aluminium availability in 2004
Savings due to inventory reduction
Tangible saving – to be included
Inclusion of SG&A expenses in variable costs
Does not make much difference as it would affect the calculations equally (for promoted and non promoted)

7. Sales of Cookware : Growth
Negative growth 2% industry wide for the aluminum cookware
March to May 2004
As per Consultant
-24%
Units
119,504
59,871
Contribution With Promotion
$1,914,615
Contribution Without Promotion
$ 2,384,105
$ 1,194,432
Profit
$ (469,489)
$720,183

8. 2004 Price Promotion – How numbers add up
Non promoted
Promoted
Average unit contribution
19.95
10.35
Quantity sold (March-May)
102,413
184,987
Total contribution
2,043,139
1,914,615
Savings due to inventory -
39,540
Total Profit
1,954,155
Actual quantity March – May 2002
91,247
Act. Qty M-M 2003
78,779
%growth spring y-o-y 2003
30%
Forecast qty for M-M 2004
1.3*78,779 = 102,413

9. 2004 Price Promotion – Outcome Analysis
Objective
Outcome
Broadening of the customer base
Stimulate excitement for brand at consumer level
Appeasement of trade
At what cost
Promotion Pass Through
75%
(50% retailers passed only 10% discount to customers)

10. HOW PROMOTIONS AFFECT SALES – did it happen for Culinarian in 2004?
Brand Switching – no visible impact
Repeat Purchasing - yes
Purchase acceleration – possibly yes
Category expansion - No

11. Alternative 1 : Price Promotion
PROS
CONS
Brand Switching –Price ranked the third important criteria for the purchase of cookware.
Repeat Purchase- 50% would favor a brand they recognized.
Since LeGourmand and Robusto never ran price promotions , there can be an element of excitement and new consumers may be willing to try the product
Category Expansion: Possibility of increase in total consumption of the product category
Tendency of traders to withhold the discount meant for customers
Non-Premium products ran regular price promotions – risk of losing premium image
Real possibility of change in reference price
Negative attribution likely – transition from self perception to object perception

12. Assuming Retailers margin @ 48% and Growth in sale 26%.
2007 Promotion Plan
Spring 2007
Spring 2006
20%
10%
Unit Orders ('000)
166.60
210.50
With Promotion ('000 $)
2179
3821
Without Promotion ('000 $)
 3324
3324
Profit ('000 $)
-1145
497
CX1 Retail Price
150.00
120.00
135.00
Retail Margin
78.00
57.60
64.80
Av. Mf. Price
72.00
62.40
70.20 VC
52.05
Av. Contribution
19.95
10.35
18.15
Assuming Retailers 48% and Growth in sale 26%.
Revenue 15%,

13. Alternative 2 :Gift with Purchase
PROS
CONS
Precedent of 15% incremental sales (on Culinarian’s GWP)
Reference price does not change
Other premuim competitors successfully running promotion of GWP
Possibility of promoting stagnating PROX1 and SX1 lines
Traders not happy with this promotion
Imitation of competitors

14. Proposal Gift with purchase on all the product lines
Minimum purchase of $600 for PROX1 & SX1 and $400 for CX1 & DX1.
The gift for both categories to be different (perceived value of the gift for PROX1/SX1 to be higher).
Timing : Either May/June or Nov/Dec

15. Thank you