Culinarian Cookware: Pondering Price Promotion

1761 Words Feb 6th, 2011 8 Pages
Case Analysis
Culinarian Cookware: Pondering Price Promotion
Situation Summary
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
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When looking at the analysis of Culinarian’s target group - the households with income over $75,000, 30% cited price as the most important criterion in selecting cookware; 30% of these consumers would be motivated to buy new cookware because of a price discount versus 20% being motivated by a free gift; 20% would intentionally wait for a sale and “Price” is ranked top 3 in the criteria of choosing a cookware. These study result show that the customers value a price promotion and even actively seek these promotion out. Clearly a cut in price will generate increased sale volume.

Indeed it is true that there are uncertainties in whether the price promotion in 2004 was profitable or not. A report by a consultant firm concluded that the promotion program was not profitable. However, one group in the management team including Brown believes there are significant flaws exist in the analysis due to the following errors: the normal sales figures being too high; variable costs including overhead cost incorrectly; the cannibalization costs and inventory savings which, instead of being left out of calculations, were included and estimated inaccurately.

Another argument being that when you look at the figures provided in the case exhibit, one could see that sales volume drop right after the price promotion in both 2004 and

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