Week 9: Culinarian Cookware: A case study in pricing and promotion strategy

Week 9: Culinarian Cookware: A case study in pricing and promotion strategy

1.     Was the previous promotion effective in achieving the goals specified in the case.  Most importantly was it profitable?

From the reading of this case, I think that the promotion was effective partially in achieving its objectives. The promotion did appease the trade for demanding price reduction events. However, it did some harm for Culinarian’s prestigious name and image.  I do not agree with Brown about on forecast 2004 March-May “normal” sales was to set them 24% below the 2003 for that same period, which is based on the sales drop during the first two months of 2004 while the promotion had been announced.

About the profitability of the promotion, I think the whole year should be considered, not only these promotion months, because its impact started from its announcing date (Jan. 1, 2004) and also upon the months to follow.

The forecast units of CX1 for 2004 could calculated based on the sales of 2003 and the US retails sales change (-2%) from Exhibit 1.   397210*(100%-2%)=389266 units.  The normal contribution is $19.95/unit.  The forecast contribution is : $7,765,865.

The promotion units of CX1 for March through May: 47191+89423+48373=184,987.  Promotion contribution: $10.35/unit.  The contribution:  $1,914.615.  Units sold for other months:  459,762-184987=274,805.  The contribution at normal price: $5,482,360.

The actual total contribution during 2004, the promotion year: $1,914,615+$5,482,360=  $7,396,975.

I think the promotion lost  $368,890.  It is not profitable, disregarding the negative impact of cannibalization and positive impact in inventory, which are not significant.

2.     What aspects of the promotion worked best and which were less successful?

The aspect of the promotion worked  best is the discounting the lowest product line, which could drive future sales in the higher margin, higher quality lines, especially for premium products. The less successful aspect will be damaging its brand image as general.

3.     Should Culinarian run a promotion prospectively?  Why or why not? 

I think Culinarian should run promotions which Market Research had indicated consumers’ is favorable of, such as gift giving and advertising by some TV cooking shows. This can increase brand awareness since 50% believed they would favor a brand of cookware they recognized from Exhibit 3 in the reading. These promotion should be low sales months, such as Jan.~March. Discounting promotion should still be an option.