Culinarian Cookware
Autor: Tim • November 1, 2018 • 1,643 Words (7 Pages) • 681 Views
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We think Brown’s calculation is more appropriate. For one, the overhead should be somewhat fixed instead of variable cost, and not included in variable cost. The incorrect average variable cost used by consultant leads a result of underestimated contribution resulting from the price promotion. However, Brown still has to explain more about how she got the number of unit sales 59,871, so I maintain the number of non-promotion unit sales used by consultant. Our calculations in table 2 in appendix combines the Consultant’s and Brown’s. The price promotion increased the revenue for 2004, but not as much as Brown’s calculation.
Recommendation:
It is clear that promoting the price can be successful thus Culinarian should continue to offer discounts of 10% - 20% to drive increased sales and net profit, as resulted from the 2004 promotion.
Culinarian should limit the promotion to its low end product lines. During the different promotions, management should calculate the effect of cannibalization within the product lines CX1/DX1 and SX1/PROX1. Dependent on the result, they might produce less units of the product line, which will not be promoted. Though this, costs might be reduced as well.
It would serve Culinarian well to align its advertising strategy with their promotional activities, as those who purchased the CX1 line while on sale, do not consistently follow Culinarian’s offerings. Promotions should be offered on its low end product lines to compete with Kitchen Select and Star Chef. This will help Culinarian enter a new market and drive sales towards its products and away from low-end competitors. The 2004 campaign exposed important facts about consumer behaviors, as 70% of customers responded that they price promotion was very important or at least important in the decision buying process. Moreover 80% of customers, using promotion were from households that already owned Culinarian products indicating that 20% were new customers. Promotions should be offered during seasonal peak sales months rather than in the spring. The sales of cookware in the U.S. market are more or less seasonal based on the purchase of cookware for weddings (May-July) and Christmas gifts (December).
Promotions, when used correctly, do not tarnish the Culinarian brand but actually enhance it. However, they must find alternative ways to advertise their promotions other than conventional magazine advertisements and cooperative retail pieces. They must market their products/promotions effectively in a rapidly changing media environment. They should utilize websites to convey promotional advertisements, allowing them to reach the masses. These recommendations will allow Culinarian to grow brand awareness and capture additional market share in the cookware market, all while maintaining their image as a market premium performance cookware provider.
Given the results of the 2004 promotion detailed above is to expect that an optimized campaign in 2007 will have an even bigger impact on the most important key performance indicator, the profit. If Culinarian Cookware considers all the mentioned points, they won’t only strengthen their position as market leader in premium cookware, but also gain market shares in the lower-quality segment. That could make Culinarian the strongest supplier on the whole cookware market.
Appendix:
Table 1
Consultant
Non-promotion
20% promotion
Average retail selling price
150
120
Ave manufacturer's selling price
72
62.4
Variable costs
52.05
52.05
Average contribution
19.95
10.35
Unit sales from March to May, 2004
119504
184987
Total contribution
2384104.8
1914615.45
Incremental contribution (Loss)
-469489.35
Brown
Non-promotion
20% promotion
Ave retail selling price
150
120
Ave manufacturer's selling price
72
62.4
Variable costs
38.64
38.64
Ave contribution
33.36
23.76
Unit sales from March to May, 2004
59871
184987
Total contribution
1997296.56
4395291.12
Incremental contribution (Gain)
2397994.56
Table 2
Our Calculation
Non-promotion
20% promotion
Average retail selling price
150
120
Average manufacturer's selling price
72
62.4
Variable costs
38.64
38.64
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