Week #8: The Culinarian Cookware Case

The Culinarian Cookware case presents an interesting marketing strategy dilemma – should price promotion be used to create value and achieve company goals?  Or not?

Copper - the "Ferrari" of Cookware 

Culinarian Cookware has established itself as a premium performance cookware manufacturer, focused on advanced performance technology as the leader in metallurgy innovation and as the first manufacturer to provide the benefits of copper cookware with effortless cleaning and maintenance. 



Given this elite positioning for the brand, my opinion is that the previous promotion was not effective in achieving the goals set forth by the CEO.  Those goals include 1) widen its distribution network, 2) increase market share in premium cookware segment, 3) preserve its prestigious image, and 4) continue to capture revenue growth of at least 15%, while preserving pre-tax earnings margins of 12%.

First, the previous promotion did not help increase the distribution network.  While it did appease trade requests, it required existing retailers to accept a 48% margin instead of their usual 52%.  Moreover, retailers were not passing all of the savings on to the customer – they were buying at the lower cost (sometimes stocking up for the future), and then pocketing the difference.  The relationship with the 50% of the retailers who did not pass along the entire discount to the customer was strengthened due to their higher profits, but those were definitely temporary gains.

Secondly, it is debatable whether the promotion actually increased overall market share.  It’s clear that sales of CX1 line increased due to the promotion, but we can’t look at just the CX1 line in isolation.  From the unit order data, I think it’s clear that the discounted sales of CX1 series cookware cannibalized the DX1 line sales.  Furthermore, once the promotion ended, unit orders of CX1 returned to their previous levels and continued growth was possible without any pricing promotion activity.  The aforementioned promotion did, however, have some positive results.  First, the mail-in survey results show that the pricing promotion was successful in attracting cost-conscious customers – 70% felt that the price discount was very important in their purchase decision.  Additionally, 20% of the buyers during the price promotion period were new to the Culinarian brand, which spreads brand recognition to new customers.

Third, the prestigious image of Culinarian Cookware was definitely not preserved.  Price discounts dilute a company’s image and potentially devalue a brand, which is definitely not desirable for the branding strategy Culinarian is trying to maintain and grow.  Culinarian’s main competitors, Le Gourmand and Robusto, never run price promotions, allowing them to maintain their status as premium cookware brands.

Finally, the previous pricing promotion had a direct negative effect on margins.  If the goal had been to increase sales without any thought to preserving the brand’s image and revenue generated, then it succeeded.  However, it did not meet the stated goals of the CEO.

Going forward, I believe Culinarian should pursue promotional activities that are more aligned with the CEO’s strategic goals.  The use of pricing promotion erodes the premium positioning that Culinarian has been working hard to build and goes against the CEO’s goal of strengthening the brand’s equity.  Furthermore, from the market research results, performance and durability were regarded as the most important features driving purchases – not price.   Pricing promotions also have a negative effect on profits, which is counter to the CEO’s goals. 

I would suggest promotional activities that DO support the goals of the company.  As an example, Culinarian should use targeted advertising to improve their perceived value and increase their brand awareness from their current levels to the levels of Le Gourmand and Robusto, especially with higher household income customers.  This advertising could be targeted at the 39% of customers who watch television cooking shows and/or the 18% who purchase cookware seen on television cooking shows.  Additional market research should be obtained surrounding the 55% of households that either purchased or received cookware as a gift, as this presents a large growth opportunity.  To strengthen relationships with retailers and widen the distribution network, Culinarian should pursue promotional activities that reward and support retailers, rather than asking them to decrease their margins.  I believe promotional activities such as these support Culinarian’s objectives much more than the use of pricing promotions.

To end, I will tie this discussion back into the automotive industry.  So-called premium brands such as Cadillac and Lincoln continue to offer large incentives and discounts to maintain and increase market share.  This has proven to continually erode brand equity and hurt resale/residual value in the long run.  Compare this with the strategies such as Mercedes and BMW utilize, which rarely put “cash on the hood”, where the long term positive effects on brand equity can be observed.  Other elite brands never… ever… run promotions, as they know it will have a large effect on their perceived value.  Have you ever seen a large advertised discount on a Porsche 911, Bentley, or Ferrari?