To some extent, it makes sense. Culinarian takes a good advantage of utilizing push promotion for their premium cookware products. Because 55% of consumers with income over $75000 would be drawn to stores with attractive displays or informed staff to shop for cookware. In addition, 20% of them would respond to a sale and only 10% would respond to multimedia advertising. At the same time, Culinarian have sales 12 visits per year while other competitors only have 6. It also offers a higher retail margin for its products which is 52% and builds an incentive program for retail clerks. According to the above analysis, the majority of the market would respond positively to the push tactics. However, Culinarian’s pull promotions are relatively ineffective. Managers of Culinarian always focus so much on advertising expense which is higher than average, that is, 4% of sales versus 3% of premium competitors. Meanwhile, some of them ignore that price promotions are beneficial to a pull strategy.
3. Was the 2004 promotion profitable? Calculate the profitability using Brown’s and theconsultant’s logic. How would you calculate it?
According to the formula: incremental contribution impact =(actual units * actual contribution – forecast units * normal contribution) We can calculate the profitability of Brown’s: $23.76 * 184,987units – $33.36 * 59,871units = $2397994.56 The consultant’s: $10.35 * 184,987units – $19.95 * 119,504units = – $469489.35
| Nonpromoted| 20% promotion|
Brown| $33.36=($72-$38.64)| $23.76=($62.4-$38.64)|
The consultant| $19.95| $10.35|
So, according to Brown’s logic, the promotion of 2004 is profitable. However, using the consultant’s logic, it can conclude that it lost profit.
4. . What are some other possible promotion strategies for Culinarian? Recommend whetherCulinarian should run a 2007 price promotion. Which promotion/terms (which products topromote, how, how much, when, how frequently, and for how long) would you suggest.
Other promotion strategies:
A. We can use contests as a promotion strategy for Culinarian. Because people like to win prizes, if consumers take part in those contests, it has a good opportunity to promote its brand and put its logo and name in front of the public rather than make money through a hard-sell campaign.
B. Another way is to encourage current customers to refer new customers to shop Culinarian’s products, which is the referral incentive program. We can use free products, big discounts and cash rewards as the incentives you can use. It is a great promotion strategy to leverage Culinarian’s customer base.
Suggestions of 2007 price promotion:
The company should run a price promotion in 2007. It can promote the boxed set of cookware, because considering cookware bought as gifts would help gain more market shares. And the promotion should occur from April to July, in order to capture the majority of the wedding market. Imagine that if a person buy a 5 piece set for a wedding , and then the newly married couple may need some more items and would purchase them at full retail. This Price promotion will not cheapen the prestigious image because the cookware will still be priced in the premium cookware price range. Besides, it still should be a 20% discount for consumers who purchase on all 5 piece sets or sometimes 3 or single piece items and retailers can take a 48% margin on the items.