Culinarian cookware marketing hbr case assignment

On the other end of the spectrum, Victoria Brown, senior sales manager, believed that sales should be 24% below 2003 numbers because of the January and February units’ slump. This would net just fewer than 60, 000 sales in 2004 (Appendix 2). The second variable is variable cost, which has wide disparity between the consultants and Mrs. Brown. The consultants included higher variable costs than Brown ($52. 05 vs. $38. 64 per unit) who incorporated only labor and raw materials in her accounting (Appendix 3).

This leads to less profitability and, ultimately, a negative return of $-469, 489 thousands as a result of the promotion in the consultant’s analysis. Brown on her side calculated an increase in revenue of about $2. 4 million (Appendix 4). Our own analysis of the 2004 promotion incorporates a more realistic function of projected unit sales and variable cost. Rather than determine a growth rate for 2004, a sales estimate was determined by using the percentage of sales by month from 2005.

Appendix 3: Pricing and Cost data for Culinarian CXI 2004 Promotion based on Consultant’s (a) and Ms. Brown’s (b) assumptions |(a) | | Per Unit | Nonpromoted | 20% Promotion | | Avg retail selling price |$150. 00 |$120. 00 | | Avg manuf selling price |$ 72. 00 |$ 62. 40 | | Variable Costs |$ 52. 05 |$ 52. 5 | | Avg contribution |$ 19. 95 |$ 10. 35 | | | | | | | | | |(b) | | Per Unit | Nonpromoted | 20% Promotion | | Avg retail selling price |$ 150. 00 |$ 120. 0 | | Avg manuf selling price |$ 72. 00 |$ 62. 40 | | Variable Costs |$ 38. 64 |$ 38. 64 | | Avg contribution |$ 33. 36 |$ 23. 76 | Appendix 4: Incremental Contribution impact of 2004 Price Promotion | Under Consultant’s assumptions: | | | Normal Sales w/o Promotion (March-May) |$ 119, 504. 0 | | Incremental Contribution Impact |$ (469, 489. 35) | | Under Ms. Brown’s assumptions: | | | Brown’s Normal Sales w/o Promotion (March-May) |$ 59, 871. 28 | | Incremental Contribution Impact |$ 2, 397, 985. 2 | Appendix 5: Estimated Promotional contribution based on our assumptions. |?? |% of 2005 Total Sales | | | January | 6. 1% | | | February | 6. % | | | Jan-Feb | 12. 8% | | |?? |?? | | | March | 6. % | | | April | 7. 0% | | | May | 9. 4% | | | March-May | 23. % | | | | | | | Estimated Nonpromotional Total Sales (2004) | 428, 410 | | | Estimated Nonpromotional March – May Sales | 99, 819 | | | | | | |?? | Consultant Variable Cost | Brown Variable Cost | | Estimated Promotional Contribution |$ (76, 783. 41) |$ 1, 065, 312. 7 | Appendix 6: Estimation of Cannibalization due to Price Promotion | Percentage Increase Year to Year | 2003-2004 | Average | Non-Promotional Average | | PROX1 | 14% |-0. 1% |-7. 2% | | SX1 | 0% | 6. 9% |-28. 6% | | DX1 | 20% | 29. 8% | 19. % | | CX1 | 58% | 10. 9% | 5. 8% | When considering only non-promotional years, DX1 has an average growth rate of 19. 6%, which is slightly lower than its actual growth rate in 03-04. We would expect cannibalization to result in a growth rate lower than the average. Therefore, we do not believe cannibalization occurred in the price promotion of 2004. Only the DX1 unit was chosen for cannibalization because it is the closest is price and quality. We believe it is unrealistic to consider the growth rate change for other item types during the 2004 price promotion.