Q06 Q06 Q06
Good, Better, Best
How do you put a price on the experience of serving friends or family the best dinner you ever cooked? Its value is far greater than the cost of ingredients or the amount of time you spent making the meal. Instead, its value lies in your original inspiration, your goal of producing a great meal, and all the care you blended into your creation-not to mention the enjoyment of your diners. Food Network marketers face this same question when considering pricing objectives for everything from advertising to branded cookware sold by retailer Kohl's.
Although Food Network sells time to advertisers and charges cable and digital distributors for content, the network's ultimate customer is the consumer. "For us, the primary relationship is with the consumer," explains Chris Powell, executive vice president for human resources at Scripps. Food Network delivers relevant content to viewers, creating value for them that allows the network to charge advertising and distribution rates. Advertisers and distributors then have access to those consumers through various outlets-whether it's placing their products in specific episodes or tweeting about an upcoming show premier. Lexus marketers may consider paying a higher price to place a new model in Restaurant: Impossible for the privilege of having its luxury auto featured on a popular show as a worthwhile investment. Distributors may agree to rates that meet Food Network's profitability objectives.
Food Network also designs and sells tangible goods-kitchen utensils, cookware, dinnerware, table linens, and more. Creating a pricing strategy for these products involves integrating the target audience for its television shows with its choice of retailer: Kohl's. Since Food Network products are sold exclusively by Kohl's, marketers can zoom in on a target market for its pricing decisions. Using a competitive pricing strategy, Food Network positions its kitchen goods along the "good, better, best" continuum. "We try to anchor ourselves at the high end of better," observes Sergei Kuharsky, senior vice president and general manager for licensing and merchandising. "We want to be quality first, but we want to be accessible as well." If Food Network priced its kitchen goods too high, fans would view them as unaffordable- undermining sales and potentially doing damage to the lifestyle image of the network. Gabe Gordon, vice president of research for Food Network, agrees with this assessment, particularly during economically difficult times. "If you're overtly leaning toward luxury, you turn a lot of people off," he points out.
When developing its kitchen products, Food Network partners with a team of culinary experts who help design, test, and review everything from frying pans to baking dishes. If these items survive hard use in the test kitchens for four to eight weeks, they'll likely perform well in consumers' homes. Quality combined with the right price creates value for consumers. Kohl's sets the actual retail prices for these items, with product-line pricing-but the price-quality relationship is important to Food Network. "We look at our products as professionally inspired but priced for the home cook, and we want them to be as good if not better for the money than anything else out there," says Kuharsky.
Although consumers don't pay for Food Network programming (except through cable or other media subscriptions), the network takes into consideration pricing issues as it creates the lineup of shows. "I do think our programming is very aspirational," comments Gordon. "We give you the tools to make things your own." When the economy shifted downward several years ago, Food Network marketers noticed that daytime viewers responded well to shows that offered special deals or featured less-expensive menus and recipes. "When times change and money is tight, people will look for ways to cut corners in a less painful way," explains Gordon. In addition, people tend to entertain at home more-instead of dining out-so they gravitate toward shows that provide low-cost but fun or attractive ideas for social gatherings. These programs "help people live a better food life," Gordon continues. Here, price limits go to work in the minds of consumers. They establish a budget for groceries or entertaining, then shop within those limits. But they want to create the tastiest meal or trendiest party those boundaries will allow-and Food Network is there to help.
Price limits also apply to wealthier viewers who might be able to afford to buy more expensive ingredients or cookware but choose not to. If they see a certain dish featured on one of the cooking shows, they might snub it as too exotic for their family's tastes or too complicated or lengthy to make at home. "Surprisingly, you end up turning off more of the upscale people in the audience," warns Gordon. In the end, everyone must eat to live-but Food Network aspires to bring out the inner cook in all of us, upscale or not. "Food is how people express themselves," says Gordon.
Questions for Critical Thinking
1. In your opinion, should Food Network try to attain prestige objectives through pricing? Why or why not?
2. How would you classify the market structure for Food Network's offerings (both content and tangible goods)? Explain.
3. How might Food Network and Kohl's use product-line pricing to expand their partnered offerings?
4. Describe the price-quality relationship of Food Network's programming and its cookware products at Kohl's.