Question

Cutco Cutlery Corporation: Direct to Consumers for Over 60 Years! CUTCO Corporation, the largest manufacturer and marketer of high-quality kitchen cutlery and accessories in the United States and Canada, celebrated its 60th anniversary in 2009. With the design and manufacture of the highest-quality product as its primary objective, over 100 kitchen cutlery products are sold under the CUTCO name. The company also carries a line of cookware, sporting/pocket knives, and garden tools. The CUTCO corporate family consists of several companies. CUTCO Corporation—parent company CUTCO Cutlery Corporation—manufacturer of CUTCO products since 1949 Vector Marketing Corporation—exclusive marketer of CUTCO products, which are sold direct to consumers CUTCO International, Inc.—marketer of CUTCO products internationally KA-BAR Knives, Inc.—maker of quality sporting knives Schilling Forge—manufacturer of precision forgings All businesses within the corporate family, except for Schilling Forge, are located in Olean, New York (USA), where the company has over 700 manufacturing and administrative employees. Schilling Forge is located in Syracuse, New York. Only a very small percentage of the company’s items are manufactured outside the United States and that is only when the company cannot find a partner in the United States that meets stringent quality standards while simultaneously meeting the pricing needs of the company and its customers. The quality built into a CUTCO product at the point of manufacturing is reinforced by the company’s direct-to-consumer channel of distribution, which enables high-quality consumer engagement during the selling process. The Producer CUTCO’s commitment to quality and innovation is evident throughout every step of the manufacturing process—from the selection of steel to final inspection. The company stands behind each and every product with a FOREVER satisfaction guarantee. The guarantee has four components: FOREVER Performance Guarantee FOREVER Sharpness Guarantee FOREVER Replace Service Agreement for Misuse or Abuse 15-Day Unconditional Money-Back Guarantee CUTCO Cutlery’s American-made products and the hard-working craftsmen and women dedicated to creating this high-quality kitchen cutlery were featured on the Travel Channel’s John Ratzenberger’s Made in America program. With its reputation for high quality, accompanied by a FOREVER satisfaction guarantee, CUTCO Cutlery Corporation distributes its products direct to the consumer via its Vector Marketing sales force. The Consumer CUTCO Cutlery Corporation has approximately 18 million satisfied consumers in North America. Customer response to CUTCO research directs the development of new products and services and the sharing of personal stories about special times with family and friends serves as an inspiration to everyone in the company. Thousands of customers have written letters telling the company about the role the company has played in their lives. These customer letters tell how CUTCO has helped them slice and dice fruits and vegetables for weeknight dinners, create weekend party fare, and chop and carve food for holidays, birthdays, and anniversaries. CUTCO cutlery is given as gifts to newly married sons and daughters and is handed down from generation to generation as a family heirloom. The customers praise the quality of CUTCO and offer thanks for the comfort of the ergonomically designed handles and the CUTCO FOREVER Guarantee. Product to Consumer Direct Channel via Vector Marketing Corporation Unlike many competitive cutlery products, CUTCO cutlery products are not available in mass merchandise or specialty stores. Boasting annual sales of over $200 million, Vector Marketing Corporation is a direct sales firm and the sole distributor of Cutco Cutlery. The independent sales representatives of Vector Marketing Corporation are largely college students from campuses across the nation. According to a company spokesperson, Vector Marketing’s sales force is a group of dynamite individuals who represent the company to the consumer in the same high-quality fashion as the CUTCO product. The sales representatives contact potential consumers via referrals, referred to as the “friends of friends” approach. Conversely, consumers can contact the company directly and be connected to a salesperson in the same geographic region. Divided into six regions (northeast, Midwest, eastern, central, southwest, and western), Vector Marketing has over 300 offices across the United States and Canada. Regional headquarters are in Philadelphia, Pennsylvania; Detroit, Michigan; Milwaukee, Wisconsin; Dallas, Texas; Austin, Texas; San Diego, California; and Toronto, Canada. Vector Marketing Corporation belongs to the Direct Selling Association (DSA), whose members are leading companies engaged in direct selling in the United States. All DSA members adhere to a strict code of ethics and promote a high standard of integrity in direct selling. From production through sales, the CUTCO Corporation takes ownership of its products. Using this direct-to-consumer channel enables the company to guarantee quality from production to consumption. Sources: CUTCO website, www.cutco.com (Links to an external site.)Links to an external site. (Accessed February 28, 2011); Vector Marketing website, www.vectormarketing.com (Links to an external site.)Links to an external site. (Accessed February 28, 2011). Case Analysis Questions Why would a company such as CUTCO Cutlery opt for the direct channel instead of the retailer channel for its consumer products? Please be specific. What other companies are similar to CUTCO Cutlery in its approach to direct retailing? Please be specific.

Answer 1

Why would a company such as CUTCO Cutlery opt for the direct channel instead of the retailer channel for its consumer products?

• High-quality consumer engagement during the selling process is possible only through direct channel distribution to consumers.
• The guarantee has four components: FOREVER Performance Guarantee FOREVER Sharpness Guarantee FOREVER Replace Service Agreement for Misuse or Abuse 15-Day Unconditional Money-Back Guarantee. These guarantees are well explained to the consumers during the relationship building process.
• Sales force and the customer response to CUTCO research directs the development of new products and services.
• Motivates employees- sharing of personal stories about special times with family and friends serves as an inspiration to everyone in the company.
• Using this direct-to-consumer channel enables the company to guarantee quality from production to consumption.

What other companies are similar to CUTCO Cutlery in its approach to direct retailing?

Direct sales agents (DSA) are employed by companies to have a personalized approach to consumers. These DSAs earn commissions and incentives in their role. The website that uses the direct-to-consumer approach for selling their products are listed in www.dsa.org. For example, Amway, Oriflame, Tupperware, Avon, Herbalife, Vestige, Unicity, etc