Consumer_Marketing_and_Branding_Strategies

Running head: CONSUMER MARKETING BRANDING STRATEGIES Consumer Marketing and Branding Strategies: Product Modification and Pricing Strategy Product Modification and Pricing Strategy Globalization of a product requires developing a strong marketing strategy that includes researching the product’s market position, the required product modifications if any, and the optimal pricing strategy for success in the new market. The following sections will detail the discoveries and recommendations for a successful product launch with regard to product modifications and pricing strategy. Marketing Position Statement Rice production yield from Stuttgart, Arkansas and other parts of the United States like California, Mississippi, Missouri, and Texas are enormous to cater for local consumption and to export to other countries including Nigeria. Rice consumption has been on the increase in the country and this was asserted by the United States Department of Agriculture (2010) when it stated that nearly 4.3 million metric tons of rice was consumed in 2009. The steady rise in consumption can be attributed to a number of reasons: 1. The increase in the Asian and Hispanic population (USDA Rural Development, 2010) 2. Rice contains less saturated fat and simple carbohydrates (sugar), and therefore it lowers the risk of obesity, high blood pressure, type II diabetes, and heart diseases. This was revealed in the study conducted by Healthy Rice Eaters (The U.S Rice Federation website, 2007) Though Nigeria is the largest rice producer in West Africa and has the capacity to be self-sufficient because of the amount of land suitable for rice cultivation, Nigeria is still the third largest importer in the world. The amount of rice importation continues to grow because of the increasing urbanization and modernization of the country as well as the large size of the market. The USDA/FAS Attaché reports (2001) that, “ only a limited portion of the locally grown rice crop is available for key urban markets, and the locally milled rice is also of poor quality and quantity which falls short of urban demand.” As a result, the Nigerian market needs long grain parboiled rice from the United States at a considerable price so as to outwit the locally produced and Asian imports. The rice is long, brownish, clean, well polished, and less starchy thereby making it non-sticky after cooking as well free from stones and foreign materials. The unique nature of rice from the United States is the reason that it is preferred over other imports, especially by the middle and upper class for home consumption, gifts, parties, and restaurants. Industry and Product Assessment Nigerian Market According to Porter’s Five Forces, the state of competition and profit potential in industry depends on five basic competitive forces: new entrants, suppliers, buyers, substitutes, and market competitors (Hollensen, 2007). The five forces have interests in the industry and therefore determine the profitability of exporting the United States’ long grain parboiled rice to Nigeria. The Nigerian rice market is not easy to penetrate because of the availability of competitors such as the local producers and importation from Thailand and other Asian countries. The existence of substitutes, therefore gives the buyers (Nigerian consumers) a high bargaining power. Nonetheless, the buyers are interested in the product because of its exclusive high quality. The USDA/FAS Attaché reports in 2001 that, “Although American rice has not made major inroads into the Nigerian market to date, it does have a market potential based upon its high quality. Many Nigerians remain familiar with US rice from the oil boom era of the 1970’s and 1980’s when branded Uncle Ben’s rice was a household name. United States In applying Porter’s theory, the research will assess the domestic Rice industry through an analysis of the market competitors, suppliers, they buyers, substitutes, and new entrants into the industry. Market Competitors The six states that are major players in the U.S. Rice Industry are Arkansas, California, Louisiana, Texas, Missouri, and Mississippi. The industry operates as an oligopoly therefore lessening competition. Currently, Arkansas dominates the rice production industry in the United States. The industry dedicates a total of 2,748,000 acres to production. According to the U.S.A Rice Federation (2010) website, Arkansas claims 48.2% of acreage at 1,325 acres. California comes in a distant second claiming 19.3% at 533 acres, and Louisiana claims 13.8% at 378 acres. Mississippi claims 6.9% at 189 acres and Missouri comes close at 6.9% at 189 acres. Texas is the least by claiming 5.3% at 145 acres. Rate of market Growth The Domestic Usage Report released by the U.S.A Rice Federation reports that the rate of consumption rate is 26 pounds of rice per capita. That rate increased a pound from the previous year. The report is based on the shipments and consumption of United States milled rice from August 2008 to July 2009. Suppliers Based on the supplier listing for the rice categories, there are only four suppliers of sweet and sushi rice in the nation. The average cost of sushi rice in the United States is approximately $3.99 per 16 ounces. Buyers The Domestic Usage Report of the U.S.A Rice Foundation (2010) also found that 60% of the rice milled in the United States was distributed to domestic market segments. The study also found that 58% of the six billion pounds shipped domestically went toward direct food use. The breakdown of the direct food use indicates that retails stores topped the distribution by 33%. Ethnic distributors distributed 23% of direct food use. Repackers distribute 19% and foodservice distributes 17% toward direct food use. Surprisingly, the warehouse clubs only distribute 7% toward direct food use. The remaining 42% of domestic rice distribution went toward pet food, processed foods, beer, and sake production. Substitutes Currently, no ideal substitute exists for rice. Rice production and marketing in the United States is emerging to be a multibillion dollar industry. At farm level alone, rice in the United States produces more than $1.5 billion in revenue. New Entrants Entry into the United States rice industry could prove to be very difficult. The U.S.A Rice Federation (2010) website indicates how the industry cohesively works together by forming the USA Rice Federation. The federation is made up of several organizations such USA Rice Producers' Group, the USA Rice Millers' Association, the USA Rice Council and the USA Rice Merchants' Association. New entrants to the industry are required to participate and fund the federation through the different organizations. The federation has strong involvement in the legislation and representation in government affairs regarding pricing, regulatory issues, and conservations. Product Features United States The three popular varietals of rice that are produced in the United States are long grain, medium grain, and short grain. The principal differences are the cooking times, the texture, and flavor variation ((U.S.A Rice Federation, 2010). Long grain rice are distinguished by its long kernels and when cooked are more separate, light, and fluffy. Medium grain rice is shorter and wider kernels. When cooked the grains tend to stick together and are moister. Short grain rice is plump. When cooked it tends to cling together and are chewier. Other varietals of rice produced in the United States are brown rice, parboiled rice, precooked rice, rough rice, organic, United States aromatic, United States grown Arborio, seed, sushi, and sweet. Of the breakdown, Arkansas dominates the distribution of all categories except for sweet rice and sushi rice. Louisiana also produces all categories except for sweet and sushi rice. California and Texas dominates the production of sweet rice and sushi rice. Mississippi and Missouri both contribute to the rough rice, brown rice, short grain, and organic categories of rice production. Nigeria Rice is one of Nigeria’s main food sources and Nigeria is one of Africa’s largest rice producers however, local rice is susceptible to disease. Long and medium grain rice has been breed to be more disease resistant but there is still issues growing the amount of rice needed to feed Nigeria and surrounding countries. Nigeria is also Africa’s largest rice importer and even though some local prefer the taste of local rice, imported rice does offer more nutrition and is normally a higher quality of rice than locally grown varieties. Rice processing in Nigeria is also sub-par as the country lacks large rice processing facilities therefore, the rice targeted to be imported into Nigeria will be preprocessed and packaged and selected for its flavor to match as closely to the local varieties preferred by the locals. However, the rice will be of higher quality and higher nutrients value than the local rice that will be marketed as such to the local population. Pricing Strategies Domestic Although the economy is still struggling, affecting consumer’s ability to pay and increasing cost to the company, the rice market in the United States is growing. Within the United States market, several price objectives become viable options. The quality leadership objective will set a price that indicates to the market that the product is leader in quality. The status quo objective will seek to avoid price wars through stabilization providing stable, although moderate profits. If the quality leadership objective is chosen, pricing may be implemented using the psychological pricing method. This method relies on price points, what consumer’s define as fair, and product quality signals as a basis for the price. This method will allow the company more freedom with the price set based upon the region and specific market sector being targeted. Of the two options, this objective and method will provide the greatest potential for higher profit margins. If the status quo objective is chosen, pricing may be implemented by the value-based pricing method. Although this objective and method will not provide the profit margin potential because the price is based upon superior value over similarly priced alternatives, it will seek to avoid profit robbing price wars (NetMBA, 2010; USDA-ERS, 2010). Foreign As in the United States, the global economy is struggling and Nigeria has not been immune to its affects. Cost of production and price to consumers of rice in Nigeria has been climbing affecting their ability to afford the product. Nigeria’s push to increase local production of rice threefold will significantly increase the competition from those local producers. As a new product, the company’s rice has two pricing objectives available (skim-pricing and penetration pricing). Skim-pricing will target the affluent sectors of the market through the use of a second objective, profit margin maximization and may be implemented by the psychological pricing method. This objective and method will only work with consumers who are less sensitive to the price than the general population and will result in relatively low quantities of the company’s rice penetrating the Nigerian market. It will however, provide the greatest profit for each unit of rice sold. Penetration pricing seeks to obtain the largest quantity of product into consumer’s hands through the use a secondary objective, quantity maximization and may be implemented by the value-based pricing method. This method will only work with highly price sensitive consumers, exponentially increasing demand as the price per unit of rice drops. Given the pervasive nature of rice within the daily diets of Nigeria’s people and the looming local production increases, this objective and method may provide the needed value and quality associations to cement the product in the culture’s consciousness (Emejor, 2010; NetMBA, 2010; USDA-ERS, 2010) Conclusion The demand for imported rice in Nigeria is continually increasing as discussed and the types of rice best suited for import has been presented. Two pricing strategies options were discussed for entering the Nigerian market based on the intended consumer base that would best position the product for future growth and company profitability. References Hollensen, S. (2007).Global Management: A Decision-Oriented Approach, (4thed.). Upper Saddle River, NJ: Prentice Hall. USDA Rural Development. (2010). Agricultural Marketing Research Center. Retrieved July 11, 2010, from http://www.agmrc.org/commodities__products/grains__ oilseeds/rice_profile.cfm U.S. USDA/RAS Attaché reports: www.fas.usda.gov/gainfiles FAO Rice and Nigeria Agriculture Information: www.riceweb.org/countries/nigeria.htm Emejor, C. (2010, March 28). Nigeria: FG plans to triple domestic rice production. Retrieved July 18, 2010, from http://allafrica.com/stories/201003290448.html. NetMBA.com. (2010).Pricing strategy. Retrieved July 18, 2010, from http:// www.netmba.com/marketing/pricing/. U.S. Department of Agriculture.Economic Research Service. (2008, April 30). U.S. rice industry: Background statistics and information. Retrieved July 18, 2010, from http://www.ers.usda.gov/news/ricecoverage.htm. U.S.A Rice Federation. (2010). Rice. A World of Great Ideas. Retrieved from http://www.usarice.com/index.php