Neptune Gourmet Sea food is the North America's third most significant seafood producer. They are having tagline "The Best Sea food on the Water Planet" plus they adhere to that. In order to preserve the business high quality image, Neptune acquired made a huge investment in new technology to improve catching functions to be more efficiently. However, this has leads to the challenge of piling up the inventory. The problem of surplus inventory can cause various problems to the company such as tight up of cash and lack of profit margins. To cope with this problem, Rita Sanchez comes up with a strategy of reducing the price in the product of Neptune Silver which is the top quality brand of Neptune. Jim Hargrove, the marketing director of Neptune Premium Seafoods, refuse the proposal, because he concerned that the price slice strategy will affect the high grade product image. To be able to keep up with the Neptune's reputation, Sanchez suggested a plan of launching a new mass-market brand. This assists Neptune decrease the inventory by adding more customers for Neptune especially to the people customer who sensitive to price. However, Hargrove worries an inexpensive brand would cannibalize the business's premium series and also lead to price conflict by its rivals. This problem was taken up for conversation at the Neptune's Marketing and Procedures Council meeting. During the meeting, each professional has different point of view, some agree with Sanchez while others take the medial side of Hargrove in disagreement of the proposal.
Problem Statement
Neptune Gourmet seafood is didn't analyze the situation correctly and was actually experiencing marketing myopia. They are really concentrated only on the source side by progressively invest in enhance their product and offer, but they are unable to view the troubles due to market aspect. Neptune is now accumulating extra inventory. It means that the company is facing a problem with oversupply for existing demand. Therefore, Neptune must appear the solutions to dispose this unwanted inventory and also profitably exploit a resource increase.
Criteria of the Problem
Neptune needs to find the most effective solution to market its surplus inventory without impacting its brand image.
Options to the Problem
Market penetration- Get a price cut of around 40- 50%
Product development- Establish a fresh brand (Neptune's Metallic) with low price than the prevailing brand (Neptune's Silver) to existing market
Market development - Add the existing brand (Neptune's Platinum) to a fresh market
Diversification- Launch a new brand with low price than the prevailing brand to new market (such as South America and Central America)
PRODUCT
New
Existing
MARKET
Existing
New
Evaluation of the options
Options 1: Go for a lessen price of around 40- 50%
Pros:
Lowering the purchase price may seem to be always a viable solution; maybe it's a quick technique to gain high sales volume.
Cons:
Dropping the purchase price may only be a temporary or short term method for Neptune. The customer may expect the costs to remain low for a long term. They aren't ready for the subsequent rise in the price so when it happens they could turn to a competitor's product.
When an organization decreases its prices, it'll send wrong impulses to customers that it has been overcharging them before.
If Neptune made a decrease in price, their competition will try to meet the challenge by reduce their price as well; this may lead to a price war in the industry.
It may ruin the image of Neptune; customer will think there's something wrong with the fish.
Options 2: Establish a new brand (Neptune's Sterling silver) with low price than the prevailing brand (Neptune's Yellow metal) to existing market
Pros:
Launching a fresh mass-market brand is a long-term strategy that may enhance Neptune's gains without endangering its hard-earned brand equity.
Launch a fresh brand could make chance of Neptune to generate new customer.
Launch a new low-price brand and record as much show of price conscious customers before another player made accessibility into this section.
It could broaden the pie for the complete sea food industry as well as carve out a good cut for itself.
It allows Neptune to operate at its full capacity serving all sections.
Cons:
The new brand could cause negative impact to their existing brand or cannibalize the company's premium brand.
Options 3: Bring in the prevailing brand to a new market
Pros:
It can sell to the people areas that don't have seafood supply.
It can help Neptune increase demand by attract new customer from the new physical area.
This could consolidate Neptune position at other market as well as make it a nation player.
Cons:
It may contain risk since they haven't any experience on the new market.
It often requires a long time for the client in new market to identify Neptune product.
It may be costly to introduce and talk Neptune's product and also to go into the new market.
Options 4: Release a fresh brand with good deal than the prevailing brand to new market (such as SOUTH USA and Central America)
Pros:
By target another different section with new brand so that the sales will not be cannibalized with the prevailing brand and trustworthiness of the premium-line will never be affected.
Increase market vitality, surplus attained by other ways that competitor may not have the ability to.
Cons:
It may contain risky because they do not have experience on the new market and the new low-price product may be not accepted by the customer.
It may be high cost and takes time to enter in the new market.
Decision
After analyze the huge benefits and disadvantages of the 4 different options, we can easily see that launch a fresh mass-market brand will be the most attractive decision. However, the decision of the case needs to be based upon the situations: whether it's an industry huge phenomenon or it is Neptune's specific problem.
If it is only the Neptune's specific and momentary problem, then I would suggest Neptune reselling their extra inventory to wholesalers functioning without their brand name in a few other market places such that it will not diluting their brand collateral. If it's industry wide occurrence, then I wish to suggestion Neptune to go for a proactive tactical by launch a new lower-price product since it is certain that future war between the players will be based on price. By releasing a new brand, it not only helps Neptune treat its immediate inventory problem but also enable Neptune to sustain its competitive benefits and better contend with their competitor in the future.
Recommendation
If Neptune launches a new branch with a totally new look and cheap than its existing brand (Neptune's Yellow metal), Neptune could unveiling a plan to present and talk their new-line to the client. They can boost the consumer's use by educate them about the wholesome, taste and good thing about the sea food that they produced. Furthermore, by launching this campaign combined with positive worthy of of mouth, when people pay attention to their friends and family about the Neptune's product, Neptune can able to reach more customers and cause them to become ingest more of the merchandise.
Neptune should highlight the differences between the new brand and their existing top quality brand (Neptune's Gold) to avoid muddying Neptune's premium image. However, the company should not label their new-line as low-price product; it should position it as another high-quality product but with a cheaper price. Furthermore, Neptune can label the new brand bundle with 'Supplied by Neptune, ' which would provide customer with an implicit quality assurance. To market the new brand, Neptune can place it at the entry-level customers shop and sell it through mass-market national or local supermarkets and big box merchants that sell fresh-food.
Besides launch a new mass-market brand, Neptune can generate incremental sales in another way. Neptune could encourage restaurants and wholesalers to buy more by offer a discount to them when they purchases extra quantities of what they had purchased in the last order. Because it only pertains to additional sales, Neptune only sacrifices little gains from this strategy unlike the first options that suggest by Sanchez that may result in a huge reduction for the business.
Conclusion
In my opinion, the pileup of inventory is not really a short-term problem to Neptune. It is because the excess inventory is cause by the investment in new technology combined with effect of new fishing laws. Therefore, I recommend Neptune to kick off a new mass-market brand to handle this excessive inventory for a long-term goal. If Neptune worried that it will affect the trustworthiness of its premium lines or cannibalizing the prevailing brand, then maybe they can go for the completely different market places to release this new brand.
