Agribusiness Unit 4 The Agribusiness OutputMarketing Sector Chapter
Agribusiness Unit 4. The Agribusiness Output(Marketing) Sector Chapter 17. Basic Principles of Agrimarketing 1
Objectives • • • Explain agribusiness marketing Discuss how marketing developed Explain the importance of supply and demand Describe the prerequisites of an efficient economic system Examine the factors to consider in consumer-driven market Discuss farm commodity marketing Discuss the marketing of agribusiness products Describe commodity research and promotion boards Explain how to conduct a market analysis Discuss strategic planning and marketing 2
Introduction Agricultural marketing • A large and important discipline in the • agribusiness output sector The cost of marketing U. S. domestic food amounted to $450 billion • While the cost of producing farm food products is $125 billion • The role of marketing is to meet the consumer’s needs while also ensuring that producers earn a sufficient profit 3
What Is Agrimarketing • It is the sum of the processes, functions, and services performed in connection with food and fiber from the farms The difference between selling and marketing • Historically, production agriculturalists have • taken any products not used on the farm and sold them locally for whatever available buyers would pay Many production agriculturalists now market their products instead of merely selling them 4
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What Is Agrimarketing How agrimarketing developed • In the early days, a majority of the workforce was involved in farming • Famers produced foods and fiber for domestic use • They were also involved in processing their products for consumption 6
What Is Agrimarketing How agrimarketing developed • As a result of the agricultural and industrial revolutions, a food-marketing industry developed in agriculture • Fewer people were growing their own food, so • • farmers were called upon to provide food for a greater number of people Nonfarmers also wanted to buy food products in different ways than farmers were used to selling them Today the largest sector of agriculture is dedicated to employing and funding marketing strategies 7
Supply and Demand Supply • The quantity of a given product that is available at a specific time and price Demand • The quantity of a product that is needed at a • specific time and price The factors determining demand • Competitions • Seasons • Money that consumers have to purchase 8
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Prerequisites of an Efficient Economic system A free market economy • Consumers dictate what is produced, how much is produced, when it is produced, who produces it, and for whom it is produced Prices that reflect the full value of market resources • Pricing efficiency is determined by how closely an economic system comes to getting the full value for its resources 10
Prerequisites of an Efficient Economic system More interaction between consumers and production agriculturalists • When consumers and production agriculturalists interact directly, both parties gain knowledge of the variety and prices of goods available and therefore can make informed choices 11
Factors to Consider in a Consumer. Driven Market Meeting modern demands • Markets now offer a wide choices of products, various systems of distribution, and many associated services • Much of the present market diversity results from food processors’, manufacturers’, and retailers’ awareness that the market is consumer-driven • Lifestyles have been changing rapidly • Increasing demand for highly prepared foods and restaurant meals 12
Factors to Consider in a Consumer. Driven Market Predicting business consumer demands is big • Management practices now involve market analysis, studying changes in consumer lifestyles and preferences and adjusting businesses to capitalize on those changes • Modern marketing involves product development, pricing strategies, efficient distribution, and product promotion The consumer population • Agricultural production and marketing must keep pace if the needs of increasing people are to be met 13
Farm Commodity Marketing strategies for farm commodities • Determine what types of markets are available to you • Determine the cost of various types of marketing • Determine transportation costs to each of the • • markets available to you, and sell where transportation costs are lowest Determine the most profitable form in which to market your product Advertise to create markets where none existed before Market seasonal products at the peak of demand Shorten the marketing channels between you and your consumers 14
Farm Commodity Marketing Types of livestock and dairy markets • Terminal markets hold and care for animals, often in stockyards, until they can be sold • Auction markets • In an auction market, members of the public bid on animals to purchase them • Direct sales • In direct sales, animal producers sell their livestock(or crops) directly to a processor 15
Farm Commodity Marketing Types of livestock and dairy markets • Cooperatives • Marketing cooperatives are formed by groups of producers who band together to market a particular commodity(ex. Milk) • They may process products themselves and sell the products directly to consumers • Government • The government purchase program also buys significant quantities of the milk produced in the United States 16
Farm Commodity Marketing Types of livestock and dairy markets • Vertical integration • With vertically integrated production, marketing, processing, and other parts are joined • It allows for extremely large systems of production that can be very efficient • Futures markets • Hedging is done by many livestock producers and feedlot operators 17
Farm Commodity Marketing Types of grain markets • Forward contracting • Cash-forward contracting is another way in which producers attempt to establish preharvest prices • Harvest pricing • Producers harvest the grain, ship it to the local elevator, and sell it for the going market price or spot price 18
Farm Commodity Marketing Types of grain markets • Postharvest pricing • This strategy involves determining a price anytime from immediately following a harvest to 10 or more months later • A key component in effectively use of postharvest pricing is the producer’s ability to store the grain for the desired waiting period 19
Farm Commodity Marketing Types of fruit and vegetable markets • Roadside markets • Farmer’s markets • Pick your own • The producer grows a large amount of a desirable garden crop, then allows customers to pick their own • Food brokers • Wholesalers • Processors 20
Farm Commodity Marketing Specialty • • • markets Fee fishing Organically grown crops Hormone-free beef On-farm restaurants Wineries 21
Marketing Agribusiness Products Advertising • What is advertising and what will it accomplish? • It is a way to send a sales message to possible consumers of a product • Good(effective) advertising is based on an analysis of the market that identifies and defines a specific target audience • Such an analysis should be completed before any money is spent • You should view advertising as an investment in the future of your business rather than as just 22
Marketing Agribusiness Products • Setting advertising goals • For any business, a primary, overall goal is to get the right message to the right group of consumers at the right time • Another goal might be to establish an image of the business in the public eye • Advertising budgets • The best way to budget for advertising is to spend no more than your need to accomplish what you want to get done • This requires a thorough analysis of the market and the types of advertising available 23
Marketing Agribusiness Products • Types of advertising • Product advertising • It focuses on the product itself • Such advertising might stress the usefulness, durability, price, or value of a product, and/ or the customer’s need for the item • Institutional advertising • It is designed to create a favorable image of the firm or institution offering the products or services 24
Marketing Agribusiness Products Price promotion • It is used to stimulate quick sales • With “dealer price incentives, ” retailers and wholesalers are allowed to purchase products from the manufacturers for limited periods of time at discounts(ex. coupons or rebates) Merchandising promotions • It focus on the retail point of sale, such as a food store, restaurant, or fast-food outlet • Merchandising techniques include endcap displays, additional shelf facings, prominent signage, and in-store demonstrations 25
Marketing Agribusiness Products Public relations activities • Public relations activities draw attention to a product or manufacturer through support for local or national civic projects, educational programs, and mass-medias Coordination • It is to coordinate advertising with other marketing strategies such as: • Promotional activities, special pricing, public relations, unique selling technique, merchandising plans, and product recognition efforts 26
Marketing Agribusiness Products Four controllable variables(Four Ps) in the marketing mix • • Product Price Place Promotion Agribusiness and agrimarketing managers strive to develop the proper combination of 4 Ps that will adequately meet the needs of consumers 27
Marketing Agribusiness Products Functions • • • of marketing Buying and selling Transporting and storing Providing the right quality and quantity Financing Risk taking Gathering marketing information 28
Marketing Agribusiness Products Value adding • Value adding can occur at any point during marketing • At each step, the value increases by more than the additional input • Packaging • It is a particularly important value-adding consideration in today’s markets • Because many consumers make buying decisions at the point of sale, it is important to package products in eye-catching, attractive ways 29
Commodity Research and Promotion Boards Check-Off program • In a check-off program, sellers make available a pool of money to be used for advertising a specific commodity • The sellers take a small portion of the proceeds from each item they sell to fund the advertising pool; this is the “check-off” amount • Current estimates reveal that 9 out of 10 farmers in America participate in check-off programs 30
Commodity Research and Promotion Boards New product development by commodity boards • • Potato board Cattlemen’s beef promotion and research board National honey board Cotton board American egg board National pork board National dairy promotion and research board 31
Market Analysis Six steps of market analysis • Determine what information is needed • Develop a means for getting the needed • • information Word questions carefully Gather the information Tabulate and analyze the information Draw meaning and interpret the findings 32
Daily Quiz What is the check-off program? 33
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