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Strategic Business Planning for Commercial Producers

How Do I Develop A
Strategic Marketing Plan?

Strategic Business Planning for Commercial Producers

Types of Marketing
Planning
Strategic Marketing
Encompasses the entire farm strategy
Deals with the broader issue of determining
firms strategic position in the market and how
to create value from that position

Product Marketing/Pricing
Deals with the tactical side of selling a product
Similar to a set of standard operating procedures
for marketing a particular product.

Strategic Business Planning for Commercial Producers

Marketing
Defined . . .
Marketing is anticipating the needs
and wants of targeted customers
and managing the process through
which these needs and wants are
satisfied . . . profitably

Strategic Business Planning for Commercial Producers

Management Philosophies
Production
Concept

Marketing
Concept

Product

Market

Focus

Product Quality
and Features

Customer
needs

Means

Improving
production &
distribution
efficiency

Integrated
Marketing

Profits through
sales volume

Profits
through
customer
satisfaction

Starting
Point

Ends

Strategic Business Planning for Commercial Producers

Building A Strategic
Marketing Plan

Strategic Business Planning for Commercial Producers

Strategic Marketing Plan


1.
2.
3.
4.
5.
6.

Environmental Analysis (SWOT)


Identifying Customers
Competitor/Value Creation Analysis
Marketing Mix: The 4 Ps
Financial Analysis and Budget
Implementation and Control Plan

Strategic Business Planning for Commercial Producers

1. Know Your Marketplace


Strengths, Weaknesses,
Opportunities, and Threats
(SWOT)
Trends and changes:
Market analysis
Segmentation
Prioritizing target markets

Strategic Business Planning for Commercial Producers

2. Who Are Your Customers?


Customers
vs.
Consumers
Customer: firm or
person that buys
your product

Consumer: firm or person


that eventually uses
your product

Strategic Business Planning for Commercial Producers

Customer/Consumer
Consumers
Trends
Customers
Households with
Just-in-time
inventory
Business to
business (B2B)
Manufacturing
mentality
Industrialization of
agriculture

fewer people
Active, on-the-go
lifestyles
Concern over the
health aspect of food,
with a desire for good
taste
Less time for meal
prep

Strategic Business Planning for Commercial Producers

Know What Is Important


to Your Customer
Get inside the mind of your customers
Find out why they would buy from you
. . . or why they would not
Truly understand their needs
Intentional listening
Customer analysis
Solve their problems

Strategic Business Planning for Commercial Producers

3. Competitor/Value
Creation Analysis
Make sure you are distinctively different
from your competition
in areas of importance
to your customers

Competitive
analysis
Reallocation of
resources if
necessary

Strategic Business Planning for Commercial Producers

The Value Chain

Technological Development

Inbound
Operations
Logistics

Outbound Marketing Service


Logistics & Sales

Procurement

MA
RG
I

Primary
Activities

Human Resource Management

IN
RG
MA

Supporting
Activities

Firm Infrastructure

Relationship with Suppliers

Relationship with Buyers

Strategic Business Planning for Commercial Producers

4. Determining the
Marketing Mix
The set of controllable variables
that will accomplish the
marketing objectives:
Product strategy
Place (distribution) strategy
Promotion (communication) strategy
Pricing strategy

Strategic Business Planning for Commercial Producers

Product Strategy
Portfolio of Products
Corn, soybeans, hogs, dairy, cattle, value-added grain,
fruits and vegetables, custom farming operations,
custom feeding operations
Fits your strengths and weaknesses
Provides acceptable risk/return tradeof
Meets needs of a particular customer segment

Quality
No. 1 versus No. 2
GMO vs. non-GMO

Service
Timely custom operations
Pre-sorting of grain or livestock quality

Volume
Large and small quantities
Guaranteed volumes (contract)

Strategic Business Planning for Commercial Producers

McDonalds Product
Package

Food
Fast service
Fun for the kids
Variety
Non-smoking
Consistent product

Strategic Business Planning for Commercial Producers

Waxy Corn
Corn with specific type of starch
Delivery Schedule
Specific hybrids
Quality requirements
Purity level

Strategic Business Planning for Commercial Producers

Place Strategy
Storage
On-farm vs. of-farm
Segregated or IP

Timing
On-demand
Equal amounts throughout the year

Location
Delivery to multiple points

Assortments
Delivery of diferent amounts to diferent places at
diferent times

Strategic Business Planning for Commercial Producers

American Crystal
Sugar (ACS)

M&M Mars changed from a commodity focus


for inputs to a quality assurance focus.
ACS keeps the sugar silo at the M&M Mars
plant full.
ACS shifted from a warehouse next to the
ACS factory in Minnesota to an ACS
warehouse in Pennsylvania near the candy
plant.

Strategic Business Planning for Commercial Producers

Spring Wheat
Bakers
Farmer-owned cooperative that
processes wheat, grown on Northern
Plains into flour
Frozen and par-baked bread factory in
Atlanta, Georgia, a population center

Strategic Business Planning for Commercial Producers

Promotion Strategy
Advertising
Creating brochures and other advertisements on the
products your farm provides and what value they add
Creating a farm logo

Personal Selling

Telling your customers how you create value


Meeting your grain elevator manager for cofee
Having lunch with the lender
Taking a Christmas pie to your landlord(s)

Public Relations
Being a good neighbor
Being involved in the community
Open house days

Strategic Business Planning for Commercial Producers

Price Strategy
Price is the cost the customer must bear in
order to obtain the product. It includes:
list price
discounts
allowances
payment period
credit terms

Strategic Business Planning for Commercial Producers

Pricing Methods
Value-Based Pricing
Set price based on buyers perception of value
(rather than on the sellers costs)

Cost-Based Pricing
Add a standard markup to the cost of the
product

Competition-Based Pricing
Set price based on following competitors prices

Strategic Business Planning for Commercial Producers

Value-Based Pricing
Customer
Oriented
Based on
customers
perceived value
Match price to
perceived value
Brand loyalty

Strategic Business Planning for Commercial Producers

Competition-Based
Pricing
Price decision

based on actions
of competition
Less attention on
cost or product
demand
Large firms all
charge the same
price
Smaller firms
follow lead of large
firms, may ofer a
slightly lower price

Strategic Business Planning for Commercial Producers

5. Financial Analysis and


Budgeting
Estimate the demand given the pricing and
promotion strategy.
Determine expenses associated with
production and marketing.
Determine anticipated cash flows.
Will strategy cash flow? When?
What are the critical assumptions of the
financial analysis and what are the impacts of
changes in those assumptions?

Strategic Business Planning for Commercial Producers

6. Implementation and
Control
Focus attention of everyone on
delivering what the customer
wants
Management of people
Monitoring and control

Strategic Business Planning for Commercial Producers

How Do I Build A Product


Pricing Plan in A
Commodity Market?

Strategic Business Planning for Commercial Producers

Commodity Marketing
Homogeneous Product
diferentiation in services, not product.
Low-cost strategy
What about the price received?
Does every producer get the same price?

Marketing plans systematic pricing strategies.

Strategic Business Planning for Commercial Producers

What Is A Marketing
Plan?
A marketing plan is an outline of
price, date and quantity objectives
used to generate a reasonable return
for the business given the existing
market conditions.

Strategic Business Planning for Commercial Producers

Diagram of A Corn
Marketing Plan
Date Triggers
Jan. 1

March 15

May 1

Sell 20%

Sell 20%

$2.50/bu

$2.40/bu
Price Triggers

Harvest
Sell 60%r
Existing
Price

Strategic Business Planning for Commercial Producers

What Does A Marketing


Plan Do?
Detached from the decision
Proper perspective
Introduces discipline
Check your logic
What if ...

Strategic Business Planning for Commercial Producers

Steps In A Marketing
Plan

Relationship between the business plan


and marketing plan
Production history and expectations
Expected prices
Production costs
Price and date targets
Review and evaluation

Strategic Business Planning for Commercial Producers

The Business Plan and


the Marketing Plan
Marketing plan is implementation of the

BP
Implementation consistent with

objectives
What are important considerations?

Strategic Business Planning for Commercial Producers

Production History and


Expectations
What is the farms history?
Is there an underlying trend?
How variable is production?
Write down expected production.
How does expected production
relate to pre-harvest sales?

Strategic Business Planning for Commercial Producers

Price Expectations
Assess the situation
Historic patterns (seasonal)
Basis patterns

The current situation


Outlook source
Market advisors (?!?)

Strategic Business Planning for Commercial Producers

AgMAS An Objective
Study of Market Advisory
Services

25 Firms subscribe to each service.


Observe and follow recommendations
Compare to a benchmark price answer
Questions:

Do they consistently beat the benchmark?


Do they reduce risk and increase returns?
Are they as good with corn as with soybeans?
http://www.farmdoc.uiuc.edu/agmas/

Strategic Business Planning for Commercial Producers

The Difference
Whats the diference between the
market advisory service and the
marketing plan?
Beat the Market vs. Accepting What
the Market is Giving.
Active Marketing = Private Information
Active Marketing vs. Passive Marketing

Strategic Business Planning for Commercial Producers

Cost of Production
What are the costs?
What revenue cover costs?
What price is needed to cover
the costs?
Is this price realistic?

Strategic Business Planning for Commercial Producers

Price, Date and Quantity


Identify price and date triggers ..
Objectives
When should pre-harvest sales be made?
What prices are acceptable?
Prices attainable?

Set quantity objectives according to


Financial need
Risk perceptions

Strategic Business Planning for Commercial Producers

Evaluate and Review


Stay disciplined!
Evaluate your actions.
Are conditions changing?

Strategic Business Planning for Commercial Producers

A Little Marketing
Philosophy ...
Bad outcomes still happen
Never compare to the market
high ..
Your plan for your
operation ...

Strategic Business Planning for Commercial Producers

Strategic Business
Planning for Commercial
Producers

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