MARKETING SUBSYTEM

Key Marketing Concepts

Marketing
Identification and satisfaction of customer
needs and wants at a profit.
Societal process by which individuals get
what they need and want through creating,
offering and freely exchanging products
and services which are of value to others.

Customer orientation the customer is the

main reason for a companys existence.

Key Marketing Concepts

Needs, Wants, Demand

Need state of felt deprivation of some basic
satisfaction
Want specific satisfiers of needs
Demand wants backed up by the capability
to buy the product

Value and satisfaction

Value is the consumers estimate of the
overall capacity of the product to meet
desired needs and wants
Satisfaction is the end result when a product
is able to meet customer expectations

Key Marketing Concepts

Marketing Opportunities
Developments

in the marketing environment that

increases a farms competitiveness
Positive forces in the marketing environment
An area of buyer need and interest in which there is a
high probability that a marketer can meet that need

Key Marketing Concepts

Market segmentation the process of

clustering customers with similar needs
and wants into a market segment.

Segments are identified by examining

geographic, demographic, psychographic
and behavioral differences among
buyers.

Target market a specific group(s) that

the marketer wants to serve or cater to

Key Marketing Concepts

Customer Markets
Consumer

Market consists of end users of products

and services
Business Markets buy products for the purpose of
producing another product or reselling to other markets

Supermarkets/Hypermarkets are examples of business

markets

Key Marketing Concepts

Exchange and Transactions

Exchange

takes place if there are two

parties who are willing to exchange
products and have the resources for
exchange, have the capability for
communication and delivery.
Transaction is the trade of values.

Key Marketing Concepts

Relationship and Networks

Relationship

marketing is the creation

of long-term, win-win transactions
between marketers and customers.
The creation of this long-term
relationship results to a marketing
network of mutually profitable business
relationships.

Key Marketing Concepts

Supply Chain
Describes

the long process that starts

from raw material sourcing to the
marketing of the final products.
Also known as value delivery system.

Competition
One

of the realities in marketing

Includes the actual and potential rivals
in product and services marketing.

Key Marketing Concepts

Marketing channels
Marketers

make the products available

through distribution channels.

These channels create time, form and

place utilities

Marketers

make the products known to

the customers through information of
communication channels

Examples print and audio-visual media

Key Marketing Concepts

Marketing Channels
Individuals

or organizations that move the products

from the producers to the consumers
Traditional channels
Farmers selling to wholesalers
Wholesalers selling to retailers
Retailers selling to the consumers in local wet markets

Key Marketing Concepts

Marketing Channels
Non-traditional marketing channels
Farmers selling to consolidators
Consolidators selling to institutional buyers (examples:
supermarkets/hypermarkets, hotels, restaurants)
Farmers selling to supermarkets

AGRIBUSINESS MARKETING
Agribusiness marketing system

affect product movements within the

agribusiness chain

Action of the participants and activities

performed are highly dependent on the
nature of interrelationship within and on
how they react and interact with the forces
in the marketing macro and micro
environment

Classification of Agribusiness
Products

Fresh Agricultural Products

Directly

harvested from the farms

Do not pass higher levels of
transformation
Cleaned, graded, sorted, graded
according to standards desired by
the markets
Examples Fresh fruits and
vegetables (FFVs), meat, eggs, etc.

Classification of Agribusiness
Products

Semi-Processed Agricultural Products

Products

that have undergone the

second level of transformation.
These are in the forms which are for use
by other industries and processors
Examples raw sugar, crude coconut oil
for refining, leather for bags and shoes
manufacturing, ube powder for cakes

Classification of Agribusiness
Products

Finished Products
Agribusiness

products that are in final

form and may already be consumed by
the buyers.
Examples processed meat, canned
fish, herbal soap, ice cream

Characteristics of Agricultural
Products

Mostly:
Seasonal
Variable

in Quantity and Quality

Perishable
The abovementioned characteristics pose
challenges in agricultural marketing

Major classification of Marketing

Activities

Agribusiness marketing system

network of participants and
activities that bring about product
movements within the agribusiness
system

Major classification of Marketing

Activities

Transactional activities exchange

activities which lead to the transfer
of ownership of property rights.
buying

and selling
Negotiation
risk taking

Major classification of Marketing

Activities

Physical handling and distribution of

products to enable the different parties
to have physical possession of the
product.
Assembly and storage
Grading
Packaging
Processing
Transportation

Major classification of Marketing

Activities

Facilitating activities activities

performed to create faster and more
efficient performance of transactional
and physical handling activities.
Market intelligence
Market information dissemination
Financing
Provision of marketing support facilities
Promotion

AGRIBUSINESS MARKETING
SYSTEM PARTICIPANTS

four major agribusiness system

components
marketing sector is the key player

assemblers - do the accumulation and bulk these

for storage or for distribution to wholesalers
wholesalers - usually handle products in bulk and
sell to retailers, processors or other wholesalers.

Do not deal with end-users of products

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AGRIBUSINESS MARKETING
SYSTEM PARTICIPANTS
Requisites for effective wholesaling operations
substantial working capital
availability or access to market facilities such as
warehouses and refrigeration facilities
communication and transportation facilities
ability to conduct market research and market
espionage activities
Three types - merchant wholesalers, wholesale brokers
and agents and manufacturer sales branches and
offices

23

AGRIBUSINESS MARKETING
SYSTEM PARTICIPANTS

Retailers - deal directly with end users;

wholesalers partners in distribution activities

also buy in bulk and repack or reprocess the products

for easier distribution
usually carry an assortment of different products and
stock small quantities of different product types.

Agents and brokers - do the business of

negotiating in behalf of the producers and buyers

do not get profit from performing selling or

distribution activities
do not assume ownership of products that they are
handling

24

MARKETING FUNCTIONS

Negotiation - facilitates transfer of ownership

Assembly - bulking/accumulation of products to
attain desired volume
Grading - size, weight, over-all quality
standardization
Storage - stocking for goods availability when
needed
Processing - undergoing some levels of
transformation for increased marketability
Packing/packaging - wrapping products for
protection, easier product handling and over-all
presentation
25

MARKETING FUNCTIONS

Financing - financial allocation for working capital

and investments in marketing facilities
Risk-taking - bearing risk associated with physical
damages, increased costs, and other types of losses
Market research - gathering relevant data for the
purpose of making or fine-tuning decisions to
respond to the ever-changing consumer preferences
Promotion - done for the purpose of giving
information regarding product availability, features
etc. With the end view of increasing sales

26

Trends in Agribusiness and

Agribusiness Marketing

Transition to market-driven systems associated

with greater reliance on input markets and growth
of post-production enterprises
Commercialization of farming and increasing
importance of agroindustries
Clear trend towards health consciousness and
dieting
Differentiation of staple foods

Trends in Agribusiness and

Agribusiness Marketing

Diversification into non-traditional fruits and

vegetables
Increasing prospects for food manufacturing
Structural changes in markets with agricultural
products marketing with growing concentration in
the retail and processing sectors
Proliferation of private sector standards for food
quality and safety

Trends in Agribusiness and

Agribusiness Marketing

Increasing size of agribusiness enterprises

Proliferation of contract growing and marketing
increasing vertical integration of exporters and
processing enterprises
Dependence on large scale retailers and manufacturers
on specialized procurement channels and dedicated
wholesalers
Very fast growth of retail outlets such as
hypermarkets and supermarkets (30-50% in the mid
90s in Central America and Southeast Asia
Rapid increase in value addition opportunities

Supermarkets & Hypermarkets

Supermarkets
Low

cost, low margin, high volume and service store designed

to meet total needs for food and household products
Large, self-service retail markets that sell food and household
items
Use standardized equipment and organizational systems such
as shipping containers, trailers, pallets, forklifts and barcode
readers

Supermarkets & Hypermarkets

Hypermarkets
Huge

stores that combines supermarket, discount store

and warehouse retailing
Stores with sale area of over 2,500 square meters with
at least 35% of selling space devoted to non-food

The Marketing Mix

The set of marketing tools a company
uses to pursue marketing objectives
with the target market
Four Ps
Four Cs
Product
Customer
Satisfaction
Price
Cost
Place (Distribution) Convenience
Promotion
Communication

Characteristics of Small Farmers

Low production volume and low

capitalization
Risk averse (afraid to take risks)
Poor access to markets and support
facilities
Want to immediately convert
produce to cash
Poor business skills

Fresh Produce Marketing System

A combination of marketing to traditional wet markets and

supermarkets with increasing trends in marketing to supermarkets.
This is explained by:

Increasing income and purchasing consumer power, more

specifically the middle class
Increasing concern for food safety
Increasing number of women in the workforce
Changes in consumer behavior and preferences towards
prepared/processed foods
Changes in payment system from use of outright cash to use of
credit and debit cards

Fresh Produce Selling in Supermarkets in

Asia
Trends
Malaysia 60% fruits, 35% vegetables (2002)
Thailand 40% fruits, 30% vegetables
Philippines 15% vegetables in Metro Manila, 5% in other
places
Korea 11% fresh produce
China 10% fresh produce

Reasons for Growth of Supermarkets

Supermarket offerings:
Competitive

prices
More reliable, better quality products
Product variety
One-stop shopping

Procurement Practices of Supermarkets

Centralized Purchasing system

Deals with a few dedicated consolidators
Sets strict quality standards
Requires financial and legal transactional
documents

Procurement Practices of Supermarkets

Centralized Purchasing done through

the central buying office and supplying
all branches. This is done for:

Economies of scale in purchasing

thereby cutting logistical costs
Quality control
Increased efficiency resulting from
volume purchases and reduced buying
costs
Increased sales monitoring and
inventory management

Procurement Practices of Supermarkets

Deals with a few dedicated consolidators

They are more able to meet quality,
volume, timing, consistency
requirements of supermarkets.
They enjoy economies of scale and can
offer their produce at lower prices.
They have the financial capability to deal
with supermarkets.
They have the logistical and transactional
instruments.

Risks of Supermarkets/Hypermarkets in
Dealing with Small Farmers

High cost of transaction due to

smallness of operations
Inconsistency in quality and price
Inability of small farmers to deliver
required goods on time
Difficulty of tracing farmers due to
lack of transaction documents.

Barriers to Entry of Small Farmers to

Supermarkets/Hypermarkets

Volume Requirements high volume and

consistent supply of fresh produce
Quality requirements quality products
with proper branding and labeling
Logistics supplying to supermarket
requires investments in transportation,
storage and communication facilities
Transaction documents checks, receipts,
contracts

Can the Small Farmers Connect with

Supermarkets/Hypermarkets?

Yes, if they:
Can improve performance to meet
supermarket standards in terms of
volume, quality, efficiency and safety
Can produce financial and legal
transaction documents such as checks,
receipts, contracts
Have the logistics to transact with the
supermarkets such as transportation and
communication facilities

How can the small farmers connect

with the supermarkets/hypermarkets?

Through collective (cluster) markets

coordinated by the largest farmer or
any assigned coordinator from the
cluster
Through a producer and marketing
association
Through a consolidator who will
collect and accumulate the various
product produced by the farmer

Small Farmers &

Supermarket/Hypermarket Partnership

Currently there is a big mismatch

between small farmers and
supermarkets/hypermarkets because of
the characteristics of small farmers and
the requirements of the supermarkets
This mismatch could be checked by the
consolidation and clustering of small
farmers to strengthen their position and
capability to deal with the identified
retail institutions

ALTERNATIVE BUSINESS
ORIENTATION
ORIENTATION

FOCUS

OBJECTIVES

Production

Matching
production with
technical
capabilities

Making the product

available in the
market

Selling

Promoting the
consumption of
the products
produced in the
farm

Profits through
convincing people
to buy (hard-sell
approach)

Marketing

Identifying
needs and
wants and
matching these
to resources

Profits through
customer
satisfaction

Marketing Mix Strategies for

Agricultural Products

Product Strategies- what you do to

the product
Dress

the product branding,

packaging, labeling
Agricultural products are rarely branded
and labeled. Packaging is the most
common product strategy for
agricultural products.

Marketing Mix Strategies for

Agricultural Products
Pricing Strategies
Considerations in pricing

Cost

to determine the lowest limit in

pricing
Demand to determine the highest price
level
Competition to determine range of
possible prices
Consider world market price
May use going rate and cost plus

Marketing Mix Strategies for

Agricultural Products
Steps in Pricing
Set pricing objective
Determine cost
Determine demand
Determine competitors prices
Select a pricing method
Set the final price

Marketing Mix Strategies for

Agricultural Products
Place (Distribution Strategies)
Distribution is done through
physical distribution channels
Functions of Agricultural Marketing
Channels
Transactional

selling

functions buying and

Marketing Mix Strategies for

Agricultural Products

Physical Functions of Marketing channels

Assembly accumulation of products from
various sources
Storage holding a certain volume of
product to ensure availability when needed
Primary processing product handling
activities undertaken to transform products
in more marketable and valuable forms

Marketing Mix Strategies for

Agricultural Products

Physical Functions of Marketing

Channels
Standardization

establishment and
maintenance of uniform measurement
of produce quality and quantity (e.g.
large, small, grades A, B, C)
Packing/Packaging wrapping of
products for protection, easier product
handling, and over-all presentation.

Marketing Mix Strategies for

Agricultural Products

Facilitating Functions of Marketing

Channels
Financing making money available to
marketing investors (traders) and customers
Risk-bearing managing losses
Market intelligence process of gathering
analyzing and disseminating market
information.
Promotion making the products known to
the target markets.

Marketing Mix Strategies for

Agricultural Products

Place Options direct and indirect

marketing
Direct marketing direct communication
and transaction with the buyers
Indirect marketing selling through
intermediaries e.g. merchants, agents,
facilitators

Channel Alternatives: company sales

force, manufacturers agency, industrial
distributors

Marketing Mix Strategies for

Agricultural Products

Criteria for Selecting Channel

Members
Product

market commitment
Focus on the same target market
Capability to carry a wide assortment of
goods
Good track records
Potential for growth

Marketing Mix Strategies for

Agricultural Products

Distribution Channel for Agricultural

Products
Conventional

distribution System
Cooperative marketing system
Export and domestic marketing through
contract growership
Direct and indirect marketing by
commercial farms

Conventional Agribusiness Distribution System

SMALL FARMS

TRADERS

BUSINESS
MARKET

CONSUMER
MARKET

Cooperative Marketing System

SMALL FARMS

COOPERATIVE
MARKETING
ORGANIZATION

CONSUMER
MARKET

Export and Domestic Marketing by Small Farms Through

Contract Arrangement
Contract Growing

SMALL FARMS

BUSINESS
MARKETS

EXPORT
MARKETS

DOMESTIC
CONSUMERS

Direct and Indirect Marketing by Commercial Farms

COMMERCIAL
FARMS

TRADERS

BUSINESS
MARKET

CONSUMER
MARKET

Export & Domestic Marketing by Commercial Farms

COMMERCIAL
FARMS

LOCAL
TRADERS

CONSUMER
MARKET

EXPORTERS

INTERNATIONAL
MARKETS

BUSINESS
MARKET

Marketing Mix Strategies for

Agricultural Products

Promotion Strategies
Marketing Communications Mix (Promotion Mix)

Advertising paid for of non-personal presentation

and promotion of ideas
Sales promotion variety of short-term incentives
to encourage trial or purchase of a product or
service
Public relations and publicity variety of programs
designed to promote or protect a companys image
or its individual products
Personal selling face to face interaction with one
or more prospects
Direct marketing use of mail, telephone, etc. to
communicate directly with specific customers

Marketing Mix Strategies for

Agricultural Products

Promotion Strategies

Promotion objectives
To inform put something into the customers
minds
To persuade ask the customers to do
something or shift from the competitors
products to your products
To remind tell the customers it is time to buy
your products
Promotion is rarely practiced by many
agricultural products producers because of
product perishability, lack of brands and high
cost.

Marketing Alliance in Agribusiness

Contract marketing
arrangements
Physical distribution
arrangements
Joint marketing collaborations
Promotional alliances