Agriculture Marketing

INTRODUCTION:

The agricultural sector has been one of the most important components of
the economy. The increasing trend of agricultural production has brought
new challenges in terms of finding market for the surplus.

Marketing. Marketing means working with markets, which in turn means

attempting to actualize potential exchanges for the satisfying human needs
and wants.

Marketing Activities. Is related to the marketing and production of

agricultural products produced by an organization or individual farmer.

Agricultural marketing. Agricultural marketing generally means the

marketing of agricultural products to the first handler. Agricultural
marketing circles consists of;
-

First circle. Refers to the final consumer or targeted customer.

Second circle. Factors that can be controlled known as marketing mix
(product, price, place, and promotion).
Third circle. Environmental factors that cannot be controlled (political
and legal, economic, law and regulation, social & culture, technologies, &
demographic).

Chapter 1.2

Agribusiness marketing. Agribusiness marketing has come to mean the

marketing operations from the first handler to the final consumer-beginning
with suppliers to farmers and covering producing, processing, and marketing
to the final consumer.

Marketing utility. Utility will refers to the value of marketing which adds to
goods and services.

Form utility. To change the raw materials to a finished products. Example,

palm oil bunch to edible cooking oil.

Time utility. Making the products be available during the convenient hours.

Place utility. Making the products and services available in convenience

location and place.

Possession utility. Making the exchange of goods and services between

the buyers and sellers.

Information utility. To informs the buyers that the products exists, how to
use it, the price and other related information of the products availability.

Marketing Concept. This concept has dominated the marketing strategies

for the past 40 years ago

The Production Concept. Kotler (1996) has defined the production

concept as a philosophy that holds consumers who will favor those products
that are available and highly affordable and therefore management should
concentrate on improving production and distribution efficiency.

The Product Concept. The product concept as defined by Kotler (1996)

holds that the consumer will favor those products that offer the most quality,
performance and features and therefore the organization should devote its
strategy to making continuous product improvement.

The Selling Concept. Kotler (1996) has defined the selling concept, which
says that the consumer will not buy enough of the organizations product
unless the organization undertakes substantial selling and promotion efforts.

The Marketing Concept (1950s 1960s). The marketing concept as

defined by Kotler (1996) is that the key to achieving organizational goal is
for the organization to determine the needs and wants of the target market
and to adapt itself to delivering the desired satisfaction more effectively
than its competitors. The product concept and the selling concept have
given way in many successful firms to the marketing concept.

The Societal Marketing Concept (1960s present). Kotler (1996) has

defined that the societal marketing concept holds that the organizations
task is to determine the needs, wants, and interest of target markets and to
deliver the desired satisfaction more effectively and efficiently than
competitors in a way that preserves or enhances the consumers and
societys well-being

Importance of marketing. There are several important reasons to

study marketing; marketing plays an important role in society, marketing is

important to business, marketing offers outstanding career opportunities, and

marketing affects our life every day.

Marketing plays an important role in society. The total population of

Malaysian exceeds 28 million people. Think about how many transactions
are needed each day to feed, cloth, and shelter a population of this size. The
number is huge. And yet it all works quite well, partly because the welldeveloped Malaysian economic system efficiently distributes the output of
farms and factories.

Marketing makes food available when we want it, in desired quantities, at

accessible locations and in sanitary and convenient packages and forms
(such as instant and frozen foods).

Marketing is important to business.

The fundamental objectives of most business are survival, profits, and growth.
Marketing contributes directly to achieving these objectives.
Marketing includes the following activities, which are vital to business
organizations:

Assessing the wants and satisfactions of present and potential customers,

designing and managing product offerings, determining prices and pricing
policies, developing distribution strategies, and communicating with present
and potential customers.

Marketing offers outstanding career opportunities.

Marketing offers great career opportunities in such areas as professional

selling, marketing research, advertising, retail buying, distribution
management, product management, product development, and wholesaling.

Marketing career opportunities also exist in a variety of non-business

organizations, including hospitals, museums, universities, the armed forces,
and various government and social service agencies.

Marketing affects our life every day. Marketing plays a major role in our
everyday life. We participate in the marketing process as a consumer of
goods and services. About half of every dollar we spend pays for marketing
costs, such as marketing research, product development, packaging,
transportation, storage, advertising, and sales expenses. By developing a
better understanding of marketing, we will become a better-informed
consumer. We will better understand the buying process and be able to
negotiate more effectively with sellers.

Chapter 2
Problems of Agricultural Marketing
The farm problem is usually associated with unstable and relatively low farm
prices and incomes.
1. Adjusting demand and production of agriculture. Farmers find it
difficult to adjust precisely their production schedules to meet changing
market conditions.
2. Orientation towards customer/buyer or demand of the consumer
towards the producer. If the producer directly sells their products to the
consumer at certain price level it is for sure they will know how much cost of
the products that the consumer willing to pay

3. To minimize cost of marketing. Cost of distribution is high because cost

of transportation, storage, and processing is part of the major distribution cost.
The percentage of spoilage is high during the transportation process from one
location to the other location because of lack of efficiencies in handling.

Common problems in the marketing of farm products.

Farmers do not have any control over the output of their production
activities.

A related component of the farm marketing problem is the difficulty farmer

face in improving their prices through independent or group activities.

The cost-price squeeze is another component of the farm marketing

problem. The competitive conditions of agriculture tend to keep farm prices
close to the cost of production.

The superior bargaining powers of buyers. Bargaining power such as

opponent pain and opponent gains differs at levels of the marketing
channels.

Changing food market pricing efficiencies. Different processors are willing to

price their products at varying price. The changing of food marketing from
one food market to another food market will allow a gap in pricing. The
pricing will depend on location, customers, e.t.c. and this will create pricing
efficiencies between the marketing food agencies.

Consumer and Market Demand.

Consumer demand is defined as the various quantities of a particular

commodity which a consumer is willing and able to buy as the price of that
commodity varies, with all other factors affecting demand held constant.

Market demand is defined in terms of the alternatives quantities of a

commodity which all consumers in a particular market are willing and able to
buy as price varies and as all other factors are held constant.

How agricultural marketing responds to consumers goals?

Understanding consumers tastes and preferences. Items in the

shoppers cart do not get there by chance. Choices are influenced by
conscious and subconscious expectations, tastes, and preferences which are
developed, or learned

Providing variety. Why is variety in food products important? In almost

any household, someone is likely to say, or think, I am getting tired of
eating this or I want something else, but I am not sure what it is.
Marketing of food at stores is, therefore, designed so that shoppers will
encounter a large variety of products.

Open dating. Freshness and two related concerns, safety and avoidance of
waste are important to consumers. Accordingly, we have open dating of
food products. The concern for freshness lay behind the development and

growth of the frozen foods industry and the increased use or air
transportation for marketing domestic and imported fresh fruits and
vegetables.

Ensuring product safety. Labeling has become more and more important
to consumers. Food safety and ingredients are important to everyone,
particularly to people with special dietary needs or allergies. Of course,
companies do not want to make public their formulations and processing
methods, but listing ingredients seldom creates a conflict of interest.

Providing nutritional information. Consumers awareness of nutrition

continues to grow. Health foods, natural foods, and vitamin supplements
are a response to this. (Health food stores, for example, have become
commonplace in shopping centers.

Special displays and promotions. There have been various responses to

consumers need for information about product available and their desire to
be entertained. Special in-store displays include meal-planning ideas
suggested by eye-catching arrangements place in the shoppers path. Pointof-purchase displays are developed by agricultural commodity groups as well
as food processors

Time-saving shopping services. Reducing shopping time was the last

goal we listed. This goal was one factor in the development of self-service
supermarkets and more recently in the development of drive-in quick-stop
convenience stores, which emphasize fast service rather than low prices.
Several regional chains of convenience stores appeared; which is one of
them is 7-11 stores.

Chapter 3.
MARGINAL COST AND MARKETING EFFICIENCIES

Marketing cost. Marketing cost is the cost involved in the marketing and
will directly influence the profit or losses suffered by sellers. Most marketing
costs are influenced by general economic forces outside of the food
economy, especially labor, transportation, packaging, and energy costs.
These rising costs will maintain their pressures on the rising food marketing
bill, and government regulations, affecting such areas as occupational
safety, plant sanitation, energy sources and uses, and environmental
protection, also will add costs.

The marketing cost can be categorized as:

Labor cost.

Transportation cost.

Packaging cost.

Hire purchase machinery.

Depreciation.

Advertising.

Taxes.

Maintenance and utility cost.

Factors contributed to the marketing cost

The marketing costs increasing steadily and more rapidly than the farm
value of food. Three factor are responsible for this rising marketing costs;

As a result of population growth, the physical quantity of food that is

marketed has increased, raising the total expenses of marketing food.

The costs of most food marketing inputs, especially labor and energy,
have added to the rising cost of marketing food.

Consumers desires for additional food marketing services, such as

represented by convenience foods, have further increased the food
marketing bill.

Marketing Margin
Marketing margin is the portion of the consumers food money that goes to
food marketing firms. This is the difference between what the consumer pays for
food and what the farmer receives. In other word it is a difference between the
purchase and resale prices of a product. The marketing margin is the price of
all utility-adding activities and functions performed by food marketing firms such
collection, processing, transportation, advertising, retailing, etc. This price
includes the expenses of performing marketing functions and also the food
marketing firms profits.

Factors influenced the marketing margin

The allocation of the consumers food dollars between farmers and

food marketing firms is one of the most controversial aspects of food
marketing. Consumers do not earmark part of their expenditures for farm
production and another part for marketing services. Factors influenced the
marketing margin are;

Time. The consumer wants the products immediately. At this juncture, the
existence of time utility is at high demand where the products needed at
reachable.

Form. Usually the consumer or buyer of the products want the product in
the form of finished or ready to consume products. The appetite of the
consumer depend on the product offered based on how the products are
wrapped, quality control and even certain occasions advertising also plays
an important role to persuade the buyer.

Institution. The role of the institution in handling the finished or raw

products are very important. One of the main function of the institution is
physical functions and exchange function.

Weather. Weather can influenced demand and supply of the products

offered in the market. Weather directly influenced the seasonal agricultural
products production in the market.

Location. The location of the products offered by the producer is important.

If the location is at a distance, then the cost of transportation, handling and
pricing will have an impact of high cost incurred by the producer. And this
also has to be shouldered of high cost by the buyer.

Competition and bargaining. The division of the consumers money is

determined by competition and bargaining between farm sectors and
marketing sectors of the food industry. In effect, consumers face two prices
for food; the farm price and the marketing price or margin. These prices
reflect the cost of producing farm products, the cost of marketing services,
as well as the consumer desires for these two products.

Marketing costs. The size of marketing margin depends upon the number
and costs of marketing functions performed rather than the number of
middle-men. The division of labor resulting from the addition of more and
highly specialized middlemen might well increase rather than decrease
marketing efficiency.

Marketing communication. It is quite possible that the farm price and the
marketing margin will rise together as retail food prices rise. We should also

remember that some of the marketing activities, such as advertising and

merchandising, are designed to increase the demand for food, and this can
lead to higher farm prices.

Costs and profits. Marketing margin is composed of both costs and

profits. The size of the food marketing margin is sometimes taken as a
measure of the profits to be gained by farmers and consumers as a result of
performing additional marketing functions. There is no guarantee that
farmers or consumers will perform marketing functions as efficiently as
middle-men and thus capture food marketing profits.

Marketing Efficiencies.

Efficiency in the food industry is the most frequently used measure of

market performance. Improved efficiency is a common goal of farmers, food
marketing firms, consumers, and society.

Any marketing change that reduces the costs of performing the functions
without altering the marketing utilities would clearly be an improvement in
marketing efficiency ratio. The marketing efficiency ratio can be increased in
two ways;
-

Operational efficiency
Pricing efficiency

Criteria/aspects of marketing efficiency

By encouraging of physical innovations and competitive pricing so that

charges equal costs plus a normal rate of profit is requires in a marketing
system. Thus several aspects below will contribute and improve to the
marketing efficiency;

Technology

Organization

Market coordination

Stable growth

Product innovation

Price discovery

Pricing

How to measure the marketing efficiencies

Marketing efficiencies can be measured through several ways such:

Price

Implementation of services offered

Structure.

Attitudes.

Total cost of marketing. Total cost of marketing is the total cost involved in
the marketing process of the producer, processor and middlemen. This can be
compared by analyzing the efficiencies of marketing. There is no single
managerial policy determines the marketing margin for the total marketing
system. Instead, it reflects the results of combined actions at various marketing
stages.
To figure the marketing cost for a product over the total system, we
simply subtract the beginning farm-level price from the final retail price.

Price policy. Pricing is the process of determining the value of a product or

service to consumers at a particular time in quantitative terms of money.
Price policy refers to the organization procedure in setting the right price to
the right customer at the right place and time. One method of price is the
price discrimination.

Price discrimination. Price discrimination is situation whereby the

seller charges different prices to different customers for the same
product. Price discrimination is made through customer segment
pricing, place basis, time pricing, and product pricing. Some of the
price discrimination schemes are;

First degree or perfect price discrimination

Second degree price discrimination
Third degree price discrimination