PRINCIPLES OF AGRICULTURAL MARKETING

 PRINCIPLES OF AGRICULTURAL MARKETING

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What is Marketing?

Marketing is a comprehensive process that involves the activities and strategies employed to promote, sell, and distribute products or services to consumers. In the context of production agriculture, marketing encompasses various facets that facilitate the connection between farmers and consumers, ensuring that agricultural commodities are efficiently collected, organized, processed, distributed, and merchandised.

Key Facets of Marketing in Production Agriculture

1. Collection of Commodities:

   The collection of agricultural commodities refers to the initial step in the marketing process, where raw products are gathered from farms. This includes activities such as harvesting crops and gathering livestock. Efficiency in this stage is critical as it sets the foundation for subsequent processing and marketing efforts.

2. Organizing and Processing Commodities:

   After collection, agricultural products typically require organizing and processing to enhance quality and marketability. This may involve sorting, packaging, and further processing (such as canning or freezing). Efficient processing improves the shelf-life and appeal of commodities, making them more attractive to consumers.

3. Distributing and Merchandising Commodities:

   Distribution involves the logistics and strategies to move products from producers to various market outlets, such as retailers or directly to consumers. Merchandising is the promotion and selling of products, which includes branding, pricing strategies, and display practices to maximize consumer interest and sales.

Marketing in production agriculture is integral to the agricultural supply chain, involving the collection, organization, processing, distribution, and merchandising of agricultural products. Each facet plays a critical role in ensuring that agricultural goods meet consumer demand and can compete effectively in the marketplace. Through understanding and optimizing these processes, producers can enhance their profitability and sustainability.

The execution of all actions related to the movement of products and services from the point of initial production to their ultimate consumption.

Key Points

1. Marketing Extends Beyond Farm Activities: Marketing encompasses a broad range of activities that go beyond just what occurs on the farm, including distribution, processing, and consumer outreach.

2. Mutual Interdependence: There is a strong interdependence between production agriculture and the marketing system, meaning that changes in one area can significantly affect the other.

3. Decision-Making Involved: Marketing is not a mechanical or automatic process; it requires strategic decision-making at various stages to effectively connect products with consumers.

4. Involvement of Farm Inputs: The marketing system also takes into account farm inputs, as these resources are essential for the production of commodities that will ultimately be marketed

Inherent Conflicts

1. Consumer Expectations: Consumers seek high-quality products at the lowest possible prices, driven by their desire to maximize value for their money.
2. Producer Objectives: Producers aim for the highest possible returns on their investments and efforts, striving to ensure that their products are profitable.
3. Marketing Agent Interests: Marketing agents seek to achieve the highest possible profits for the services they provide, balancing between consumer demands and producer expectations

Goal of the Marketing System

The primary aim of the marketing system is to reconcile the conflicts faced by all parties involved and to facilitate the most efficient movement of goods and services from producers to consumers.

What is a Market?

A market is a platform that organizes and facilitates business activities, addressing fundamental economic questions about what goods and services to produce, the quantity to produce, the methods of production, and the distribution of those products.

Defining a Market

1. Location: The physical or virtual place where buyers and sellers interact to exchange goods and services.
2. Product (Form): The specific type of goods or services being offered, including their characteristics and variations.
3. Time: The period during which transactions occur, influencing availability, demand, and pricing.
4. Institutional Level: The organizational structure or framework within which the market operates, including the roles of various entities such as producers, distributors, and retailers.

Markets and Utility Creation

Markets serve to connect the various components of the marketing system, facilitating the exchange of goods and services.

Marketing as “Utility Creation”

    Classification of Utilities:

    Form Utility:

        This involves changing the form of a product to make it useful to consumers.

            

        Examples:

            Wheat is processed into flour, which is then used to make bread.

            Cotton is transformed into fabric, which is then made into blue jeans.

    Place Utility:

        This refers to altering the location of a product to enhance its usefulness to consumers.

        

        Examples:

            Rattan bags produced in Bicol are made available in SM stores.

    Time Utility:

        This involves changing the timing of product availability to meet consumer needs.

        

        Examples:

        Seasonal strawberry production leads to the creation of strawberry jam, which is available in Baguio stores when consumers want it.

    Possession Utility:

    This refers to changing the ownership of a product so that consumers can utilize it.

        

    Examples:

        A grocery store owns products until they are purchased by consumers, transferring ownership.

Value Added

    Is an essential concept that underscores the importance of refining and enhancing products to increase their utility and appeal to consumers. Each improvement or addition not only raises the intrinsic value of the product but also influences consumer behavior, market dynamics, and overall economic health. By focusing on value added, businesses can better satisfy consumer needs and achieve sustainable success in the marketplace.

The Marketing Cost

The marketing cost refers to the expenses incurred in promoting, distributing, and selling goods and services, particularly in the agricultural sector.

Final Value: This is the price at which goods (like food and fiber products) are sold to consumers in the marketplace.

Farm Value: This is the initial value of the products when they leave the farm, representing the amount farmers receive for their goods.

Relationship:

The marketing cost is calculated as the difference between the final value of the goods and their farm value.

    In simpler terms:

                                    Marketing Cost = Final Value - Farm Value

Understanding marketing costs helps to identify how much is spent on activities such as packaging, transportation, advertising, and sales efforts, which are essential for getting products from farms to consumers. It highlights the added expenses that occur after production but before the sale to consumers.

Why Middlemen Profits?

    Middlemen (such as wholesalers and retailers) earn profits for several key reasons:

• Adding Utility: Middlemen enhance the value of products in three main ways:
• Place Utility: They make products available where consumers want to buy them, often by transporting goods from producers to convenient locations.
• Time Utility: They ensure products are available when consumers need them, such as stocking seasonal items in advance.
• Possession Utility: They facilitate the transfer of ownership, making it easier for consumers to purchase and take possession of the products.
• Bearing Risk of Inventories: Middlemen take on the financial risk associated with holding inventory. This includes:

1. The possibility of products becoming unsold or going out of date.
2. The costs associated with storing and managing inventory until it is sold.

Middlemen profit by adding value to products through their services and by managing the risks involved in inventory, which ultimately benefits both producers and consumers.

Characteristics of the Marketing Process

Sequence of Events:

    The marketing process involves a series of organized steps or activities that occur in a specific order.     This may include:

1. Market research to understand consumer needs.
2. Product development and design.
3. Promotion to inform potential customers.
4. Distribution to get products to the market.
5. Sales and post-sale services.

Coordination of Activities:

Successful marketing requires the coordination of various activities and stakeholders. This includes:

1. Collaboration between different departments (like sales, advertising, and logistics) to ensure a cohesive strategy.
2. Aligning the efforts of suppliers, distributors, and retailers to ensure that all parts of the process work together smoothly.

The marketing process is characterized by a structured sequence of events and the effective coordination of diverse activities to deliver products successfully to consumers.

Macromarketing and Micromarketing: Two Different Views

Macromarketing - The "Big Picture"

• Definition: Macromarketing looks at marketing from a broader societal perspective. It examines the effects of marketing strategies, activities, and institutions on society as a whole.
• Scope: It considers how marketing interacts with and impacts the economy, culture, environment, and overall societal well-being.
• Focus Areas:

1. Economic Development: How marketing contributes to the growth of the economy.
2. Social Responsibility: The role of marketing in addressing societal issues such as sustainability, ethical practices, and consumer rights.
3. Cultural Impact: How marketing influences cultural norms, values, and behaviors.
4. Policy and Regulation: The impact of laws, regulations, and public policy on marketing practices.

Micromarketing - Firm Management

• Definition: Micromarketing focuses on marketing strategies and practices at the individual firm or consumer level. It involves tailoring marketing efforts to suit the specific needs of a target market or segment.
• Scope: It deals with the practical aspects of marketing management within a business or organization.
• Focus Areas:

1. Target Market Identification: Determining specific customer segments to focus on.
2. Product Development: Creating products that meet the needs and preferences of the target market.
3. Pricing Strategies: Setting prices that attract customers while maximizing profitability.
4. Promotion and Advertising: Developing and implementing campaigns to communicate with the target audience.
5. Distribution Channels: Ensuring products are available where and when customers want them.
6. Customer Relationship Management (CRM): Building and maintaining strong relationships with customers to encourage loyalty and repeat business.

In summary, macromarketing takes a holistic view of marketing's role in society, emphasizing its broader impacts, while micromarketing zooms in on the tactical and strategic decisions made by individual firms to satisfy specific customer needs.

Need for Marketing Expertise

1. Increasing Commercialization of Agriculture

As agriculture becomes more commercialized, the sector shifts from traditional subsistence farming to market-oriented production. This transformation necessitates sophisticated marketing strategies for several reasons:

• Market Competition: Producers face competition not only locally but also globally. Effective marketing can help differentiate products in crowded markets.
• Consumer Preferences: Understanding and anticipating consumer preferences are crucial for positioning products successfully.
• Value Addition: Marketing expertise can help identify opportunities for value addition, such as organic or fair-trade certifications, which can command higher prices.
• Supply Chain Management: Efficient marketing can streamline supply chains, reduce costs, and ensure timely delivery to markets.

2. Increasing "Gulf" Between Producers and Consumers

The growing physical and psychological distance between producers and consumers makes marketing expertise essential for bridging this gap:

• Consumer Education: Effective marketing educates consumers about the origins and benefits of agricultural products, fostering trust and loyalty.
• Brand Building: Building strong brands helps create a connection with consumers, making them more likely to choose specific products.
• Communication Channels: Utilizing diverse communication channels (social media, advertising, direct marketing) helps reach and engage with consumers effectively.
• Feedback Mechanisms: Marketing strategies often include mechanisms for gathering consumer feedback, which can inform production and improve product offerings.

3. "The Global Economy"

In an interconnected global economy, marketing expertise becomes indispensable for navigating complex international markets:

• Market Research: Understanding global market trends, consumer behavior, and regulatory environments requires advanced marketing research.
• Cultural Sensitivity: Effective marketing strategies must be culturally sensitive and tailored to diverse consumer bases across different regions.
• Digital Marketing: Leveraging digital platforms to reach a global audience is crucial, requiring specialized skills in digital marketing and e-commerce.
• Trade Regulations: Navigating international trade regulations and standards is critical for accessing global markets, necessitating expertise in global marketing strategies.

In summary, marketing expertise is crucial for navigating the increasingly commercialized, globally connected agricultural sector, bridging the gap between producers and consumers, and effectively competing in the global economy.

References:  

   - Tiongco, M., & Kauffman, R. J. (2016). Agricultural Marketing and Purchasing: Concept and Practice. *Agribusiness: An International Journal*, 32(2), 263-280. [DOI: 10.1002/agr.21465](https://doi.org/10.1002/agr.21465).

   - Rausser, G. C., & Simon, L. K. (2019). *Agricultural Marketing: The Basics*. In *The Economics of Agriculture* (pp. 101-134). Wiley-Blackwell. [DOI: 10.1002/9781119437878.ch6](https://doi.org/10.1002/9781119437878.ch6).

   - Azzam, A. M., & Featherstone, A. M. (2020). *Commodity Distribution and Value Chains*. *Agricultural Economics*, 51(1), 1-11. [DOI: 10.1111/agec.12615](https://doi.org/10.1111/agec.12615).