Agricultural Marketing Review

7/29/2019 Agricultural Marketing Review

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AGRICULTURAL

MARKETING

Prepared by: Dr. Aida S. Ong


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Marketing

a series of services involved in moving

the product from the point of production

to the point of consumption

Services

Point of Production

Point of Consumption

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Market

a place where buyers and sellers meet to

exchange goods and services

Why is Marketing Productive?

Because it creates utility

Types of Utility

- Form - Place

- Time - Possession

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Marketing System

Characteristics

has objectives or goals to achieve

has components

needs institutional arrangements needs planning and management

decisions

has spatial and temporal dimensions

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Marketing

Components/Subsystem

o Producer Subsystem

o Channel Subsystem

o Flow Subsystem

o Functional Subsystem

o Consumer Subsystemo Environment Subsystem

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The Role of Marketing in Economic

Development

o What to produce and how to prepare it

for sale

o When and where to sello Who will do the task

o What to do to expand the market

o Which marketing arrangements are

desirable

o

What practices necessarily be changed

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Problems Areas in Agricultural

Marketing

o Characteristics of the Products

o Number of Producers

o Characteristics of the Consumers

o Reflecting the demand of consumers

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Approaches to the Study of

Agricultural Marketing The Commodity Approach

The Institutional Approach The Functional Approach

The Conduct Performance

Approach

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Middlemen

are those individuals or

business concerns that

specialize in performing thevarious marketing functions

involved in the purchase and

sale of goods as they movedfrom producers to

consumers.

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Classification of Middlemen

Merchant Middlemen

Agent middlemen

Processors and manufacturers

Facilitative Organizations

Market Associations

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Classification of Marketing

(Functional Approach)

Exchange Function

Physical Function

Facilitating Function

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PRICES

the amount of money plus goods which is

needed to acquire in exchange of some

product and its accompanying services

Utility

- the attribute of an item that makes it capable of

satisfying wants

Value

- is the quantitative expression of the power a

product has to attract other products in

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Roles of Price

tell producers what and how much to

produce

keep supplies coming forward in linewith consumer demands

rationing and allocating function

guide the channel of trade

ration the goods and services to

those who demand them

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PRICE DETERMINATION

In a Perfectly Competitive

Market, price is determined by

supply and demand.

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Causes of Price Fluctuations

Fluctuations in demand

Fluctuations in supply

Experimentation in the price-

discovery process

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Types of Price Fluctuations

Seasonal

Annual

Trends

Cyclical

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Pricing Strategies

1. Manufacturers Pricing Strategies

Skimming the Market

Moving down the demand curve

Penetration Pricing

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Pre-emptive Pricing

Extinction Pricing

Formula Pricing

Tie-in Pricing

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1. Retailer Pricing Strategies

Competitive Pricing

Psychological Pricing Unit pricing

Price Lining

Special Prices

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MARKETING CHANNELS

refers to the set of interdependent

institutions and agencies involved in the

task of moving products from theirpoint of production to the point of

consumption

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Nature of Marketing Channels

It varies according to the types of

commodity handled, time and

location

Producer

Retailers

Consumers

Sample Marketing Channel with

One Middlemen

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Factors that Affect the Choice of

Marketing Channel

Nature of Product

Nature of the Market

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Marketing Channels of Selected

Farm Products

Contract buyers

Wholesalers

Commission agents Assembler Wholesalers

Butcher Retailers

Retailers

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MARKETING MARGINS AND

COSTS

Marketing Margin refers to the

difference between what the

consumer pays and what theproducer receives for his

agricultural produce.

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Components of Marketing

Margins

Wages as return to labor

Interest as return to borrowed

capitalRent as return to land and

buildingsProfit as return to

entrepreneurship

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Types of Margins

Absolute constant margin constant

regardless of quantity

Percentage margins

absolutemargin divided by the selling price

Absolute margin% Margin Selling Price x 100

where:Absolute margin = Selling Price Buyingprice

Absolute margin

%Mark-up Buying Pricex 100

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Price and Price Margins

Pr = a + b(Pf)where:

Pr = retail price

Pf = farm price

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Marketing Costs

Marketing cost and the farmers share of the

consumer peso

Marketing cost differ among products

Are marketing costs too high

Marketing efficiency

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Ways of Measuring Marketing

Efficiency

Using marketing margins

Input-output measurements

Evaluation of product loss and waste

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Areas where efficiency may be

develop

Cost of marketing

Marketing system

Volume of businessLocation of business

Changes in marketing methods

Integration of present marketing

agencies

One organization

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GRADING AND


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GRADING AND

STANDARDIZATION

Size

Weight

Shape

Color

Odor

Length

Diameter

Strength

Density

Texture

Uniformity

content

Grading is the sorting of products into lots or units

according to one or more of their quality

attributes.

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Standardization

is the practice of making the quality

specifications of grade uniform

among buyers and sellers andfrom places to places and time to

time.

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Advantages of Grading

Pricing Efficiency

Operational Efficiency

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Determination of Standards

The objective of ideal standard

is to aid the consumer in

telling the producer what heconsiders desirable in a

product.

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Criteria for Good Standards

Built on characteristics that users

consider important and easily

recognizable

Built on factors that can be accurately

and uniformly measured and

interpreted.

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Should use terminologies in grading

meaningful to all kinds of users

Should consider the quality of theproduct produced

Should pass the adequacy of

standard in acceptance use

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Problems of Developing and Using

Grades

Number of grade classes

Grade terminology

Quality deteriorationRelevant quality characteristics

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Space Dimension of Marketing

Transportation

Primary Concern of Transportation

Time and Transfer Cost

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Effects of Transportation Cost

Location of Production

Market Area Served

Farm of Product Marketed Size and quality of product marketed

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Who Pays Transportation Cost

If demand for the product is inelastic

buyers will bear the transportation

cost

If demand and supply have the same

elasticitiesboth buyers and sellers will bear the

added cost equally

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Time Dimension of Marketing


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Time Dimension of Marketing -

Storage

Types of Normal Storage Operations

Seasonal production matches to thepattern of demand

Storage at all times

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Reasons for Storing Farm


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Reasons for Storing FarmProducts

Seasonal nature of production

Demand for the different products throughout the

year

Time required to perform the various marketing

services

The need for a carry-over into the following

seasons.

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Objectives of storage

o

To help balance supply and consumption or tobalance periods of plenty and periods of

scarcity.


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Place of Storage

Farms

Production areas

Terminal markets

Consuming centers

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Cost of Storage (Types)

cost that provide and maintain the physical

facilities for storage

Repairs

Depreciation

Insurance against loss

Handling feeForklift hire

Electrical power consumption

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interest on the amount of capital

invested in the stored products

quality deterioration, shrinkage duringstorage, insect and rodent damage

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Risk of Storage

Loss from fire, theft

and natural causes

Natural productdeterioration (insect

and pest damage)

Loss due to price

changes

- can be eliminated or

reduced by use of

insurance

- use of proper, well-

operated

- buying and selling of

contracts for future

delivery goods

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Time of Storage

The size and nature of a crop is a

major consideration in storage.

Who should store?

Farmer

Commercial storage operatorFood processor

Speculator

etc.

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ADVERTISING

It is used to influence customer

buying of particular brands of

products.

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Purposes of Food Advertising

To inform consumers what is

available for purchase.

To change the demand for theproduct.

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Problems in Advertising Food


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Problems in Advertising Food

Products

Food products have a number of

unique characteristics

Food products have to be processedbefore use by consumer

Demand for most products is inelastic

(purchase of products remainuniform, even with changes in

prices.)

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Competition among food products is

in price.

Food products have few emotionalappeals.

Difficulty of getting sufficient funds for

conducting and advertising program.

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Effectiveness of Advertising Farm


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Effectiveness of Advertising Farm

Products

Recognition of the difficulty in

effective advertising

A regional identificationProduction and marketing should be

in the hands of an organized group of

farmersAdvertising program must be

coordinated with other marketing

activities

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Farm product advertising is most

successful for commodities

moving to the consumers in fresh.There should be substantial

amount of money intended for

advertisement.

Use commodity advertising.

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Agricultural Marketing Review

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