AGRICULTURAL MARKETING

Prepared by: Dr. Aida S. Ong

Marketing
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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

Market
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a place where buyers and sellers meet to exchange goods and services

Why is Marketing Productive? Because it creates utility Types of Utility - Place - Possession

- Form - Time

Marketing System Characteristics

has objectives or goals to achieve has components needs institutional arrangements needs planning and management decisions has spatial and temporal dimensions

Marketing Components/Subsystem
Producer Subsystem o Channel Subsystem o Flow Subsystem o Functional Subsystem o Consumer Subsystem o Environment Subsystem
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The Role of Marketing in Economic Development

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o
o o

What to produce and how to prepare it for sale When and where to sell Who will do the task What to do to expand the market Which marketing arrangements are desirable What practices necessarily be changed

Problems Areas in Agricultural Marketing

o

Characteristics of the Products Number of Producers Characteristics of the Consumers Reflecting the demand of consumers

Approaches to the Study of Agricultural Marketing

The Commodity Approach The Institutional Approach The Functional Approach The Conduct Performance Approach

Middlemen
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are those individuals or business concerns that specialize in performing the various marketing functions involved in the purchase and sale of goods as they moved from producers to consumers.

Classification of Middlemen
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Merchant Middlemen Agent middlemen Processors and manufacturers Facilitative Organizations Market Associations

Classification of Marketing (Functional Approach)

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Exchange Function

Physical Function

Facilitating Function

PRICES
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the amount of money plus goods which is needed to acquire in exchange of some product and its accompanying services the attribute of an item that makes it capable of satisfying wants is the quantitative expression of the power a product has to attract other products in

Utility
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Value
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Roles of Price
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tell producers what and how much to produce keep supplies coming forward in line with consumer demands rationing and allocating function guide the channel of trade ration the goods and services to those who demand them

PRICE DETERMINATION
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In a Perfectly Competitive Market, price is determined by supply and demand.

Causes of Price Fluctuations

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Fluctuations in demand Fluctuations in supply Experimentation in the pricediscovery process

Types of Price Fluctuations

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Seasonal Annual Trends Cyclical

Pricing Strategies
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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

MARKETING CHANNELS
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refers to the set of interdependent institutions and agencies involved in the task of moving products from their point of production to the point of consumption

Nature of Marketing Channels

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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

Marketing Channels of Selected Farm Products

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Contract buyers Wholesalers Commission agents Assembler Wholesalers Butcher Retailers Retailers

MARKETING MARGINS AND COSTS

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Marketing Margin refers to the difference between what the consumer pays and what the producer receives for his agricultural produce.

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Components of Marketing Margins

Wages as return to labor Interest as return to borrowed capital Rent as return to land and buildings Profit as return to entrepreneurship

Types of Margins
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Absolute constant margin constant regardless of quantity Percentage margins absolute margin divided by the selling price

where: Absolute margin = Selling Price Buying price Absolute margin %Mark-up Buying Pricex 100

% Margin

Absolute margin Selling Price x

100

Price and Price Margins

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Pr = a + b(Pf)
where: Pr = retail price Pf = farm price

Marketing Costs
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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 business Location of business Changes in marketing methods Integration of present marketing agencies One organization

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GRADING AND STANDARDIZATION

Grading is the sorting of products into lots or units according to one or more of their quality attributes. Size Diameter

Weight Shape Color Odor Length

Strength Density Texture Uniformity content

Standardization
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is the practice of making the quality specifications of grade uniform among buyers and sellers and from places to places and time to time.

Advantages of Grading
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Pricing Efficiency Operational Efficiency

Determination of Standards
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The objective of ideal standard is to aid the consumer in telling the producer what he considers desirable in a product.

Criteria for Good Standards

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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 the product produced Should pass the adequacy of standard in acceptance use

Problems of Developing and Using Grades

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Number of grade classes Grade terminology Quality deterioration Relevant quality characteristics

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Space Dimension of Marketing Transportation Primary Concern of Transportation Time and Transfer Cost

Effects of Transportation Cost

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Location of Production Market Area Served Farm of Product Marketed Size and quality of product marketed

Who Pays Transportation Cost

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If demand for the product is inelastic buyers will bear the transportation cost If demand and supply have the same elasticities both buyers and sellers will bear the added cost equally

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Time Dimension of Marketing Storage

Types of Normal Storage Operations

Seasonal production matches to the pattern of demand

Storage at all times

Reasons for Storing Farm Products

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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
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To help balance supply and consumption or to balance periods of plenty and periods of scarcity.

Place of Storage
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Farms Production areas Terminal markets Consuming centers

Cost of Storage (Types)

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cost that provide and maintain the physical facilities for storage
Repairs Depreciation Insurance

against loss Handling fee Forklift hire Electrical power consumption

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interest on the amount of capital invested in the stored products quality deterioration, shrinkage during storage, insect and rodent damage

Risk of Storage
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Loss from fire, theft and natural causes

Natural product deterioration (insect and pest damage) Loss due to price changes

can be eliminated or reduced by use of insurance

use of proper, welloperated buying and selling of contracts for future delivery goods

Time of Storage
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The size and nature of a crop is a major consideration in storage.

Who should store?

Farmer Commercial

storage operator Food processor Speculator etc.

ADVERTISING
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It is used to influence customer buying of particular brands of products.

Purposes of Food Advertising

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To inform consumers what is available for purchase. To change the demand for the product.

Problems in Advertising Food Products

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Food products have a number of unique characteristics Food products have to be processed before use by consumer Demand for most products is inelastic (purchase of products remain uniform, even with changes in prices.)

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Competition among food products is in price. Food products have few emotional appeals. Difficulty of getting sufficient funds for conducting and advertising program.

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Effectiveness of Advertising Farm Products

Recognition of the difficulty in effective advertising A regional identification Production and marketing should be in the hands of an organized group of farmers Advertising 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.