TOPIC 7 – FOOD MARKETING CONTD

MARKETING MIX
The marketing mix is defined as “the set of marketing tools a company utilizes to achieve
its marketing goals in the target market environment.” According to marketers, it’s
what makes your product unique and different from the competition. Marketing is
about matching the right product with the right audience at the right price, place, and
time. It may seem simple, but a lot goes into figuring out what customers desire, where they
shop, how to price the product to match its value, and coordinating it all to meet the
correct time frame. The tool guides a marketer to create a marketing plan that puts the
product in the right place at the right time and at the right price also taking into
consideration the service aspects of the business.

The Figure above illustrating the 7 P’s of the marketing mix (Professional Academy
2015a; Saari 2015

Because every product has an individual life cycle including the introduction, growth,
maturity and decline phases, it’s important to reinvent products to stimulate more
demand once the sales reach the decline or even a stagnant phase. New products
should also be released to diversify and expand the depth of a product line, also
called creating the right product mix. The product purchased should be what the
customers are expecting to get and even more. There are properties that customers
perceive to surround a product, aspects like service and support as well as the
reputation and perceived status of the selling company. These aspects are especially
important whilst defining the relative value between competing products since nowadays
they can be copied so much faster, therefore service becomes the primary tool for
differentiation between suppliers.
Adjusting the price of a product also shapes the whole marketing strategy and affects the
sales and demand of the product. Pricing forms the perception of a new product in a
customer’s eyes. A low price is associated with an inferior good by material or some
other meter comparing it to a competitor where high prices can make the costs
outweigh the benefits gained. This can be seen to be the case especially with new
products comparing them to familiar ones. The product should be seen as representing

1
good value for money, but customers are usually happy to pay a little more for
something that works really well for them.
Placement is an important part of marketing for any product. The position and distribution
must be handled in a way that the product is accessible to potential buyers where they find
it easiest to shop and have it delivered and enabling this requires full understanding of the
market.
The Company’s marketing communications i.e. promotion mix consists of a particular
blend of advertising, sales promotion, public relations, direct marketing and personal
selling. These tools are used to persuasively communicate a product’s value to a customer
and build customer relationships. When trying to choose the right channel to reach the
right audience it needs to be taken into consideration how to deliver the message in a
manner they would most like to receive it. Advertising in general seems to be shifting in
focus from traditional paid channels like printed media into the online world. Public
relations consist of obtaining favourable publicity and good corporate image and can easily
be maintained online. Meeting customers for personal selling and thus creating or
maintaining relationships in sales presentations, trade shows, press releases and events
attract and reach people involved and interested in the contents. Experiences with the sales
staff and with the product inevitably creates positive or negative promotion by word of
mouth and can therefore be perceived more reliable and unbiased to another consumer
since it comes from ordinary customers instead of paid spokespeople. Nowadays word of
mouth can be harnessed effectively as one of the more valuable promotional assets if there
is a possibility to get it circulating online, on a social media channel for instance.
The employees of a business are vital in marketing activities because it’s eventually
them who deliver the service and service can be perceived as important an offering as
the company’s products. Therefore it’s important to hire and train the right people in
order to deliver excellent service to the clients. Employees who sincerely believe in the
company’s products or services more likely perform the best they can and are more open to
honest feedback about the business and contribute through their own thoughts and passion
to the development and growth of the business. The people can become an internal
competitive advantage over competitors if the products or services otherwise are of
equal quality.
The system and processes in the organization need to be tailored to fit the employees’
needs in order to optimize the result of the service in a way that it’s as quick, reliable
and risk-free as possible to minimize costs and make the experience pleasant from the
customer’s point of view because it’s the service they’re paying for.
Physical evidence in addition to the actual product itself are e.g. documents of the order
and its delivery as well as somehow presenting the company’s presence and establishment.
Branding can be exercised with physical evidence to increase the company name’s
presence with the operators in the market and affecting the market’s perception of the
product and its supplier with supportive marketing activities.

The seven (7) Ps

1. Product
State the unique features of the product that gives it an added advantage over the
competitors’ products. The type of flavours or enrichment done should be considered a
competitive advantage. A notable advantage for the deployment of this new product is
that most of the ingredients are organic etc.

2. Price
Due to lower production costs because it’s manufactured in Centralized system like
Brookside. Compared to the competitors, the price for the company's product should be set
a bit higher for higher-quality brand image purposes, and it can be argued by the product's
new nutritional quality.

2
When introducing the product for ordering, a market penetrating price should be calculated
for a certain period of time for orders made. In this situation a lower price is set to a level
that attracts a large number of buyers quickly to win a market share during a pre-
determined period of time. After the new product has achieved a position on the market,
the price can be gradually hauled to its desired margin level. After introducing the product
with a common market penetration price to all major clients, the price can be negotiated
separately for each customer as a part of a segmented pricing strategy and a certain
functional discount for initial large stock orders shortly after reaching pricing agreements
could work as an incentive for immediate large order quantities regardless of the product’s
novelty.

3. Place
It’s of paramount importance to have any amount of products available at the latest within
a fortnight. Customers/Market outlets value and require fast and punctual deliveries on site
and the stock situation of a product can often be a decisive factor between two competitors
at the end of the day. As the company should do itself, the main distribution channels i.e.
wholesalers should be encouraged to hold a high stock level of products that are expected
to receive large or otherwise frequent orders and hold a safe order penetration point.
As found out, influencers and decision-makers in a purchasing process often look for
product information online so it becomes vital to have all the information different
operators might need to come to a decision for the company’s option available and easily
found. As professional and social networks become a larger part of the operations of any
business, versatile online presence will inevitably increase visibility, possibility of
producing multifaceted content and hits on pages.
4. Promotion
Advertising in the traditional media channels would mostly go to waste because normally
those messages are paid to reach consumers directly. Although through the right channels
people in the target market can be reached e.g. by placing product advertisement on
industry publications. With this product, it would be important to also include the logo of
the better-known brand of the product. A newsletter with articles and information about the
business and its new products can be distributed in co-operation with some industry
publication. Product catalogues could also reach small business outlets at stands in
wholesalers’ stores.
Sales promotion in form of pricing incentives to encourage early purchases was addressed
in the price consideration of the marketing mix.
Handling the corporate image as public relations can be done firstly by maintaining the
company’s website by adding content like news and other posts from time to time and
especially new product information as comprehensively and detailed as possible, as well as
removing outdated information. Social media channels are also an effective way to
maintain them in addition to other advantages; Facebook is more business-to-consumer
oriented with its company page features but more people still have a Facebook account
instead of a LinkedIn account and it could be used as a tool to present the products from an
end-customer’s point of view to have conscious consumers want for the company’s brand
for their upcoming business’ Commenting on products with Facebook would enable for
instance wholesaler salespeople or designers who are searching for information to ask
specifying questions or give feedback to new products after a purchase under their own
name, creating public word of mouth marketing.
Personal selling can be the most convincing and shows more dedication to the sales work
on the supplier’s behalf. Appointments with main clients showing and discussing the
product as well as presenting it on an industry trade fair will provide valuable experiences
for the client with the product and the representative of the case company. Product release
presentations as sales promotion could be also organized in co-operation with wholesalers
where they invite their most important customers to see a presentation of a new product

3
held by a representative from the company, to predict interest and boost sales early on in
order to benefit from the bulk order discounts.

5. People
The staff should always bear in mind that they are representing the company with their
actions. It is very important what it comes to hiring, that new employees are motivated and
willing to better the company with their effort. Motivation and above all enthusiasm reflect
to customer service and should be continuously maintained with current employees. The
quality of service is one aspect of marketing a business, the staff should exchange what
they think could be useful information about clients and products with each other in order
to make customer service seem well informed about several aspects of the business
operations. Some customers value better service over a cheaper price and to ensure an all-
encompassing service experience, after sales support by e.g. asking new customers how the
product or services eventually worked out for them can add important value to the case
company's offer over its competitors.
Studies have shown that effective communication is considered a key factor in successful
partnerships. The key aspects are listed as communication quality, information sharing and
participation. The quantity of critical information shared between partners enables them to
act more independently increasing satisfaction and being a pivotal role in partnership
success. The expectations of a partnership can be reached by planning and setting goals
mutually and participating in the process.

6. Process
It should be a continuous endeavour to try to improve customer service processes. Things
should be handled with as short a delay as possible and especially issues should be
communicated to the counter party before they're discovered some other way. By always
having so to say black on white, e.g. confirming telephone conversations in an e-mail
message is a good way of keeping actions recorded and revisable. Multiple people
operating multiple systems simultaneously needs good organizing and holding on to
common ground rules. Trying to keep everything simple and straightforward can diminish
the amount of human error and makes it easier to correct them. The easier the system, the
fewer mistakes will occur and overall costs will be lower.

7. Physical evidence
As physical evidence, order confirmations documenting all basic and special information
like delivery instructions etc. is a clear reviewable evidence of a business transaction. The
information should be accurate and not have room for interpretation. New products could
be advertised as appendices for confirmation e-mails as the order-placing person is directly
a target customer and might want to receive information about new releases. It should also
be monitored that transport documents and cover letters for deliveries are handled
correctly and recorded to a database for review. Keeping in touch and acknowledging who
your customers are by seeing the trouble to send out e.g. Christmas cards yearly, calendars
during new year and even business presents can generate a great deal of customer retention
and loyalty, sending monthly greeting cards saying “We value you”.

Conclusion
In conclusion, the considerations of the marketing mix has to be taken into account, who
are the customers generating the most profits. By applying the Pareto's principle that
suggests 80 percent of profits come from 20 percent of customers and vice versa, the
customers who purchase the company’s products from the distribution channels i.e.
Supermarkets and SMEs can be divided based on their number so that big super
markets account for 20 percent giving the 80% profits and SME retail outlets
represent 80 percent of the population.

4
Market Segmentation
Generally, segmentation is about identifying common characteristics within a mass
market and dividing customers into smaller segments based on different needs that
customers in different groups possess. The task then is to select the segments that appear
to represent the strongest marketing opportunities within the resources available in the
organization. Taking into consideration the simple pareto principle where 80 percent of
profits come from just 20 percent of customers, there is a justified need to segment
markets and create specifically tailored marketing programmes. Instead of trying to reach
the entire market as a whole, selecting sub-markets where to concentrate different
activities should improve profitability. This approach is more customer-orientated and
competitor aware and leads to better targeting and positioning programmes.
A segmentation approach that considers a target market consisting of businesses or
customers that are different and tries to identify groups with similarities, is referred to as
the build-up approach. For example the department may also alongside producing food
products be involved in producing food product flavours. In this case the market can be
seen to consist of two segments the food product and flavours.
In a case like this with essentially different kinds of target segments the most effective way
is to design different separate offers for each segment which is called differentiated
marketing.

MARKETING FUNCTIONS
Marketing specialists have categorized a marketing system into two distinct dimensions or
functions. One of those dimensions of functions is the institutions, organizations and
enterprises which participate in a market and the second is the functions that those
participants perform. Kohls and Uhl have classified the functions involved in agricultural and
food marketing processes as under three sets of functions of a marketing system

1. Buying
A. Exchange Functions
2. Selling
3. Storage
B. Physical Functions 4. Transportation
5. Processing
6. Standardization
7. Financing
C. Facilitating Functions
8. Risk Bearing
9. Market Intelligence

Each of these functions add value to the product and they require inputs, so they incur costs.
As long as the value added to the product is positive, most firms or entrepreneurs will find it
profitable to compete to supply the service.

A. Exchange functions

Buying: The marketing concept holds that the needs of the customer are of paramount
importance. A producer can be said to have adopted a market orientation when production is
purposely planned to meet specific demands or market opportunities. Thus a contract farmer
who wishes to meet the needs of a food processor manufacturing sorghum-based malted
drinks will only purchase improved sorghum seed. He/she will avoid any inputs likely to
adversely affect the storage and/or processing properties of the sorghum and will continually

5
seek new and better inputs which will add further value to his/her product in the eyes of the
customer. In making his/her buying decisions his underlying consideration will be the effect
upon the attractiveness of his/her output to the markets he/she is seeking to serve.

The buyer's motive is the opportunity to maintain or even increase profits and not necessarily
to provide, for example, the best quality. Improving quality inevitably increases the
associated costs. In some cases the market is insensitive to improvements in quality, beyond
some threshold level, does not earn a premium price. Under such circumstances, the grower
who perseveres and produces a ‘better product’, is not market oriented since he/she is
ignoring the real needs of the consumer. The most successful agribusiness is the one which
yields the largest difference between prices obtained and costs incurred.

Selling: Of the nine functions listed, this is probably the one which people find least
difficulty in associating with marketing. Indeed to many the terms marketing and selling are
synonymous. Kotler7 suggests that:

“Most firms practice the selling concept when they have over capacity. Their immediate aim
is to sell what they can make rather than to make what they can sell.”

There is no denying that ‘high pressure selling’ is practiced, where the interests of the
consumer are far from foremost in the mind of the seller. This is not marketing. Enterprises
adopt the marketing philosophy as a result of becoming aware that their own long term
objectives can only be realized by consistently providing customer satisfaction. Whereas
selling might create a consumer, marketing is about creating a customer. The difference is
that marketing is about establishing and maintaining long term relationships with customers.

Selling is part of marketing in the same way that promotion, advertising and merchandising
are components, or sub-components of the marketing mix. These all directed towards
persuasion and are collectively known as marketing communications; one of the four
elements of the marketing mix.

The Figure below illustrating the exchange function

B. Physical functions

Storage: An inherent characteristic of agricultural production is that it is seasonal whilst

demand is generally continous throughout the year. Hence the need for storage to allow a
smooth, and as far as possible, uninterrupted flow of product into the market. Because he is
dealing with a biological product the grower does not enjoy the same flexibility as his
manufacturing counterpart in being able to adjust the timing of supply to match demand. It
would be an exaggeration to suggest that a manufacturer can turn production on and off to
meet demand - they too have their constraints- but they have more alternatives than does the
agricultural producer. A manufacturer can, for example, work overtime, sub-contract work,

6
and over a longer time horizon, the manufacturer can increase or decrease productive
capacity to match the strength of demand.

In agriculture, and especially in Least Developed Countries (LDCs), supply often exceeds
demand in the immediate post-harvest period. The glut reduces producer prices and wastage
rates can be extremely high. For much of the reminder of the period before the next harvest,
the product can be in short supply with traders and consumers having to pay premium prices
to secure whatever scarce supplies are to be had. The storage function is one of balancing
supply and demand.

Both growers and consumers gain from a marketing system that can make produce available
when it is needed. A farmer, merchant, co-operative, marketing board or retailer who stores a
product provides a service. That service costs money and there are risks in the form of
wastage and slumps in market demand, prices, so the provider of storage is entitled to a
reward in the form of profit.

Transportation: The transport function is chiefly one of making the product available where
it is needed, without adding unreasonably to the overall cost of the produce. Adequate
performance of this function requires consideration of alternative routes and types of
transportation, with a view to achieving timeliness, maintaining produce quality and
minimizing shipping costs.

Effective transport management is critical to efficient marketing. Whether operating a single

vehicle or a fleet of vehicles, transportation has to be carefully managed, including cost
monitoring - operations on different road types, fuel and lubrication consumption and
scheduled and remedial maintenance and repair. Skilful management of all aspects of vehicle
operations can also make a substantial contribution to efficient marketing especially with
respect to optimum routing, scheduling and loading and off-loading; maximization of shift
hours available, maintaining the vehicle fleet at an optimum size, taking account of time
constraints on delivery, and collection times and judicious management of vehicle
replacement and depreciation. Transport managers also have to weigh the advantages and
disadvantages of owning, hiring or leasing transport.

Processing: Most agricultural produce is not in a form suitable for direct delivery to the
consumer when it is first harvested. Rather it needs to be changed in some way before it can
be used. Kohls and Uhl observe that:

“The processing function is sometimes not included in a list of marketing functions because it
is essentially a form changing activity.”

However, it is for this very reason that processing ought to be included as a marketing
function. The form changing activity is one of that adds value to the product. Changing green
coffee beans into roasted beans, cassava into gari or livestock feed, full fruit bunches into
palm oil or sugarcane into guru increases the value of the product because the converted
product has greater utility to the buyer. How the form of produce is to be changed and the
method to be used in bringing about such changes are marketing decisions. For example,
some years ago when Ethiopia was looking to expand its tea business, a prototype
manufacturing plant was established. The plant was capable of curing the tea and packing it
in individual tea bags. At that point, tests were undertaken in which the product was
compared with others already on the market. The results were encouraging. However, in the
course of the marketing research, it was also discovered that ninety percent of the black tea
consumed is blended and not the pure variety placed in tea bags by the Ethiopians. By going
past the point of changing green leaf into high quality black tea, the Ethiopians were entering
a nice market which is not what they intended at all. Timely marketing research would have
directed Ethiopia to stop the form changing activity short of bagging since, at that time,
7
Ethiopia did not have the acreage of tea, nor the resources, to develop a tea blending facility
of its own. In the same way, a producer of fresh fruits may have pulping and/or canning
facilities but if potential buyers want the flexibility of using the fruits in a variety of ways,
then these stages of processing serve to reduce utility and value, rather than increasing them.

Of course, processing is not the only way of adding value to a product. Storing products until
such times as they are needed adds utility and therefore adds value. Similarly, transporting
commodities to purchasing points convenient to the consumer adds value. In short, any action
which increases the utility of the good or service to prospective buyers also adds value to that
product or service.

C. Facilitating functions

The facilitating functions include product standardization, financing, risk bearing and market
intelligence. Facilitating functions are those activities which enable the exchange process to
take place. Marketing, in simple terms, is the act of supplying products to someone in
exchange for something perceived to be of equal or greater value, (usually, but not always, a
given sum of money). Facilitating functions are not a direct part of either the exchange of title
or the physical movement of produce.

The Figure below illustrating the facilitating functions

Standardization: Standardization is concerned with the establishment and maintenance of

uniform measurements of produce quality and/or quantity. This function simplifies buying
and selling as well as reducing marketing costs by enabling buyers to specify precisely what
they want and suppliers to communicate what they are able and willing to supply with respect
to both quantity and quality of product. In the absence of standard weights and measures
trade either becomes more expensive to conduct or impossible altogether. In Nepal such was
the diversity of weights and measures used with respect to grain within the country, that it
was easier for some districts to conduct trade with neighbouring states in India than it was to
do business with other districts within Nepal. Among the most notable advantages of uniform
standards, are:

 price quotations are more meaningful

 the sale of commodities by sample or description becomes possible
 small lots of commodities, produced by a large number of small producers, can be
assembled into economic loads if these supplies are similar in grade or quality
 faced with a range of graded produce the buyer is able to choose the quality of
product he/she is able and willing to purchase.

Quality differences in agricultural products arises for several reasons. Quality differences
may be due to production methods and/or because of the quality of inputs used.

8
Technological innovation can also give rise to quality differences. In addition, a buyer's
assessment of a product's quality is often an expression of personal preference. Thus, for
example, in some markets a small banana is judged to be in some sense ‘better’ than a large
banana; white sugar is considered ‘superior’ to yellow sugar; long stemmed carnations are of
‘higher quality’ than short stemmed carnations; and white maize is ‘easier to digest’ than
yellow maize. It matters not whether the criteria used in making such assessments are
objective or subjective since they have the same effect in the marketplace. What does matter
in marketing is to understand how the buyer assesses ‘quality’.

Financing: In almost any production system there are inevitable lags between investing in
the necessary raw materials (e.g. machinery, seeds, fertilizers, packaging, flavourings, stocks
etc.) and receiving the payment for the sale of produce. During these lag periods some
individual or institution must finance the investment. The question of where the funding of
the investment is to come from, at all points between production and consumption, is one that
marketing must address. Consider the problem of a food manufacturer who wishes to launch
a range of chilled products in a developing country where few retail outlets have the
necessary refrigeration equipment. This is a marketing problem. It might be solved by the
food manufacturer buying refrigerators and leading these to retailers (or arriving a hire-
purchase arrangement with retailers).

A common marketing problem, in developing countries, is the low level of incomes leading
to low levels of effective demand for many products. The challenge to marketing is to
somehow channel what income is available into effective demand. In the case of agricultural
equipment marketing this might involve offering hire-purchase schemes where the
prospective buyer makes payment in regular instalments. During this time he/she is deemed
to have hired the machine. If payments are not forthcoming, the machine can be recovered
since its ownership remains with the seller up until the final payment is made, at which point
the farmer is considered to have purchased the machine. Alternatively, the seller might set up
leasing, rather than purchasing schemes where again the farmer is making regular payments
but never takes title to the machine. Where a food item is being marketed, to a low income
market, the seller can consider reducing the price of the product by making the pack or lot
size smaller. Another tactic is to make the product more affordable by using cheaper
ingredients and/or packaging. Instant coffee can be sold at lower prices by substituting some
of the coffee with chicory; the price of meat products is reduced by increasing the percentage
of cereals in these products and including less meat and/or making use of less expensive parts
of the animal such as entrails, offal, feet and head.

Marketing is also concerned with the financing of the enterprise itself. Here again some
creative solutions can be developed. Where internal financing is insufficient for the purposes
in view, an enterprise in a developing country can look to several alternatives including:

 development banks
 commercial banks
 shares issues
 credit co-operatives and/or credit unions

Where these sources of finance are considered inappropriate, or are simply not available to a
particular enterprise, a strategic alliance in the form of a joint venture could be the answer.
These are partnerships formed to exploit market opportunities more effectively and/or
efficiently than either party can on its own. An enterprise, in a developing country, may
engage in a joint venture with either an indigenous partner and/or with a foreign partner. The
agreement between parties to a joint venture normally specifies their respective contributions
of resources, share of management control, profit and risk.

9
Whatever the source of finance under consideration marketing has a role to play in evaluating
the appropriateness of that source as well as identifying it in the first place. A common
requirement is that marketing proposals include a forecast of the payback period. Those
responsible for developing these proposals are best placed to evaluate the compatibility
between the market opportunity under consideration and the alternative modes of financing it.
Of specific interest is the prospect of the investment payback period matching the repayment
schedule. Enterprises which finance long term investments through short term sources of
finance are either badly misinformed or have adopted a high risk strategy.

Risk bearing: In both the production and marketing of produce the possibility of incurring
losses is always present. Physical risks include the destruction or deterioration of the produce
through fire, excessive heat or cold, pests, floods, earthquakes etc. Market risks are those of
adverse changes in the value of the produce between the processes of production and
consumption. A change in consumer tastes can reduce the attractiveness of the produce and
is, therefore, also a risk. All of these risks are borne by those organizations, companies and
individuals.

Risk bearing is often a little understood aspect of marketing. For example, when making
judgements as to whether a particular price is a ‘fair price’ the usual reference point is the
producer or supplier's costs. However the risks borne are rarely taken into account by those
passing judgement and yet, almost inevitably, there will be occasions when the risk taker
incurs losses. Stocks will spoil, markets will fall, cheaper imports will enter the country,
consumer tastes will change, and so on. These losses can only be observed if adequate
surpluses were generated in previous periods. Risk bearing must be acknowledged as a cost
since what is uncertain is not whether they will occur, but when they will occur.

Market intelligence: As for as is possible marketing decisions should be based on sound

information. The process of collecting, interpreting, and disseminating information relevant
to marketing decisions is known as market intelligence. The role of market intelligence is to
reduce the level of risk in decision making. Through market intelligence the seller finds out
what the customer needs and wants. The alternative is to find out through sales, or the lack of
them. Marketing research helps establish what products are right for the market, which
channels of distribution are most appropriate, how best to promote products and what prices
are acceptable to the market. As with other marketing functions, intelligence gathering can be
carried out by the seller or another party such as a government agency, the ministry of
agriculture and food, or some other specialist organization. What is important is that it is
carried out.

10