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Chapter -19 Agricultural Marketing and Consumer

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 Chapter - 19

Agricultural Marketing and

Consumer Behaviour

Dr. Sneha Pandey1 and Dr. Sumit B. Wasnik2

1
Department of Agricultural Economics, Rajmata Vijyaraje Scindia Krishi Vishwa
Vidyalaya, Gwalior, (Madhya Pradesh)
2
Department of Agricultural Economics, RSV CARS, Bemetara IGKV (Chhattisgarh)

Abstract
The interaction between buyers and sellers is called Market. A Market is an
institution or a process that allows and sellers to interact. A market is not necessarily
a Marketplace, which is a physical location where buyers and sellers go to exchange
goods. In marketing, understanding consumer behavior has become very important
for businesses. Consumer behavior refers to the study which analyzes how consumers
make decisions about their wants, needs, buying or act with respect to a product,
service or organization. It is very critical to understand the behavior of consumers
to analyze the behavior of potential consumers towards a new product or service. It
is also very useful for companies to identify opportunities which have not yet been
met. In marketing, understanding consumer behavior has become very important for
businesses. Consumer behavior refers to the study which analyzes how consumers
make decisions about their wants, needs, buying or act with respect to a product,
service or organization. It is very critical to understand the behavior of consumers
to analyze the behavior of potential consumers towards a new product or service.
It is also very useful for companies to identify opportunities which have not yet
been met. In this chapter we are going to understand about agricultural marketing,
Characteristics of market, classification of market, functions of market and market
functionaries. This chapter also describes consumer behavior, types of consumer
behavior, importance of consumer behavior and factors affecting consumer behavior.
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Keywords: Agricultural Market, types of market, consumer behaviour

Meaning
A Market can be located in a physical space such as D-Mart, shopping mall, local
market and also buying and selling on internet from a firm such as Amazon, Flipkart
provide the market platform internet into a market, even though the buyers and
sellers are not in the same physical location and may never exchange a word. A
market appears wherever there is interaction determines the price of a good, and
the quantity of the good that changes hands. One key feature of markets is that
they are voluntary. Individual buyers and sellers determine quantities and prices.
Agricultural Marketing is a process which starts with a decision to produce a
saleable farm commodity, and it involves all the aspects of market structure, both
functional and institutional, based on technical and economic considerations,
and include pre- and post-harvest operations viz., assembling, grading, storage,
transportation and distribution.

Definition of Agricultural Marketing

“The buying behaviour of final consumers- individuals and households who buy goods
and services for personal consumption”
Philip Kotler

Characteristics of Agricultural Marketing

The process of concentration, equalization and dispersion is a peculiar characteristic
of agricultural marketing to get products from growers into the hands of distant
consumers.
(a) Concentration: Concentration begins with the collection of small surpluses of
individual farms at the country’s trading centers which may be the primary markets,
secondary markets or tertiary markets. The basic raw materials, foodstuffs etc. are at
first concentrated at the central points.
Concentration is particularly important in the marketing of goods sold in
their natural state. Raw cotton, wool grain (to be milled) iron ore, fresh fruits,
vegetables, liquid milk etc. are concentrated. Concentration is also important in
the marketing of some manufactured products that are used as production goods
by other manufacturers.
(b) Equalization: Equalization consists of adjustments of supply to demand on the
basis of time, quantity and quality. It is the process by means of which the supply
of goods ready for sale is adjusted to the demand for them.
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(c) Dispersion: The final step in adjusting the farm supply to the demands of
manufacturers and consumers is the process of dispersion. This is the process of
dispensing toward the consumer those commodities which have been concentrated
in the central markets and equalized in the wholesale markets.
Concentration, equalization and dispersion are the heart of marketing. The
transfer of title between producer and consumer is greatly facilitated by the processes
of concentration and dispersion. Equalization takes place in the wholesale markets
which may be looked upon as great reservoirs into which goods flow in varying
quantities and in many varieties and qualities.

Classification of Agricultural Market

Agricultural Markets can be classifies according to each of the twelve dimensions
listed below.

1. On the basis of Location:

Markets are classified into the following categories based on their location or mode
of operation:
i. Village Markets: A village market is a market located in a small village, where
major transactions take place between the village’s buyers and sellers of a village.
ii. Example: weekly market, local market, vegetable-mandi.
iii. Primary wholesale Markets: These markets are located in large cities near
agricultural commodity production centers. The producer-farmers themselves
bring a large portion of the product to these markets for sale. Farmers and dealers
are the most common participants in these markets.
iv. Secondary wholesale Markets: These markets are usually found around
railway crossroads, district offices, or key trading centers. The main commodity
transactions take place between local traders and wholesalers. Other markets
account for the majority of the arrivals in these markets. Produce is handled in
big quantities in these markets.
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v. Terminal Markets: A terminal market is one where the product is either sold to
customers or processed for export, or it is assembled for export. Merchants are
well-organized and employ sophisticated marketing techniques. These markets
have commodity exchanges that provide opportunities for forwarding trading
in certain commodities. Markets like these can be found in either metropolitan
centers or seaports, such as Bombay, Madras, Calcutta, and Delhi.
vi. Seaboard Markets: Seaboard markets are those that are located near the seashore
and are mostly used for the import and/or export of commodities. Bombay,
Madras, and Calcutta are examples of these markets in India.

2. On the basis of Area/Coverage:

Markets can be grouped into four categories based on the area from where buyers
and sellers often come for transactions:
i. Local or Village Markets: A market where purchasing and selling activities are
restricted to buyers and sellers from the same village or surrounding communities.
Village markets are mostly for perishable goods in small quantities, such as local
milk or vegetables.
ii. Regional Markets: A market for a commodity that draws buyers and sellers from
a wider area than local marketplaces. Food grains are mainly sold in regional
markets in Bangladesh.
iii. National Markets: A market where buyers and sellers are based on a nationwide
scale. Durable commodities such as jute and tea have national markets.
iv. World Market: A market where buyers and sellers come from all over the
world. From a geographical standpoint, these are the most important markets.
These markets exist in commodities with global demand and/or supply, such as
coffee, machinery, gold, silver, and other precious metals. Many countries have
been moving toward a regime of open international commerce in agricultural
products such as raw cotton, sugar, rice, and wheat in recent years.

3. On the basis of Time Span:

Markets can be classified into the following categories based on their time span.
i. Short-period Markets: Short-period markets are those that last only a few
hours. These marketplaces trade in very perishable items like seafood, fresh
vegetables, and liquid milk. Commodity prices are mostly determined by the level
of demand for, rather than the supply of, the commodity in these marketplaces.
Example: Vegetables, fruits market etc.
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ii. Long-period Markets: Unlike short-term markets, these markets are held for
a longer period of time. Food grains and oilseeds are among the commodities
sold in these marketplaces since they are less perishable and may be stored for
a long time. The factors of supply and demand both influence prices.
Example: potato, onion market etc.
iii. Secular Markets: These are markets that are always open. The commodities
exchanged in these markets are long-lasting and can be kept for a long time.
Example: Markets for machinery and manufactured goods are two examples.

4. On the basis of Volume of Transactions:

On the basis of the number of transactions made at any one time, there are two sorts
of markets. These are given below:
i. Wholesale Markets: Commodities are bought and sold in huge lots or in
bulk on a wholesale market. The majority of transactions in these markets are
between dealers.
ii. Retail Markets: A retail market is one where people buy and sell goods based
on their needs. In these markets, transactions take happen between retailers and
consumers. Retailers buy in bulk from wholesalers and sell to customers in small
batches. These markets are in close proximity to the customers.

5. On the basis of Nature of Transactions:

There are two types of marketplaces that are based on the types of transactions that
individuals engage in:
i. Spot or Cash Markets: The spot or cash market is a market where goods are
traded for money immediately after the transaction.
ii. Forward Markets: A market in which the purchase and sale of a commodity
occur at a time ‘t,’ but the exchange of the commodity occurs at a future date,
i.e., time t + 1. It is possible that the commodity will not be exchanged even on
the given date in the future(t+1). The difference between the purchase and sale
prices is instead paid or taken.

6. On the basis of Number of Commodities in which Transaction takes place:

The quantity of commodities in which transactions are completed determines whether
a market is general or specialized:
i. General Markets: The general market is a market where all types of commodities
are bought and sold, such as food grains, oilseeds, fiber crops, gur, and so on.
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These markets deal in a wide range of products.

ii. Specialized Markets: A specialized market is one in which transactions are
limited to only one or two goods. There are distinct markets for each type of
commodity. Food grain markets, vegetable markets, wool markets, and cotton
markets are all examples.
7. On the basis of Degree of Competition: Each market can be categorized on a
continuous scale ranging from perfectly competitive to pure monopoly or monopsony.
Extreme versions are nearly unheard of. Nonetheless, knowing their qualities are
beneficial. Various midpoints of this continuum have been identified in addition
to these two extremes. Markets can be categorized into the following groups based
on the competition:
i. Perfect Market: The presence of a large number of enterprises and homogeneous
and similar products are two fundamental aspects of perfect competition. Because
of this, the customer has no reason to demonstrate a preference for one company
over another. There is no restriction on entering or exiting the sector or market.
Firms are price takers, meaning they have no say over the price they charge for
their goods. Each manufacturer contributes only a small part of the industry’s
total output. Finally, both buyers and producers have complete market knowledge.
Everyone is aware if one company alters a product feature.
ii. Imperfect Markets: Imperfect markets are defined as those in which perfect
competition does not exist. The following scenarios can be defined, each based
on the degree of imperfection:
a. Monopoly Market:
A market arrangement in which there is only one vendor of a commodity is known
as a monopoly. He has complete control over the commodity’s quantity and pricing.
The price of a commodity in this market is often higher than in other markets.
When it comes to purchasing power for irrigation, Indian farmers are in a monopoly
market. A monopsony market is one in which there is just one buyer of a product.
b. Duopoly Market:
A duopoly market is one in which there are only two commodity sellers. They may
jointly agree to charge a common price that is higher than the hypothetical market
price. The duopsony market refers to a situation in which there are only two buyers
of a commodity.
c. Oligopoly Market:
An oligopoly market is one in which there are more than two but still a few sellers
of a commodity. Oligopsony market is a market with a few (more than two) buyers.
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d. Monopolistic competition:
Monopolistic competition occurs when a large number of vendors trade in a
heterogeneous and differentiated form of a commodity. Different trade markings on
the product draw attention to the difference. For the same basic product, different
prices are prevalent. Input markets are a good example of monopolistic competition
that farmers confront. They must, for example, pick between several brands of
insecticides, pump sets, fertilizers, and equipment.

8. On the basis of Nature of Commodities:

Markets can be categorized into the following groups based on the sort of items
traded:
i. Commodity Markets: Commodity markets trade goods and raw materials such
as wheat, barley, cotton, fertilizer, seed, and other agricultural products.
ii. Capital Markets: Capital markets, such as money markets and stock markets,
are markets where bonds, shares, and securities are purchased and sold.

9. On the basis of Stage of Marketing:

Markets can be divided into two categories based on their stage of marketing:
i. Producing Markets: Producing markets are those that primarily assemble the
commodity for subsequent sale to other markets. These markets are found in
areas where goods are produced.
ii. Consuming Markets: Consumer markets are markets that collect produce for
final distribution to the general public. These markets are typically found in areas
when production is insufficient or in densely populated urban areas.

10. On the basis of the scope of government intervention:

Markets can be classified into one of two groups based on the level of government
intervention:
i. Regulated Markets: Markets in which transactions are conducted in accordance
with the rules and regulations set forth by a statutory market organization
representing various market segments. In such marketplaces, marketing
expenditures are standardized, and practices are regulated.
ii. Unregulated Markets: These are the markets where there are no fixed rules
or restrictions for doing business. Traders set the rules for how the company is
conducted and runs the market. There are numerous flaws in these markets, ranging
from unstandardized costs for marketing tasks to price determination flaws.
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11. On the basis of type of Population Served:

A market can be classed as either urban or rural based on the population it serves:
i. Urban Market: An urban market is a market that caters mostly to those who live
in urban areas. The nature and volume of agricultural product demand generated
by the urban population are referred to as the urban market for farm products.
ii. Rural Market: The term “rural market” usually refers to the demand generated
by people living in rural areas. The form of embedded services required with a
farm product differs significantly between urban and rural demands.
12. On the basis of Marketing Margin Accumulation: Markets can also be segmented
based on who receives the marketing margins. There has been a significant increase
in the number of producers or consumers co-operatives or other organizations that
handle product marketing over the years. Though private commerce still handles the
majority of farm product trade, co-operative marketing has grown in its proportion
of some agricultural commodities such as milk, fertilizers, sugarcane, and sugar.
Marketing margins are either negligible or divided among members of producer or
consumer cooperatives when they engage in marketing activities.

Functions of Agricultural Marketing

Agricultural marketing involves in its simplest form the buying and selling of
agricultural produce. In olden days, when the village economy was more or less
self sufficient, the marketing of agricultural produce presented no difficulty, as the
farmer sold his produce direct to the consumer on a cash or barter basis. Agricultural
marketing consists of all the functions and services used in moving the commodities
from the producer to the final consumer. It includes not only the physical movement
to the place where the product is wanted but also putting it into the form and amount
is desired and having it ready at the time it is wanted.
The essential functions of agricultural marketing may be describes as follows:
1. Assembling:
Collection of produce for sale in mandis or larger markets is called Assembling.
Assembling is of two types:
i. Bringing together of smaller amounts of produce for greater convenience and
economy in buying, transporting or processing.
ii. Assembling occurs in the distribution of finished products. Wholesaler buys
from many processors to have on hand the commodities wanted by retailers
to supply the consumers.
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2. Grading and Standardization:

Grading is the sorting out of the commodities into different groups on the basis of size,
variety, taste, quality, colour etc. Such separation may or may not conform to established
standards. Whereas standardization fixes the grades and does not allow them vary from
season to season and year to year. Grading and standardization are used interchangeably.
Advantages of Grading and standardization
a. Uniformity between markets is provided
b. Products of similar grade can be stored in bulk
c. Market values are better understood
d. Commodities can be bought and sold without previous examination
e. Standards provide a basis for market reporting and advertising
3. Processing:
Processing is the conversion of farm produce into more consumable form. E.g.
conversion of wheat into floors, preparation of butter, ghee from milk, hulling of
paddy into rice etc. Processing imparts form utility Advantages.
a. Surplus produce may be conserved
b. Reduces the work in home
4. Transportation:
Physical movement of produce from the place of production to the final consumer
is called transportation. Transportation creates place utility. Transportation takes
place through different means like road, rail, air, and water.
5. Storage:
Storage is the holding of produce from time of production until needed by the
consumers. Storing creates time utility. Storage helps to spread out market supply.
Some products are stored for short period whereas fresh fruits, vegetables require
cold storage.
6. Packaging:
Packaging is the packing or covering the product in such sizes and pattern as to
be most Marketable. The objectives of packaging are
a. to facilitate the handling of product
b. to reduce the storage and marketing cost
c. to prevent loss by deterioration and rob
d. to make products more attractive
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7. Distributing:
It relates to dispersing, retailing and marketing of produce. Distribution bridges
the gap between the wholesalers and large number of consumers.

Marketing functionaries (Agencies)

» The transfer of produce or goods takes place through a chain of middlemen
or functionaries (agencies).
» In a primary market, the main functionaries are the producer, the village, or
itinerary merchant, pre harvest contractors, commission agents, transport
agents etc.
» In the secondary market all the functionaries of primary market are involved and
also the processing and manufacturing agents are the additional functionaries.
Financing agents, such as banks and co-operatives also take part.
» In the terminal or export market, the commercial analyst and shipping agent
also get involved in the transfer of goods.
» The functionaries have their own setup. They may be individuals, partners
or co-operatives who may buy and sell on ready and future basis, at a price
determined by forces of demand and supply. Each functionary renders some
service in the process of marketing and also earns a varying margin of profit
for himself and at same time bears risks involves in the process.

What is Consumer Behaviour in Marketing?

Consumer behavior incorporates ideas from several sciences including psychology,
biology, chemistry and economics. By understanding consumer behavior, businesses
can tailor their marketing efforts to target specific groups, improve brand loyalty,
and identify emerging trends. This knowledge can also help businesses stay ahead
of their competition and adapt to changes in consumer behavior.
In conclusion, understanding consumer behavior is vital to any successful marketing
strategy. By analyzing the factors that influence consumer behavior, businesses can
develop effective marketing campaigns that cater to the needs and wants of their
target audience.
In this guide, we’ll look at the different aspects and facets of consumer behavior
and discuss the most effective types of customer segmentation.
Generally, consumer behaviour refers to the actions and decisions of purchasing;
within this context, many authors have attempted to define it. For example, Blackwell
et al. (2006) defined Consumer Behaviour as the activities people undertake when
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obtaining, consuming and disposing of products and services (p.4). “Consumer

Behaviour is the study of the processes involved when individuals or groups select,
purchase, use or dispose of products, services, ideas or experiences to satisfy needs
and desires” (Solomon et al.2010, p.6). Consumers’ behaviour describes how they
make purchase decisions and use and dispose of purchased goods and services (Lamb
et al., 2012). Consumer behaviour is an essential and constant decision-making
process of searching, purchasing, using, evaluating, and disposing products and
services (Valaskova et al., 2015).

Figure 1: Consumer behavior

Importance of Consumer Behavior

Studying consumer behavior helps marketers see what consumers want and their
reasons choosing certain products over others. By understanding consumers’ reactions
to goods and marketing, they can analyze their audience’s needs and expectations and
thus work toward meeting them. It’s also important for retailers and companies to
keep up to date with shifting trends in taste, needs and economics, as these factors
can affect consumer behavior and require further adjustments in both marketing
and production.
There are several other ways in which understanding consumer behavior can
benefit marketers, companies and other businesses. They are:
1. Knowing the Competition
2. Understanding differentiation
3. Allowing for trend forecasting
4. Promoting retention and innovation
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Types of Consumer Behaviour

1. Habitual buying behavior: Habitual buying behavior refers to purchases
made with low conscious or emotional involvement and without significant
thought about differences between product types. It often involves products
that consumers use regularly, even every day. An example of a habitually
bought product might be dental floss. When buying dental floss, many
consumers may not care to consider any qualities of the product other than
cost. In these cases, factors that influence purchases are familiarity and visual
appeal. A consumer may be more likely to select the dental floss with the
well-known brand name or the one whose packaging appears most vibrant
to them.
2. Variety- seeking buying behaviour: Variety-seeking behavior, another low-
involvement behavior, is prevalent when the differences between products
are noticeable, motivating consumers to make frequent switches between
brands. The motivating factor for switching is not dissatisfaction with
previously purchased goods, but curiosity about other products.
3. Extended decision making: Also known as complex buying behavior,
extended decision-making is a high-involvement process, or one that involves
great conscious and emotional involvement. It occurs when consumers are
considering buying a type of good that they rarely, if ever, purchase. Usually,
this item is expensive, so the financial risk in choosing one brand over
others is higher. Therefore, the consumer spends an extended amount of
time researching the differences between brands and types before making
their decision.
4. Limited decision making: Limited decision- Making, also known as
dissonance-reducing buying behavior, applies to people looking to buy goods
among which there is limited variety. For example, at a sporting goods store,
there might be only three types of coolers. They all perform the same function,
have identical capacities and look similar. The only discernible difference is
price. One cooler might be $100, whereas the other coolers might be around
$40. In limited decision-making behavior, the customer is likely to exclude
the more expensive brand and instead make a high-involvement decision
between the two lower-cost products.

Factors affecting Consumer Behaviour

If a company fails to understand the reaction of a consumer towards a product, there
are high chances of product failure.
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Six factors affect consumer behaviour. These factors help determine whether
a person will purchase an item:
1. Psychological factors:
i. Motivation: The drive to get what we need. Every person has different
needs. However, some needs are more pressing than others.
ii. Learning: It’s how consumers change their behaviour after they gain
information. This process affects how you shop what you buy.
iii. Attitudes: These are “mental positions” or ideas. Marketers aim to change
beliefs and attitudes to positive ones. They do this by designing unique
campaigns.
iv. Perception: This is when a customer collects information about a product
and then gives it meaning. Two people can look at the same product yet see
something very different.
2. Social factors: Social factors include the following- Family, Roles and status
and Reference groups.
 285

3. Cultural factors: The influence of culture varies from place to place. This means
seller have to aware of culture of different groups and different social classes.
4. Personal factors: Personal factors, such as age, life style, personality, occupation
affect and influence consumer behaviours.
5. Economic factors: Most important factors that affects consumer behaviour
are Economic factors such as personal income, liquid assets etc. when personal
income and liquid assets are higher than it gives to consumer confidence to
buy luxury goods.
6. Biological factors: Body weight is a major biological factors affecting consumer
behaviour.

Conclusion
This paper discussed theories of marketing like different characteristics of agricultural
marketing, including classification of market on the basis of twelve dimensions,
functions of agriculture marketing and functionaries of the same. We discussed
about consumer behaviour in agricultural marketing, Importance of consumer
behaviour, types of consumer behaviour and factors affecting consumer behaviour
(Physiological, Social, Cultural, Personal and Economic).

References
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edition. Mason, OH: Thomson Business and Economics.
https://www.gialli.io/blog/5-major-factors-affecting-consumer-behavior.
Jan Benedict, E.M.S.(1997). Dynamics in Consumer behavior with respect to
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Lamb, C.W., Hair, J.F., McDaniel, C. (2012), Essentials of Marketing. South-
Western: Cengage Learning.
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