SEEDS TOOLKIT

MODULE 5
Seed Marketing
PRINCIPLES OF SEED MARKETING
 What is seed marketing?
Process by which seeds and associated services
are valued and exchanged.
• It is much more than the physical distribution of seeds
and providing accompanying services.

• You need to understand the marketplace (needs of

farmers in terms of crops, varieties, packaging size, etc.)

• You need to fully meet the needs of the customers

(satisfying the specific needs of farmers).
 Functions of seed marketers
1. Exchange or sale (buying and selling)
 Functions of seed marketers
2. Physical supply (storage and transportation)
 Functions of seed marketers
3. Facilitation (market research, production planning, seed
processing, packaging, branding, promotion and sales).
 Final goal of seed marketing
• Identify, satisfy and retain customers.
• Focus on the needs/desires of target markets and
deliver better value than existing competitors.
Differences between seed sale and marketing
• Selling is product focused and largely producer
driven with the aim of maximizing sales and profits.

• Seed marketing is based on needs of the farmer. These

are reflected in production planning, pricing, promotion,
seed distribution and receiving feedback after sale.
Seed selling and marketing concepts
 Marketing Concept
• Seed companies should strive to satisfy the
needs and desires of their customers.
• The customer is Queen and comes first!
 Elements of the marketing concept
• Target market. The market which gives your
company the best returns on investment as
determined by market research.

• Needs and demands of the target market. Farmer

needs and demands in the target market, which
determine the varieties and seeds to multiply.

• How to deliver value to the target market. The

best ways or marketing strategies to satisfy the
target market.
 Hard thinking!
• A producer must think hard how to determine the needs
of the market and may choose to do market research.
• A producer must decide which marketing strategy to
adopt to satisfy the target market.
 Outcomes of the hard thinking
• Develop a marketing philosophy depending on your
company structure. Choose between setting up a
separate marketing department, becoming entirely
customer oriented, or using social contacts and
personal communication.

• Do market research to identify right market segments,

ascertain their size, characteristics and specific needs.

• Identify the right varieties, charge the right price, get

seed to right place at right time, and create
awareness, i.e. you achieve the right marketing mix.
What is marketing mix in seed industry?
• Four controllable parameters in seed business:
– Product,
– Price,
– Place
– Promotion

• Commonly referred to as the 4Ps

• To succeed, any business must create have an
appropriate mix of the 4Ps subject to external
constraints of the marketing environment.
 Marketing Mix: (1) Product
Seed for sale must have the right characteristics
(desired crop/variety and high quality in terms of
purity, germination capacity and health)
 Marketing Mix: (2) Price
Seed must be both affordable for famers and able
to generate a reasonable profit for the enterprise.
 Marketing Mix: (3) Place
Seed must be in the right place at the right time
(normally within easy reach of the farmers and in
an area where the enterprise is able to compete for
market share).
 Marketing Mix: (4) Promotion
Farmers made aware of the existence and availability
of the seed through appropriate messages.
Successful enterprises must combine all 4Ps to
develop a marketing strategy. For example:

Marketing strategy: Create a trusted brand

• Product: Maintain high quality by monitoring growers

and obtaining only seeds from the best plots.

• Price: Sell new seed at discount price to encourage

more farmers to buy and try.

• Place: Deliver seed orders free to remote places.

• Promotion: Be honest and credible – label all packages

with clear information as required by farmers.
 PRODUCT PRICE
Variety: new, drought Retail price: 25% above
tolerant, high yielding, grain price
early maturing Wholesale price: 3% less
Quality: Certified seed than retail price
Packaging: Excellent Discounts: Buy 3, get 1 free
Brand name: Renowned
Labeling: Full TARGET
Guarantee: Assured MARKET

Farmers located in
rain-fed high altitudes

PLACE PROMOTION

Wholesalers: In large Advertising: Radio & TV

shopping centers Sales promotion: Posters,
Retailers: At local markets free samples (mini-kits),
Agents: Door to door Publicity: Seed fairs and
Transport: Free delivery field days
for bulk purchases Personal selling: word of
Other: Online shopping mouth
and mail order
Demand and Supply in Seed Markets
Demand and supply are 2 fundamental aspects of
any seed market.

• Demand is the desire and willingness of farmers to

buy a specific kind of seed.

• Supply is the desire and capacity of enterprises to

produce and make available a particular type of
seed for sale.
Enterprises need a good understanding of demand and
supply in order to make smarter and better-informed
marketing decisions for greater profitability.
 Nature of demand for seed
Quantity demanded is the amount (number of units) of seed that a
farming household would buy in a given time period and at the
current or given market price.

A household’s decision about the quantity of seed of a

particular variety to demand depends mainly on:
 The price of the seed in question.
 The income available to the household.

The most important relationship is that between prevailing market

price (P) and quantity of seed demanded (Q).

In examining the relationship between Q and P, we should assume

all other factors (income, wealth, other prices, tastes, and
expectations) constant.
 The Law of Demand

 The law of demand states that there is a negative,

or inverse, relationship between price and the
quantity of a good demanded and its price.

 This means that demand curves slope downward.

Theoretical structure of demand and price

P2 Demand is downward sloping

As price increases, demand falls

Slope depends on proportional

change in demand with respect
to change in price (elasticity)

P1

Q2 Q1
Quantity of seed demanded
Other determinants of household demand
 Normal Goods are goods for which demand goes up when
income is higher and for which demand goes down when
income is lower. E.g., certified seed

 Inferior Goods are goods for which demand falls when income
rises. E.g., non-certified seed

 Substitutes are goods that can serve as replacements for one

another; when the price of one increases, demand for the other
goes up. E.g., two similar varieties of a crop

 Perfect substitutes are identical products. E.g., two perfectly

identical varieties of a crop.

 Complements are goods that “go together”; a decrease in

price of one results in increase in demand for the other, and
vice versa. E.g., improved seed and fertilizer
 Shift of Demand Versus
Movement Along a Demand Curve

 A change in demand is not the same

as a change in quantity demanded.
 A higher price causes lower quantity
demanded and a move along the
demand curve DA.
 Changes in determinants of demand,
other than price, cause a change in
demand, or a shift of the entire
demand curve, from DA to DB.

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 A Change in Demand Versus
a Change in Quantity Demanded
To summarize:

Change in price of a good or service

leads to

Change in quantity demanded

(Movement along the curve).

Change in income, preferences, or

prices of other goods or services
leads to

Change in demand
(Shift of curve).
 The Impact of a Change in Income

 Higher income decreases the  Higher income increases the

demand for an inferior good demand for a normal good

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Elasticity of demand

Let elasticity of demand = d

Percentage change in quantity demanded %ΔQD

d = =
Percentage change in price %ΔP

d  1 = Elastic d  1 = Inelastic

is more
P elastic P
than
QD QD
 Demand schedule for seed of different crops
Less elastic
e.g., HYB maize
P2 More elastic
e.g. rice, beans

P1

Q1 Q2 Q3 Q4
Quantity of seed demanded

• Demand for rice and bean seed is relatively elastic since farm-saved
seed is a close substitute. A moderate increase in seed price gives greater
drop in seed demanded.

• Demand for hybrid seed of maize is less elastic, since farmers cannot produce
their own seed. A moderate rise in seed price causes little change in demand.
 Forecasting seed demand
• This is the process of predicting future demand for
seed and making projections based on past patterns
and current trends in seed use.

• You can get a good demand forecast by asking farmers

about their future effective demand for seed. This
method is only reliable when farmers know about the
benefits of using quality seed.

• You can use seed replacement rate (SRR) to estimate

demand. SRR is the number of generations that seed
from a previous crop can be used before replacing it.
 Forecasting seed demand using SRR

SRR = seed replacement rate for a given crop

Q = amount of quality seed used by farmers
A = area under the crop K = seed rate per unit of
area

This approach is often used by policy-makers, since

recommended seed rates are available and it is easy to
estimate the area under cultivation.
 Law of supply

The law of supply states that there is a

positive relationship between price and
quantity of a good supplied.

This means that supply curves typically have a

positive slope.

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Theoretical structure of supply and price

P2

Supply is upward sloping

As price increases, supply rises

P1

Q2 Q1
Quantity of seed supplied
 Other Determinants of Supply

 The price of the good or service.

 The cost of producing the good, which in turn depends on:

– The price of required inputs (labor, capital, and land),
– The technologies that can be used to produce the product,

 The prices of related products.

 Shift of Supply Versus
Movement Along a Supply Curve

 A higher price causes higher

quantity supplied, and a
move along the demand
curve.

 A change in determinants of
supply other than price
causes an increase in
supply, or a shift of the
entire supply curve, from SA
to SB.
 Shift of Supply Curve for Soybeans
Following Development of a New Seed Strain

 In this example, since the factor

affecting supply is not the price of
soybeans but a technological change
in soybean production, there is a shift
of the supply curve rather than a
movement along the supply curve.

 The technological advance means

that more output can be supplied for
at any given price level.

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 Shift of Supply Versus
Movement Along a Supply Curve
To summarize:

Change in price of a good or service

leads to

Change in quantity supplied

(Movement along the curve).

Change in costs, input prices, technology, or prices of related goods and

services
leads to

Change in supply
(Shift of curve).

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 Market Equilibrium
 Market equilibrium is the condition that exists when quantity
supplied and quantity demanded are equal.

 At equilibrium, there is no tendency for the market price to

change.
 Only in equilibrium is
quantity supplied equal to
quantity demanded.

 At any price level other than

P0, such as P1, quantity
supplied does not equal
quantity demanded.

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 Theoretical structure of equilibrium price

Peq. Equilibrium point, where

supply equals demand

Qeq.

Quantity of seed demanded and supplied

 Changes in Equilibrium

 Lower demand leads to lower  Lower supply leads to

price and lower quantity higher price and lower
exchanged. quantity exchanged.
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 Price determination
• “Cost plus” pricing: Total cost per unit of seed + profit
margin = selling price of seed

• Willingness to pay: Selling price based on affordability

and willingness of farmers to pay a certain price for
quality seed.

• Effective price determination involves a combination of

both methods.
 Distribution (delivering seed to farmers)

• The route the seed follows to reach the farmer

is the distribution channel.

• The distribution channel may involve a single step

if sales are made directly to farmers, or a series of
steps, if intermediaries (e.g. wholesalers,
retailers or dealers) are involved.

• The choice of distribution channel is influenced by

factors including costs, intermediaries, type of
seed, nature of competition and needs of farmers.
 Seed distribution channel

A B C D
GROWER SEED ENTERPRISE DEALER FARMER
Seed Processing Seed Purchases
Multiplication Storage and Marketing sales Sows
 Marketing Margin

• The difference in value for a fixed quantity of seed

between one stage and another in the distribution
channel.

• The cost of seed builds up as it passes through the

channel since intermediaries at every stage incur costs
and expect to earn some profit when they re-sell at
future prices.

• The desire by all intermediaries to make a profit

increases the total cost of marketing the seed.
 Calculating margins
Margins are expressed as % of costs incurred

Example ($/t):
Grower’s cost 131.25 Retail margin 10.85
Buying price from grower 157.50 Retail % margin 5%
Grower’s margin 26.25
Grower’s % margin 20%

Seed enterprise cost price 197.26 Selling price of seed to

Seed enterprise cost margin 39.76 the farmer 227.85
Seed enterprise % cost margin 25%
Seed enterprise profit margin 9.74
Seed enterprise % profit margin 10%
Selling price by enterprise 217
Grower Grower Enterprise Enterprise Dealer

Stage A Stage B Stage C Stage D

$26.25 $39.76 $19.74 $10.85 FARMER
Grower Enterprise Profit Retail
Margin cost margin margin margin
20% 25% 10% 5%

$131.25 $157.50 $197.26 $217.00 $227.85

Share of retail price important in margin analysis
Grower share = 26.25/227.85 = 11.5%
Enterprise share = 19.74/227.85 = 8.6%
Dealer share = 10.85/227.85 = 4.4%
Rest are costs = 75.5%
Examples of distortions in the seed market

• Subsidies: organizations receiving hidden

subsidies and distributing free or cheap seed.

• Fake seed: unlicensed dealers distributing poor-

quality fake seed to farmers at low prices.

• Emergency seed: demand usually guided by

disaster relief or political considerations, where
farmers become dependent on free sources of
seed and not motivated to purchase.
EXERCISES AND DISCUSSION