Analyzing Food

Markets
Functional Approach
 A marketing function may be defined as “a
major specialized activity performed in
accomplishing the marketing process.”
 EXCHANGE FUNCTIONS
(1) Buying (Assembling)
(2) Selling
 PHYSICAL FUNCTIONS
(3) Storage
(4) Transportation
(5) Processing
 FACILITATING FUNCTIONS
(6) Standardization
(7) Financing
(8) Risk Bearing
(9) Market Intelligence
 Exchange Functions
 Those activities involved in the transfer of
title of goods.
Buying Function
 Seeking out the sources of supply,
assembling the products, and performing
the activities associated with purchase.
Selling Function
 The group of all the activities that are
sometimes called merchandizing.
 Physical Functions
 Those activities that include handling,
movement, and physical changes to the
commodity.
Storage Function
 Activity associated with making the product
available at the desired time.
Transportation Function
 Concerned with making goods available at
the proper place.
Processing Function
 Manufacturing activities that change the
basic form of the product.
 Facilitating Functions
 Those functions that make possible the
smooth performance of the exchange and
physical functions.
Standardization Function
 The establishment of uniform
measurements of both quantity and quality.
Financing Function
 The use of money to carry out the various
aspects of marketing.
Risk Bearing Function
 The accepting of the possibility of a loss in
the marketing of a product.
Market Intelligence Function
 The job of collecting, interpreting, and
disseminating data necessary to marketing.
Understanding Functions:
What Does it Tell Us?
 Functions not only affect the cost of the
product, but also the value of the product to
the consumer.
 It may be possible to “eliminate the
middleman,” but it impossible to eliminate
the function he/she performs.
 Functions can be performed anywhere in the
marketing system.
Two Issues:
(1) Whether the necessary functions are
being performed, and
(2) Whether these functions are being
performed in the most efficient manner.
 Institutional Approach
 Focuses on “who” performs the marketing
activities.
Marketing Middlemen
 Merchant Middlemen
– Retailers
– Wholesalers
 Agent Middlemen
– Brokers
– Commission men
 Speculative Middlemen
 Processors and Manufacturers
 Facilitative Organizations
Merchant Middlemen
 Take title to the products they handle
 Primary objective is to satisfy consumer
wants at a profit.
Agent Middlemen
 Act only as representatives
 Do not take title to the products they handle
Speculative Middlemen
 Those who buy and sell products with the
primary objective of profiting from price
movements.
Food Processors
 Specialize in adding time, form, place, and
possession utility to raw farm products.
Facilitative Organizations
 Aid the various middlemen in performing
their tasks.
 Reasons for Middlemen
 Division of labor and specialization
 Many functions are marked by economies
of scale
 Reduce market search and transactions cost
Should we have
middlemen?
 Marketing middlemen will perform their
functions when their efficiency in doing so
is greater than that of farmers and
consumers.
 Marketing Management
 The process by which firms and
organizations develop and implement
programs that assist them in satisfying
consumers and making a profit.
 Marketing Concept
 Finding out what the consumer wants and
providing it to them at a profit.
 Product Differentiation
 Not all consumers want the same thing
 Varying quality, price, packaging, brand or
offering services
 Market Segments
 Dividing consumers into groups with
similar tastes and preferences.
 Marketing Mix (The 4-Ps)
 Product
 Price
 Place
 Promotion
 Marketing Strategy
 Composed of the firm’s target market and
marketing mix choices.
Analyzing Market
Performance
 Market performance is how well the
marketing system performs in relation to
what society and market participants expect
of it.
Theory of Industrial
Organization
Market performance is determined by:
(1) industry structure, and
(2) market conduct.
Market Efficiency
 Efficiency is measured as the ratio of output
to input.
Improving Market Efficiency
 Reduce the cost of marketing without
reducing the marketing utilities, or
 Enhance the marketing utilities without
increasing the cost of marketing.
Operational Efficiency
 Operational efficiency refers to the input
side of market efficiency.
 Increases in operational efficiency reduce
the cost of marketing.
 Typically measured by labor productivity.
Pricing Efficiency
 Concerned with the ability of the marketing
system to efficiently allocate resources and
coordinate the entire food production and
marketing process in accordance with
consumer directives.
Less than “Perfect”
efficiency
Prices fail to:
(1) fully represent consumer preferences,
(2) direct resources from lower to higher-
valued uses, and/or
(3) coordinate buying and selling activity.
Efficiency Conflicts
 Sometimes, there are conflicts between the
types of efficiency.
 Conflicts make “improving” the marketing
system difficult.
 Consumers
 The “doctrine of consumer sovereignty”
holds that all business and marketing
activity is directed toward the satisfaction
of consumers.
Altering Consumer Attitude
 Advertising, packaging, product design,
merchandizing, and other strategies can be
used to influence consumer preferences.
 Ultimately, firms must provide real value if
they are to survive.
Conditions for Consumer
Sovereignty
 The consumer must be provided with real
choices.
 The consumer must have reliable and
accurate information to match choices with
preferences.
 Prices must reflect all private and social
costs of producing and marketing products.