AGRICULTURA

L MARKETING
Basic Marketing Concepts
Marketing
A series of services involved in
moving the product from the point
of production to the point of
consumption.
The process of moving the product
from the point of production to the
point of consumption.
Basic Marketing Concepts
Market
a place where buyers and sellers
meet to exchange goods and
services
A group of buyers and sellers with
the facilities for trading with each
other
Basic Marketing Concepts
Market
A large geographic area wherein a
set of supply and demand forces
operate to set up prices.
Basic Marketing Concepts
Services
a function performed on a product
that alters its form, time, place or
possession characteristics.
services performed involved costs
and add value to the product (value
added) and somebody has to pay
for it.
 The Marketing Services

1. Processing
2. Transporting
3. Storing
4. Buying and Selling
Basic Marketing Concepts
Point of production
the point of first sale by the
farmers.
Services performed by the
producer before the point of first
sale are production services and
are not included in the definition.
Basic Marketing Concepts
Marketing creates four types of
utility in the process of making goods
and services useful:
Form utility
Place utility
Time utility
Possession utility
Basic Marketing Concepts
Form utility – created if goods
possess the required properties.
 results
from changing the form of raw
materials and creating something new.
 ex.hogs that are slaughtered and cut
into parts
Basic Marketing Concepts
Place utility – created when products
are made available where they are
most wanted.
 ex.
Shippers who bring hogs to Metro
Manila from Mindanao, then from
wholesalers, retailers then to consumes.
Basic Marketing Concepts
Time utility – created when products
are made available when they are
most wanted.
 ex.
Meat wholesalers who freeze some
pork products for later use.
 Meatis made available from periods
when they are plenty to periods when
they are scarce.
Basic Marketing Concepts
Possession utility – created when
goods are placed under the control of
those who decide to use them.
Basic Marketing Concepts
Marketing function
A specialized activity performed in
accomplishing the marketing
process.
 Approaches to the study of
marketing

Commodity Approach
Institutional Approach
Functional Approach
Structure-conduct-performance
approach
 Approaches to the study of
marketing

Commodity Approach
product oriented rather than
marketing function oriented
May cover the characteristics of the
product, demand and supply,
behavior of consumers and prices.
 Approaches to the study of
marketing

Institutional Approach
analysis of the various agencies
involved in the marketing process.
Answers the “who” in the
marketing process.
 Approaches to the study of
marketing

Functional Approach
Attempts to answer “what” in the
query “who does what?”
Marketing function – a major
specialized activity performed in
accomplishing the marketing
process
 Approaches to the study of
marketing

Functional Approach
Considers the jobs that must be
done
Helpful in evaluating marketing
costs of various middlemen
 Approaches to the study of
marketing

Types of marketing functions

– Exchange function
– Physical function
– Facilitating function
 Elements of Market

1. Buyers
2. Sellers
3. Trading facilities
Problems in Agricultural Marketing:

• Perishability
• Seasonality
• Bulkiness
• Heterogeneity
 The 4 P’s to consider

1.Product
2.Price
3.Place/Distribution
4.Promotion
 I. Product Strategy
a.) … revolves around the choice of the
right group of product

Products may be grouped into:

• raw/fresh
• Semi-processed
• processed
b.) …choice of the right product mix

• Wide (lot of product lines)

• Deep (several products w/in each line)
• Consistent (products produced are
related)
c.) Product Branding Strategy
*Brand- a letter, word or symbol used to
identify a product

Branding is uncommon in Agriculture because:

• Not affordable
• Lack of product differentiation
• Short shelf life/ market exposure
• perishable
 d.) Packaging Strategy

Packaging - it is the total presentation of the

product (known as the silent middleman).

• Some characteristics of a good package

• Attractive
• Informative/immediate (answers what
consumers ask , tells about the product)
• Dependable (sustain quality or shelf life)
 Benefits from packaging:

• Protection
• Convenience
• Enhancement/promotion
 II. Pricing Strategy

Three things to consider:

1. Demand
2. Cost
3. Competition
 Steps in price setting:

1. Set pricing objectives

2. Determine demand
3. Determine costs
4. Analyze competitor’s price
 Some Pricing Strategies

1. Manufacturer’s strategies:
- skimming the market
- moving down the demand curve
- extinction pricing
- formula pricing
- tie-in pricing
 2. Retailer’s Strategies

- competitive
- psychological
- unit pricing
- price lining
- special price
 III. Place/Distribution Strategies

Distribution Factors:
1. No. of potential buyers
2. Complexity of product
3. Sales & distribution experience
4. Geography
 Marketing/Distribution Strategies
• Route through which a product & its
title or ownership flow from
production to consumption.

Channel consists of:

1. Producer & consumer
2. Producer, intermediaries, consumer
 Mktg Channel of Upland Rice in
Cotabato 2002

Upland Rural Miller Wholesaler Consumer

rice trader trader
farmer

Retailer
 Choice of the Marketing
Channel

the most efficient channel at the

lowest cost is influenced by:
Nature of the product
Nature of the market
 Nature of the product

Perishability
Unit value
Newness of the product in the
market
 Nature of the Market

Consumer buying habits

Size of the average scale
Total sales volume
Concentration of the purchases
Seasonality of sales
 Factors in Selecting a Middleman:

1.Experience and reputation

2.Future growth potential
a. access to markets that entrepreneur wants
to reach
b. carries adequate stocks of the
entrepreneur-seller
c. provides services to clienteles (credit,
delivery, etc.)
d. effective promotional program
e. pays his bills on time
 Types of Middlemen

Merchant middlemen – take the title

to and therefore own the products
they handle
Buy and sell for their own gain.
 Types of Middlemen
Agent middlemen – acts as
representative of their clients.
do not take title to and therefore
do not own the products they
handle;
income is in the form of fees and
commission
 Types of Middlemen

Processors and manufacturers

Facilitative organizations – e.g.
auction markets
Market associations
 Merchant Middlemen

Contract buyers
Grain millers
Wholesalers
 Merchant Middlemen
Wholesalers
Assembly wholesalers or viajeros
Financer wholesaler or
bodegeros/cuartejera
Shippers
Wholesalers
Wholesaler/retailer
retailer
 Agent Middlemen

Commission agent
Normally take over the physical
handling of the product;
Arranges for the terms of sale,
collection, deducts his fees and
remits the balance to the principal.
 Agent Middlemen
Broker
Usually does not have physical
control of the product;
Ordinarily follows the instructions
of his principal closely and has less
discretionary power in price
negotiations than the commission
agent.
 Benefits from packaging

• Protection
• Convenience
• Enhancement/promotion for the
product
 Pricing strategy

Three things to consider:

1. demand
2. cost
3. competition
 Steps in price setting:

1. set pricing objectives

2. determine demand
3. determine costs
4. analyze competitors’ price
 Pricing strategies

1.Manufacturer’s strategy
-skimming the market
-moving down the demand curve
-extinction pricing
-formula pricing
-tie-in pricing
 Pricing strategies

2. Retailers strategies
-competitive
-psychological
-unit pricing
-price lining
-special price
 IV. Promotional Strategies

Importance of Promotion:
1.It makes the buyers (consumers and
industrial) aware of the alternatives goods
and services that exist.
2.Promotions shorten the distance between
the market and the manufacturers by keeping
buyers well-informed about the different
products.
3.Promotions also help regulate the level and
timing of demand.
 Promotional Methods

1. advertising
2. sales promotion
3. personal selling
4. publicity
 Some Considerations on
Promotions

1. Nature of the market

2. Nature of the product
3. Stage of the product life cycle
4. Availability of funds
 Decisions in Advertising:

1. objective selling
2. budget decision
3. message decision
4. campaign evaluation
 Marketing Margin

• difference between prices at different

levels of the marketing system
• difference between what the consumer
pays and what the producer receives
for his produce ( Price Spread)
 Components of Marketing Margin:

1. Wage- return to labor

2. Interest – return to borrowed capital
3. Rent –return to land & buildings
4. Profit – return to entrepreneurship &
risk capital
 Types of Margins:

a. Absolute Margin=
Selling price – Buying price

b. Percentage Margin=
(Absolute Margin/Selling Price) x 100%
Percent Make-up=
(Absolute Margin/Buying Price) x 100%
Components of the marketing margin

Marketing cost
– returns to the factors of production
used in providing the processing and
marketing services rendered
between the farmers and
consumers.
Components of the marketing margin

• Marketing charges
Returns according to the various
agencies or institutions involved in
the marketing of products
Net return or profit component
 Breakdown of Consumer’s Peso:
• This phase applies to the series of figures
representing the absolute margins of
different types of middlemen or assignable
to different marketing functions, divided by
the retail price,

• Or Absolute Margin at any two levels

Final Retail Price or Consumer price
Where: Final Retail Price or Consumer Price=
Farm Price + Mktg Margins of all Middlemen

1. Farmer’s Share =
(Farm Price/Final Retail Price) x 100%
Eg. Farmer 10 Retailer 20 Consumer

Farmer’s share = (10/20) x 100% = 50%

 2. Middleman’s share =
Middlemen’s Absolute Margin X 100 %
Final Retail Price

a. Wholesaler Share (WS) =

WS Absolute Margin X 100%
Final Retail Price
b. Contact Buyer Share (CB) =

CB Absolute Margin
X 100 %
Final Retail Price

c. Retailer Share (R) =

R Absolute Margin
Final Retail Price X 100 %
Eg. Farmer P10 CB P20 WS P25 RS P28 C

a. WS Share = {(25-20)/28} x 100% = 17.85%

b. CB Share = {(20-10)/28} x 100% = 35.71%

c. R Share = (3/28) x 100% = 10.7%

d. Farmer’s share = (10/28) x 100% = 35.71%

 Theory of Price Controls
Principal purpose: Keep prices from
rising.
Recall: High prices discourage
consumption and encourage production
particularly in a competitive economy
where economic forces operate.
Assume that the market for meat is initially
at equilibrium at P* and Q*.
 Theory of Price Controls
Assume further that income increases
because of a wage increase (recall again
the slogan “ITAAS ANG SWELDO,
IBABA ANG PRESYO!!).
Result: Consumers demand for meat will
shift to the right (D2), i.e. consumes
purchase more meat than previously at
each price.
 Theory of Price Controls
Consumers notice that most meat
counters are emptied faster.
Due to the increase in demand, retailers
attempt to purchase more carcass beef.
Given the fixed supply of cattle, the
retailers must pay higher prices for cattle.
The higher prices are passed on to
consumers.
 Theory of Price Controls
The rising prices have two effects:
1. It encourages producers to expand
output.
2. It discourages consumption eventually
resulting to a new equilibrium price at
P2 and quantity Q2.
Effect of a price freeze????
 Effects of a price freeze
Unless price is allowed to increase, there
will be ________ of meat because
consumers will want to purchase more
than what producers can sell.
First-come, first serve is frequently used
as a rationing device.
When there are no more cattle to butcher,
the meat stands become empty.
 Export embargoes
Political solutions to perceived economic
problems.
In the US in 1973, there was political
pressure to impose export controls due to
threats of a worldwide food shortage.
Preventing shortages and controlling
prices may be addressed by increasing
supply or reducing demand.
 Export embargoes

In the short run, the only viable solution is

____________________ by restricting
exports.
Effect: Prices fell dramatically after the
export embargo.
Producers felt bad due to the low prices of
farm output; consumers convinced that the
embargo was effective.
Reduced import restrictions
Quantitative restrictions – a trade
measure meant to limit the import volume
of a commodity.
If imports of chicken increased, the
quantity supplied in the market will
increase and prices _________.
With a price freeze, domestic production of
chicken will _______ and prices will
_____.
Reduced import restrictions
If you were the president and shortages
of food supply looms, then you would
_______________________.
Relaxation of food imports would make
____________, ___________, _______
happy.
A series of steps involved in
moving a product from the point
of production to the point of
consumption

a. marketing operations
b. marketing function
c. marketing
d. buying and selling
In agricultural marketing, this
refers to the utility created if
goods possess the required
properties

a. form utility
b. time utility
c. place utility
d. possession utility
Refers to the activity performed to
alter the form, time, place or
possession characteristics of the
product

a. marketing service
b. food processing
c. market planning
d. marketing function
The point of usual first sale by
farmers, typically at the farm or at
the farmer’s home.

a. Point of consumption
b. Point of equilibrium
c. Point of production
d. Point of marginalism
The point where the marketing
end or the point sale refers to

a. Point of consumption
b. Point of equilibrium
c. Point of production
d. Point of breakthrough
A marketing service that
influences consumers to buy. The
objective is to inform consumers
what is available for purchase,
specially if the product is new in
the market.
a. Market intelligence
b. Advertising
c. Market research
d. Branding
This involves the study of various
agencies involved in the marketing
processes. It attempts to answer
the question “who” in agricultural
marketing.
a. Institutional approach
b. Commodity approach
c. Functional approach
d. Market-structure-conduct-
performance approach
The marketing function addresses
the problem of product seasonally.
The primary aim of which is to help
balance the period of plenty to the
period of scarcity.

a. pooling
b. storage
c. processing
d. packaging
It is a demand for finished
product, e.g., choice cuts of meat
is considered

a. Primary demand
b. Derived demand
c. Consumer demand
d. Both a and c
A brand name is a symbol to make
the product

a. Easy to recognize
b. To convey a meaning
c. competitive
d. Both a and b
Which one does not belong to the
4 P’s of marketing?

a. product
b. price
c. place
d. purchase
e. promotion
 It is a type of middleman who
takes title to and therefore, owns
the products he handle. He also
buys and sells for his gain.

a. middleman
b. merchant middleman
c. commission agent
d. broker
Components of marketing margin
are:

a. Marketing cost and marketing charges

b. Marketing cost and transportation
cost
c. Transportation cost and processing
d. Marketing cost and storage cost
 A series of figures representing the
absolute margins of different types
of middleman assignable to different
marketing function divided by the
retail price
a. Percentage margin
b. Constant margin
c. Percentage mark-up
d. Breakdown of the consumer peso
 This is pricing strategy to gain more
customers while maintaining/ holding
the present ones (e.g., odd centavo, even
centavo pricing, quality image pricing,
price of P0.99 etc.)

a. Unit pricing
b. Price lining
c. Special pricing
d. Psychological pricing
A major specialized activity
performed in accomplishing the
different marketing processes.

a. Marketing system
b. Marketing machinery
c. Marketing function
d. Marketing institution
 The volume handled by the farmers
represent their

a. Total production
b. production + import
c. Production + consumption
d. Marketable surplus
Quantitative restrictions vs. a
Tariff
If you were the president and shortages
of food supply looms, then you would
_______________________.
Relaxation of food imports would make
____________, ___________, _______
happy.
ThaNk You