FBM 1

AGRICULTURAL MARKETING
AND PROPOSAL MAKING

Prepared by:

LYNETTE Y. SALAS
Instructor I
 TERMINOLOGIES
MARKET
refers to a place where buyers and sellers
transact.
AGRIBUSINESS MARKETING
is the process of moving the product from the point of
production to the point of consumption.

MARKETING

series of services (activities, functions) involved in moving

a farm product from the point of production to the point of
consumption.
 AGRICULTURAL MARKETING

DEFINED AS:

- is the study of all the activities, agencies and policies

involved in the procurement of farm inputs by the
farmers and the movement of agricultural products from
the farms to the consumers.

- The agricultural marketing system is a link between the

farm and the non-farm sectors.
 OBJECTIVES OF AGRICULTURAL MARKETING

The efficiency and success of the system depends on how these

conflicting objectives are reconciled.
• Producers: Producer-farmers want the marketing system to purchase
their produce without loss of time and provide the maximum share
in the consumer's rupee. They want the maximum possible price for
their surplus produce from the system. Similarly, they want the
system to supply them the inputs at the lowest possible price.
• Consumers. The consumers of agricultural products are interested in
a marketing system that can provide food and other items in the
quantity and of the quality required by them at the lowest possible
price. However, this objective of marketing for consumers is
contrary to the objective of marketing for the farmer-producers
 OBJECTIVES OF AGRICULTURAL MARKETING
• Market Middlemen and Traders: Market middlemen and traders are interested in
a marketing system which provides them a steady and increasing income from the
purchase and sale of agricultural commodities. This objective of market
middlemen may be achieved by purchasing the agricultural products from the
farmers at low prices and selling them to consumers at high prices.

• Government: The objectives and expectations of all the three groups of

society-producers, consumers and market middlemen - conflict with one another.
All the three groups are indispensable to society. The government has to act as a
watch-dog to safeguard the interests of all the groups associated in marketing. It
tries to provide the maximum share to the producer in the consumer's rupee; food
of the required quality to consumers at the lowest possible price; and enough
margin to market middlemen so that they may remain in the trade and not think of
going out of trade and jeopardize the whole marketing mechanism. Thus, the
government wants that the marketing system should be such as may bring about
the overall welfare to all the segments of society.
There are three terms in the definition that need
emphasis:
1)Services
these are any function or activity performed
on or for the product that alters its form, time,
place and possession characteristics.
they add value to the product and someone
has to pay for the services rendered
These activities or functions are categorized into:
a) transactional
which include finding buyers, buying and
selling and risk taking
b) logistical
which include grading, assembling,
packaging, storage, transportation and
presentation of customers
c) facilitating functions
which include dissemination of marketing
information, marketing research and
financing.
2) Point of production
the point of usual first sale by the farmer at
the farm or at the farmer’s home.
At this point, transaction occurs and a farm
price is established
3) Point of consumption
the point where marketing ends or the point of
last sale where the goods are in the possession
of the final consumer, a transaction occurs and a
price is established

Why marketing is productive?

It is productive because it creates utility, the
process of making useful goods and services. It
is the want satisfying power of an object or
service
IMPORTANCE OF
AGRICULTURAL
MARKETING
The importance of agricultural marketing economic development has been indicated in
the paragraphs that follow:
• Optimization of Resource use and Output Management: An efficient agricultural
marketing system leads to the optimization of resource use and output management An
efficient marketing system can also contribute to an increase in the marketable surplus by
scaling down the losses arising out of inefficient processing storage and transportation.
• Increase in Farm Income: An efficient marketing system ensures higher levels of income
for the farmers by reducing the number of middlemen or by restricting the commission on
marketing services and the malpractices adopted by them in the marketing of farm products
An efficient system guarantees the farmers better prices for farm products and induces them
invest their surpluses in the purchase of modern inputs so that productivity and production
may increase. This again results in an increase in the marketed surplus and income of the
armers. If the producer does not have an easily accessible market-outlet where he can sell
surplus produce, he has little incentive to produce more.
• WIDENING OF MARKETS: A well-knit marketing system widens the market for the
products by king them to remote corners both within and outside the country, ie, to areas far
away om the production points. The widening of the market helps in increasing the demand
on continuous basis, and thereby guarantees a higher income to the producer.
• GROWTH OF AGRO-BASED INDUSTRIES: An improved and efficient system of
agricultural marketing helps in the growth of agrobased industries and stimulates the overall
development process of the economy. Many industries depend on agriculture for the supply
raw materials.
• PRICE SIGNALS: An efficient marketing system helps the farmers in planning their
production accordance with the needs of the economy. This work is carried out through price
signals.
• ADOPTION AND SPREAD OF NEW TECHNOLOGY: The marketing system helps the
farmers in the adoption of new scientific and technical knowledge. New technology requires
higher investment and farmers would invest only if they are assured of market clearance
• EMPLOYMENT: The marketing system provides employment to millions of persons
engaged in various activities, such as packaging, transportation, storage and processing.
ADDITION TO NATIONAL INCOME: Marketing activities add value to the product thereby
increasing the nation’s gross national product and net national product.
BETTER LIVING: The marketing system is essential for the success of the development
programs which are designed to uplift the population as a whole economy.
 Four types of utility are created:
Form utility
is created if goods possess the required
properties. They change the form of raw
materials and create something new.
Time utility
is created when products are made available
at the time when they most wanted
Place utility
is created when products are made available to
the place where they are most wanted
Possession utility
is created when goods are transferred or are
placed under the control of the persons who
desire to use them.
Market has three elements:
 buyers
 sellers and
 trading facilities.
It refers to a group of buyers and sellers with
facilities with one another.
It is a place where buyers and sellers meet to
exchange goods and services
Agricultural marketing system for agricultural
products is a complex system within the various
subsystem that interact with one another and with
different marketing environment

Characteristics:
It has goals or objectives to attain
It has components or participants to perform
certain functions and all necessary job
between the decision to produce and the final
consumption of the product.
It needs institutional arrangements
 It needs planning and management decision
structure which control and coordinate the
forces at work
It has spatial and temporal dimension and
most often commodity specific.

The marketing system has six components or

subsystems:
Producer subsystem – consists of the initiators
of production who produced goods and brought to
consumers via channel subsystem
 Channel subsystem – consists of market
participants who are directly responsible for
making farmer’s products available to the user at
the right place, time and form.
Flow subsystem – facilitates product financial
information flows such as product trends, grading,
standardization and prices.
Functional subsystem – consists of marketing
functions or services related to the creation of
place, time and form utilities that involve
assembly, concentration and dispersion.
Consumer subsystem – the final repository of
products produced by farmers.

Environmental subsystem- facilitates market

performance encompasses four other areas or
factors that affect the working of the entire
marketing system: climatic/physical, socio-
cultural, economic/technological and
legal/political factors.
Knowledge of marketing and its problems will help
farmers make important decisions on the following
aspects:
What to produce and how to prepare it for sale
When and where to sell
How much of the marketing job should be done
by the farmer himself either as individual or as a
member of the group
What can be done to expand markets
Which of the many different marketing
arrangement are desirable
How to secure changes necessary to correct
undesirable practices be served
 On the part of middlemen and consumers the marketing
system performs the following functions:

Provide an outlet for intermediaries of

agricultural products
Distribute goods and services to consumers in
the desired forms and conditions and delivers
them at prices consumers are willing and able
to pay.
Provides employment for middlemen and
producers
 Characteristics and Problems of
Agricultural Marketing
Dependence on middlemen can be
explained by small farm size, poor cash
position of the farmers and unavailable
marketing facilities
Inadequate market information
Inadequate marketing support services
Unique features of agricultural products
Number of producers
Characteristics of consumers
Entry Points in Agricultural Marketing
Organization of Small Farm Businesses
Corporate and Small Grower
Arrangement
Establishment of Trading Posts
Setting up of Grading Standards for
Agricultural Products
Building of Marketing Infrastructures and
Communication facilities
Market Research in Agricultural Products
 Approaches to the Study of
Agricultural Marketing
Commodity approach
this is a product oriented approach.
It studies the characteristics of the product,
market demand and supply situation at the
domestic and international level, the behavior
of the consumers in relation to a specific
product and prices either at the farm,
wholesale or retail level.
Institutional approach
studies the various agencies and business
structures that perform the marketing process.
It considers the nature and character of various
middlemen and related agencies and the
arrangement and organization of the marketing
machinery.
This includes merchant middlemen (contract
buyers, grain millers, wholesalers, and retailers),
agent middlemen (commission agent, broker),
processors, manufacturers, facilitative
organizations and market associations. In this
approach the human element receives primary
emphasis.
Functional approach
method of classifying the activities in the
marketing process into functions.
It attempts to answer “what” in the question
“who does what”.

Market structure, conduct and performance

Market structure
refers to how a market is organized with particular
emphasis on the characteristics that determine the
relationship among the various sellers in the market,
among the various buyers in the market or between
various buyers and sellers in a market.
 Market conduct
refers to the way firms adjust to the market in
which they are engaged as buyers and sellers.
Marketing performance
the appraisal of how much the economic
resources of the industry’s market behavior
or conduct deviate from the best possible
contribution they can make to handle relevant
socio-economic goals.
Market performance includes:
The price relative to the average cost of production
and size of profits
The relative efficiency of production
 The size of sales promotion costs relative to
the costs of production
The character of the product, including choice
of design, level of quality and variety of
product within any market
The rate of progress of the firm and industry
in developing both products and techniques of
production
The size of the margin in relation to marketing
resources
The size of marketing loss
 Marketing Functions
1. Exchange functions – are activities involved in the
transfer of the title of goods
Buying function – seeking out the sources of
supply, assembling of products and the
activities associated with purchase.
Selling function – covers all the various
activities that are sometimes called
merchandizing.
2.Physical function- are those activities that involve
handling movements and physical change of the actual
commodity itself
 Storage function – primarily concerned with
making goods available at the desired time.
Transportation function – primarily concerned
with making goods available at the proper
place and the adequate performance of
alternative route and types of transportation
costs.
Processing function – includes all essential
manufacturing activities that change the basic
form of the product
3. Facilitating Function – makes possible the
smooth performance of exchange and physical
functions.
 Standardization function- the establishment and
maintenance of uniform measurements of both
quality and quantity.
Financing function – the advancing of money to
carry on the various aspects of marketing.
Risk-bearing function – the acceptance of the
possibility of loss in the marketing of a product.
Market intelligence function – the job of collecting
, interpreting and disseminating the large variety of
data which are necessary to the smooth operation
of the marketing process.
Market research
undertaken to evaluate the possible alternative
marketing channels that may be used in the
different ways of performing other functions
and market potentials for new products.
Demand creation
usually achieved through effective advertising
of the product and other promotional devices
using either the media or a house to house
campaign.
 Choice of Marketing Channel
1) Nature of the product
 considers the perishability, unit value of
the product and newness of the product.

2) Nature of the market

considers the consumer buying habits, size of
average sale, total sales volume, concentration
of purchases and seasonality of sales.
3) Cost involved, investment required and
potential net profit from sales
the producer may decide to distribute the
product through established middlemen who
are specialized in their marketing functions
and thereby minimize costs.
 Types of Intermediaries:
Contract buyers
Wholesalers
Commission agents
Wholesaler-retailers
Assembler-wholesalers
Retailers
Marketing margin
refers to the difference between prices at
different levels of the marketing system.
It can also be defined as the difference
between what the consumer pays and what
producer receives for his products.
 Types of Margins
Absolute constant margin
expressed in terms of pesos and are constant
overall quantity ranges.
Regardless of the volume marketed the
absolute peso difference between prices at
various levels remains constant.
 Percentage margin
the absolute difference in price i.e. the absolute
margin divided by the selling price.

Percentage margin = Absolute margin x 100

Selling Price

where absolute margin = selling price – buying price.

Combination of fixed constant and percentage

margin
Percentage mark-up
It is computed as the absolute margin divided
by the buying price. In our example above, the
absolute margin is P3/kilo therefore, the
percentage mark-up would be 25% which is
higher than the percentage margin.
 Breakdown of Consumer’ Peso
Absolute margin at any two levels = AM
Final retail price or consumer’s price PM

Where: Final retail price = Farm price +

marketing margin of all middlemen

Farmer’s share =(Farm Price)/Final retail price

Middleman ‘s share = (Middleman’s margin)/ Final retail
price

Example: Wholesaler’s share = (Wholesaler’s

margin)/Final retail price
Retailer’s share = (Retailer’s margin)/ Final retail price
Marketing Program – 4 P’s of Marketing
1.Product Strategy
A product is defined as anything offered for
sale, attention and acquisition

a. Product mix – refers to the number of

products a firm is handling. The firm’s product
mix may be described as
1) wide – if there are a lot of product lines
2) deep -if there are several products within
each line and
3) consistent- if the products being produced are
related.
b.Branding – is a letter, word or symbol used to
identify products. A brand has three parts: the
name, mark and trademark.
Functions of branding:
Brands make product identification easier.
They distinguish one product from another so
that imitations can be prevented
They are used to emphasize a certain quality
level and facilitates setting different prices for
each level
 They make branding easier because
traders could sort the products they are
carrying the brands.
c.Packaging – the total presentation of the
product
benefits from packaging:
It protects the goods in storage and
transit
It makes handling convenient
It promotes and enhances the product
2. Pricing strategy
It is considered as the most important
function since it is the only function which
lets money flow back to the business.
Steps in Price Setting
1.Set pricing objective
2.Determine demand
3.Determine cost
4.Analyze competitor’s prices
5.Evaluate pricing models
6.Select the price
Retailer’s Pricing Strategies:
Competitive pricing
set prices to be near or equal to those in other
stores for products bought at regular or
irregular basis
Psychological pricing
the use of odd-centavo pricing such as P4.91,
P4.95, P4.97 or P4.99 instead of P5.00.
These prices are understood by the customer
to denote minimum price more than mere
quality available in the market price.
Unit pricing
setting prices to gain volume is through pricing items
in units of two or more. This quoting a product as 2
for P8.99 results to large purchases.

Price lining
offering two or more classes of the same product at
different prices. By separating same products into two
or more groups and placing a high price on the better
lots even though the cost is the same , profits can be
increased.
 Special prices
pricing on items to be offered on special occasions

3.Distribution or Place Strategy

Three decisions to be made in order to effectively
manage distribute systems:

1.) a seller has to choose between direct and indirect

marketing.
2) if he choose indirect marketing, he has to
determine the number of channels to be passed by
his products
3) he has to decide on the channel management
system.
 Distribution factors to be considered
before contemplating a distribution option:
Number of potential consumers
Complexity of the products
Distribution budget
S e l l e r ’s s a l e s a n d d i s t r i b u t i o n e x p e r i e n c e
Geography
 Importance of Middlemen in Marketing
Chain

Intermediaries aid in the creation of time, place

and possession activities.
Intermediaries have their own form of
specialization in marketing activities
Intermediaries reduce contractual costs
 4. Promotion Strategy
Promotional Methods;
Advertising
any paid form of non-personal presentation
of the product
Personal selling
oral presentation of the product
Sales promotion
are price off, bonuses, lotteries and
premiums
 Publicity
non-personal form of promotion which aims
to attract buyers by publishing commercially
significant news about the product in
different media.

Importance of Promotion:
It makes the buyers aware of the alternative
goods and services that exist.
It shortens the distance between the market
and the manufacturers by keeping buyers well-
informed about the different products.
Promotions also keep regulate the level and
timing of demand.
Thank You!! 