Concepts of Marketing Margins

Concurrent margins
The difference between the prices prevailing
at successive stages of marketing at a given
point of time.

For example, the difference between the

farmers selling price and retail price on a
specific ate in the total concurrent margin.
 Concepts of Marketing Margins

Lagged margin
The difference between the price received by
a seller ata particular stage of marketing and
the price paid by him at the preceding stage of
marketing during an earlier period.

Slide 16 of 30 Office Theme

Estimationof MarketingMargins and Costs

Chasingoflot method

Sum of average gross margin method

Comparisonof prices at successivestages of

marketing
Chasingof lot method

A specificlot orconsignmentis selected and

chased through the marketingsystem until it
reachesthe ultimate consumer.

Thecost and margininvolved at eachstageare

assessed.

This method is appropriate for such perishable

farm commodities as fruits, vegetables, milketc.
Sum of average gross margin method

The average gross margin at each successive level of

marketing is worked out by dividing the difference of

the money value of sales and purchase by the number
of units of the commodity transacted by a particular
agency.
Sum of average gross margin method

M 2
MT Total marketing margin
Si Sale value of a product for jth firm

P i value paid bythe jih firm

Q i Quantity ofthe product handled by ith firm

Comparison of prices at successive stages of
marketing8
Prices at successive stages of marketing at the producer's,
wholesaler's and retailer's levels are compared.
The difference is taken as gross margin.
This method is more appropriate when the objective is to study the

movements of marketing costs and margins in relation to prices and

cost indices.

Commodities not requiring processing before sale to consumers, such

as wheat, maize, bajra, jowar

Comparison of prices at successive stages of
marketin8
Prices at successive stages of marketing at the producer's,
wholesaler's and retailer's levels are compared.
The difference is taken as gross margin.
This method is more appropriate when the objective is to study the

movements of marketing costs and margins in relation to prices and

cost indices.

Commodities not requiring processing before sale to consumers, such

as wheat, maize, baira, jowar

Producer- Whole saler -Retailer--Con
Comparison of prices at successive stages of
marketing
Prices at successive stages of marketing at the producer's,
wholesaler's and retailer's levels are compared.
The difference is taken as gross margin.
This method is more appropriate when the objective is to study the

movements of marketing costs and margins in relation to prices and

cost indices.

Commodities not requiring processing before sale to consumers, such

as wheat, maize, baira, iowar

Producer
Whole saler -Retailer- Consumer
Other concepts

Producer'sprice:
P,Pa-C
P-Producer price
Pa-Wholesale priceinthe primaryassembling market
C-Marketing cost incurredbythefarmer
Other concepts

Marketing margin of a middleman:

The difference between the total payments (cost+
purchase price) and receipts (sale price) of the
middleman (ith agency)

(a) Absolute margin of ith middlemen

(Ami)= Pri( PPi +Cmi)

Producer --wholesaler -

Retailers-consumer
 Other concepts

Marketing margin of a middleman:

(b) Percentage margin of ith middlemen
Pmi (Ppi + Cm) x 100
PRi
(c) Mark-up ofith middleman

Mi PRI-Ppi+ Cmi) 100

Where,
PRi Totalvalue of receipts per unit (sale price)
Ppi Purchase value of goods per unit (purchase price)
Cmi Cost incurred on marketing per unit.
Factors affecting the cost of marketing

Perishability of the product.

Extent of loss in storage and transportation.

Volume of the product handled

Regularity in the supply of the product

Extent of packaging

Extent of adopting grading

Necessity of demand creation

Bulkiness of the product

Extent of risk

5
Necessity of storage
Reasons for Higher Marketing costs ofAgricultural
Commodities

widely dispersed farms and small output per farm

Bulkiness of agricultural products
Difficult grading
Irregular supply
Need for storage and processing
Large number of middlemen

Risk involved
 How to Reduce Marketing Costs

1.Increase the efficiency of marketing

Increasing the volume of business
Improved handling methods
Managerial control
Changein marketing practices and technologY