AM GRICULTURAL

ARKETING
KING JEHU II QUIRINO RADAZA
Department of Agribusiness Management
College of Agriculture
CENTRAL MINDANAO UNIVERSITY
MARKETING CHANNELS
Marketing channels are alternative routes by which
products flow from the producers to the consumers.
These are made up of interdependent agencies
and institutions involved in the task of moving
products from points of production to points of
consumption.

Marketing channels vary with respect to the type of

commodity handled, time and location.

Marketing channels may have either or greater or smaller

number of members involved depending on the performance
of various marketing functions given in terms of service outputs.

A product often passes through a number of intermediaries

before reaching the consumers.
TYPES OF INTERMEDIARIES

A. Contract buyers- most prevalent for fruits and

vegetables channels. An agreed price is set and a
contract is made between the producer and
buyer before the product is harvested. The
contract buyer takes care of the plants until
harvest. All expenses are borne by the buyers
including pre-harvest and post –harvest and risk.

B. Wholesalers- merchant middlemen who sell to retailers and

other merchants in significant amounts but not to ultimate
consumers. Products are usually sold in large quantities or on
wholesale basis.

C. Commission agents – middlemen who buy products in localized

areas from the producers and other middlemen. They buy
products for other middlemen such as assembler-wholesaler and in
return be given commissions as payment for their services.
D. Wholesaler-retailers – middlemen who get
the produce in large quantities either
from wholesalers or contract buyers.
They sell mainly to retailers on
wholesale basis but they also retail the
rest.
E. Assembler-wholesalers – they buy from producers and
contract buyers, assemble the products in large
volume and transport them to market centers. They
sell products in wholesale basis.

F. Retailers- these are product handlers who serve as the last

link in the marketing channel. They are selling directly
to consumers on retail basis and conducted almost
every day.
ANALYSIS
OF AGRICULTURAL PRODUCTS
Market analysis is the process of looking into,
examining and evaluating the external
environment of the firm or farm with view of
identifying opportunities and threats. The
components of market analysis in agricultural
products are: 1) market structures 2) demand
and supply, price analysis 3) methods of
forecasting and 4) market segmentation and
target marketing.
1. Market structure refers to how a market is organized
with particular emphasis on the characteristics that
determine the relationships among the various sellers
in the market, among the various buyers and
between the various buyers and sellers in a market. In
other words, market structure deals with the
organization of the market as it influences the nature
of competition and pricing

Types Characteristics How Price is determined

1. Perfect Many buyers and sellers; By interaction of demand and
Competition no single market supply curve
participant affecting price
2. Monopoly One seller, many buyers By seller, facing market demand

3. Monopsony One buyer, many sellers By buyer, facing market supply

4. Oligopoly Few sellers dominate In complex manner

market
5. Oligopsony Few buyers Influenced by price/wage
quoted by competing firms
2. Demand and Supply

3. Methods of Forecasting
a. Needs Assessment
b. Expert’s Opinion
c. Time Series Analysis
1. Arithmetic Straight Line Approach
2. Geometric Approach
3. Trend using Least-square method
4. Market Segmentation and Target Marketing
Another component of market analysis is the selection of a target
market. Before pinpointing a target market , the total market must
be segmented first. Market segmentation is the process of
subdividing the total heterogeneous market into several groups
which are more or less homogeneous. This method is used to
identify potential consumers because an appropriate marketing
strategy cannot be determined until the market has been
identified.
Major Segmentation Variables

1. Geographic region by political regions I-XII

2. Density -urban, rural, sub-urban
3. Demographic- age, sex, household size, family life
(young and single, young married), monthly
income, occupation, education, religion
4. Psychographic – social class(Class A, B, C,D) lifestyle (
conservative, modern)
5. Behavioral – occasion (regular)
6. User status - non-user, ex-user, potential user, first time
user. Usage rate (light user, medium user, heavy
user)
 MARKETING MARGINS
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.

The value of the marketing margin may be

subdivided into different components.
One way of subdividing this margin is in terms of its returns to the factors
of production used in providing the processing and marketing services
rendered between the farmers and consumers. These include wages
as return to labor, interest as a return to borrowed capital, rent as a
return to land and building and profit as a return to entrepreneurship
and risk capital. All these things are referred to as marketing costs.
Another way of subdividing marketing
margin is according to various agencies
and institutions involved in marketing of
products like return to retailers for their
services, to wholesalers for their activities,
to processors for their manufacturing
activities and to assemblers for the work
they perform. This subdivision is referred to
as marketing charges.

In marketing studies, these components are presented as

marketing costs and returns. Net return is derived by
deducting marketing costs from marketing margin. The net
return is used to reflect the payment for the risks,
management and capital employed in moving the product
from one market level to another.
 EXPENSIVE PRICE
The wide margin is largely due to the provision of
marketing services demanded by consumers. These
services require additional labor, management and
capital that lead to accumulated costs thus brought
to a large margin. On the other hand, the wide
margin may be due to excessive marketing cost.
This weak position of many producers when bargaining with
wholesale buyers because of indebtedness to them, lack of
capital, inadequate knowledge of prices and market condition
and the lack of competition between buyers at the farm level
often allow the wholesalers to obtain higher than necessary
profits at the expense of the farmers.

The wholesalers and retailers may incur high cost because of

inadequate transport, storage and handling facilities and
methods which cause heavy losses of produce, deterioration in
quality and enhanced market risks.
Another source of excessive costs is the lack of
price and quality information among consumers,
the absence of effective competition at the retail
level and the lack of consumer organization and
public measures to protect their interests.
TYPES OF MARGIN
A. 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.
B. Percentage margin – the absolute difference in price i.e.
the absolute margin divided by the selling price. If a retailer
purchased a kilo of eggplant at P12/kilo and sold it for
P15/kilo, the absolute margin would be P3/kilo and the
percentage margin would be 20%.

Percentage margin = Absoluite margin x 100

Selling Price

where absolute margin = Selling price – buying price

C. Combination of fixed constant and percentage
margin – middlemen set a fixed margin, say
P0.50/kilo of eggplant in addition to the percentage
margin he could obtain.

Percentage mark-up is different from percentage

margin. 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’S PESO
The breakdown of consumer’s peso is a phrase popularly
applied to a series of figures representing the absolute
margins of different types of middlemen or assignable to
different marketing functions, divided by the retail price.
Mathematically, this can be expressed as:

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
Wholesaler’s share = (Wholesaler’s margin)/Final retail
price
Retailer’s share = (Retailer’s margin)/ Final retail price
Example:
Given: Farm price of mango = P30/kilo
Wholesaler price = P38/kilo
Wholesaler-retailer price = P45/kilo
Final Retailer price = P60/kilo

To compute for:
Farmer’s share = 30/60 x 100 = 50%
Wholesaler’ share = (38-30)/60
= 8/60 x 100 = 13.33%
Wholesaler-retailer’s share
= (45-38)/60
= 7/60 x100 = 11.67%
Retailer’s share = (60-45)/60
= 15/60 x 100 = 25%
Middlemen’s share = 100 –farmer’s share
= 100-50 = 50%
or 13.33 + 11.67 + 25 = 50%
Farm price = P12/kg,
Retail price = P18/kg,
Marketing Cost = P0.65/kg
Farmer’s share =12/18 = 0.67 or 67%

Net profit as a percentage of marketing margin.

From the expression marketing margin = marketing

cost + net profit, the net profit can be computed as

Net profit = marketing margin – marketing cost

= (18-12) – P0.65= P5.35/kg

Net profit as a percentage of margin

= 5.35/6 =0.89 or 89%

Marketing cost as a percentage of marketing

margin = P0.65/6 = 0.108 0r 11%
THE 4 P’S OF MARKETING
A marketing mix strategy consists of four parts:
product, price, place or distribution and
promotion. These strategies are referred to as the
4 P’s of marketing.
A. Product Strategy

A product is defined as anything offered for sale, attention

and acquisition.

Agribusiness products are classified into three groups: raw or fresh

agricultural products, semi-processed and processed products.

Raw products are newly harvested products from the farms which
are devoid of transformation. They are either consumed directly or
used as raw materials by agro-industries. Semi-processed products
had underwent primary processing and are not usually intended for
human consumption but further processing. Processed products are
finished products which underwent several levels of transformation.
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.

Branding – is a letter, word or symbol used to

identify products. A brand has three parts: the
name, mark and trademark.

In agriculture, branding is not commonly observed

because they are highly perishable, have short
exposure in the market, considers added cost to the
farmers without any added return and the lack of
differentiation among farm products. Their only basis of
differentiating and choosing one product over the
other is the degree of freshness.
A label is a part of a package which carries
information about the product, It shows the
brand, manufacturer, expiry date and other
information about the product. The types of label
are brand label, grade label and description
label which is the most common type of label.
B. Pricing strategy
Business whether small or large have the important task of
pricing the products. It is considered as the most important
function since it is the only function which lets money flow back
to the business. The other components of the marketing mix
such as product, place or distribution and promotional
strategies all contribute to the cost pricing t of operating the
business.

Steps in Price Setting

1. Set pricing objective 4. Analyze competitor’s prices
2. Determine demand 5. Evaluate pricing models
3. Determine cost 6. Select the price
PRICE BEHAVIOUR OVER TIME

A. SEASONAL PRICE VARIATIONS

B. ANNUAL PRICE VARIATION
C. TREND
D. CYCLICAL PRICE VARIATIONS
E. RANDOM OR IRREGULAR PRICE MOVEMENTS
Price are generally determined by supply and demand relationships. The
Fluctuation in prices occur primarily for three reasons:

A. SEASONAL PRICE VARIATIONS

 PRICING STRATEGIES
A. Competitive pricing- set prices to be near or equal to
those in other stores for products bought at regular or
irregular basis. This is the most common pricing
method used in agricultural products.
B. 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.
C. 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.
D. 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.
E. Special prices – pricing on items to be offered on special occasions
C. Distribution or Place Strategy

Distribution means making the right products

available at the right place and at the right time. It
is a very important component of the marketing mix
because it links the firm to the market.

There are 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.
D. Promotion Strategy
The entrepreneur’s job does not end in deciding where
and how the company will distribute the products.
Another consideration is to disseminate that
information that such products exists and to keep
buyers well-informed about the product merits and
developments.

Promotion is the personal and /or impersonal process of assisting a

prospective customer to buy a product or act favorably upon an
idea that has commercial significance to the seller.

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
Marketing Plan
A marketing plan is a means that allows the farmer
to study the needs and preferences of the
consumers in advance before production is carried
on. It consists of the courses of action that the farm
manager should do to insure that the products that
will be produced will be sold at a price
commensurate with his efforts and costs of
production.
Purpose of the marketing plan

Basically, the marketing plan will address what products to grow with
good market potential? when to sell (markets), to whom to sell
(potential buyers) and to define the strategy how to reach that
market. –means of transport, packaging materials, schedule of
delivery, prices expected, terms of payment, etc.