Strategic Business Planning for Commercial Producers

How Do I Develop A Strategic Marketing Plan?

Strategic Business Planning for Commercial Producers

Types of Marketing Planning

Strategic Marketing
Encompasses the entire farm strategy Deals with the broader issue of determining firms strategic position in the market and how to create value from that position

Product Marketing/Pricing
Deals with the tactical side of selling a product
Similar to a set of standard operating procedures for marketing a particular product.

Strategic Business Planning for Commercial Producers

Marketing Defined . . .
Marketing is anticipating the needs and wants of targeted customers and managing the process through which these needs and wants are satisfied . . . profitably

Strategic Business Planning for Commercial Producers

Management Philosophies
Production Concept Starting Point Focus
Product Product Quality and Features Improving production & distribution efficiency

Marketing Concept
Market

Customer needs

Means

Integrated Marketing

Ends

Profits through sales volume

Profits through customer satisfaction

Strategic Business Planning for Commercial Producers

Building A Strategic Marketing Plan

Strategic Business Planning for Commercial Producers

Strategic Marketing Plan

1. 2. 3. 4. 5. 6. Environmental Analysis (SWOT) Identifying Customers Competitor/Value Creation Analysis Marketing Mix: The 4 Ps Financial Analysis and Budget Implementation and Control Plan

Strategic Business Planning for Commercial Producers

1. Know Your Marketplace

Strengths, Weaknesses, Opportunities, and Threats (SWOT) Trends and changes:
Market analysis Segmentation Prioritizing target markets

Strategic Business Planning for Commercial Producers

2. Who Are Your Customers?

Customers vs. Consumers
Customer: firm or person that buys your product Consumer: firm or person that eventually uses your product

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Customer/Consumer Trends
Customers Just-in-time inventory Business to business (B2B) Manufacturing mentality Industrialization of agriculture Consumers Households with fewer people Active, on-the-go lifestyles Concern over the health aspect of food, with a desire for good taste Less time for meal prep

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Know What Is Important to Your Customer

Get inside the mind of your customers Find out why they would buy from you . . . or why they would not Truly understand their needs
Intentional listening Customer analysis Solve their problems

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3. Competitor/Value Creation Analysis

Make sure you are distinctively different from your competition in areas of importance to your customers
Competitive analysis

Reallocation of resources if necessary

Positioning

Strategic Business Planning for Commercial Producers

The Value Chain

Firm Infrastructure

Supporting Activities

Human Resource Management Technological Development Procurement

Inbound Operations Logistics

Outbound Marketing Service Logistics & Sales

Relationship with Suppliers

Relationship with Buyers

Strategic Business Planning for Commercial Producers

4. Determining the Marketing Mix

The set of controllable variables that will accomplish the marketing objectives:
Product strategy Place (distribution) strategy Promotion (communication) strategy Pricing strategy

Strategic Business Planning for Commercial Producers

Product Strategy
Portfolio of Products
Corn, soybeans, hogs, dairy, cattle, value-added grain, fruits and vegetables, custom farming operations, custom feeding operations Fits your strengths and weaknesses Provides acceptable risk/return tradeoff Meets needs of a particular customer segment

Quality
No. 1 versus No. 2 GMO vs. non-GMO

Service
Timely custom operations Pre-sorting of grain or livestock quality

Volume
Large and small quantities Guaranteed volumes (contract)

Strategic Business Planning for Commercial Producers

McDonalds Product Package

Food Fast service Fun for the kids Variety Non-smoking Consistent product

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Waxy Corn
Corn with specific type of starch Delivery Schedule Specific hybrids Quality requirements Purity level

Strategic Business Planning for Commercial Producers

Place Strategy
Storage
On-farm vs. off-farm Segregated or IP

Timing
On-demand Equal amounts throughout the year

Location
Delivery to multiple points

Assortments
Delivery of different amounts to different places at different times

Strategic Business Planning for Commercial Producers

American Crystal Sugar (ACS)

M&M Mars changed from a commodity focus for inputs to a quality assurance focus. ACS keeps the sugar silo at the M&M Mars plant full. ACS shifted from a warehouse next to the ACS factory in Minnesota to an ACS warehouse in Pennsylvania near the candy plant.

Strategic Business Planning for Commercial Producers

Spring Wheat Bakers

Farmer-owned cooperative that processes wheat, grown on Northern Plains into flour Frozen and par-baked bread factory in Atlanta, Georgia, a population center

Strategic Business Planning for Commercial Producers

Promotion Strategy
Advertising
Creating brochures and other advertisements on the products your farm provides and what value they add Creating a farm logo

Personal Selling
Telling your customers how you create value Meeting your grain elevator manager for coffee Having lunch with the lender Taking a Christmas pie to your landlord(s)

Public Relations
Being a good neighbor Being involved in the community Open house days

Strategic Business Planning for Commercial Producers

Price Strategy
Price is the cost the customer must bear in order to obtain the product. It includes: list price discounts allowances payment period credit terms

Strategic Business Planning for Commercial Producers

Pricing Methods
Value-Based Pricing
Set price based on buyers perception of value (rather than on the sellers costs)

Cost-Based Pricing
Add a standard markup to the cost of the product

Competition-Based Pricing
Set price based on following competitors prices

Strategic Business Planning for Commercial Producers

Value-Based Pricing
Customer Oriented Based on customers perceived value

Match price to perceived value

Brand loyalty

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Competition-Based Pricing
Price decision based on actions of competition Less attention on cost or product demand Large firms all charge the same price Smaller firms follow lead of large firms, may offer a slightly lower price

Strategic Business Planning for Commercial Producers

5. Financial Analysis and Budgeting

Estimate the demand given the pricing and promotion strategy. Determine expenses associated with production and marketing. Determine anticipated cash flows. Will strategy cash flow? When? What are the critical assumptions of the financial analysis and what are the impacts of changes in those assumptions?

Strategic Business Planning for Commercial Producers

6. Implementation and Control

Focus attention of everyone on delivering what the customer wants
Management of people Monitoring and control

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How Do I Build A Product Pricing Plan in A Commodity Market?

Strategic Business Planning for Commercial Producers

Commodity Marketing
Homogeneous Product differentiation in services, not product.

Low-cost strategy
What about the price received?
Does every producer get the same price?

Marketing plans systematic pricing strategies.

Strategic Business Planning for Commercial Producers

What Is A Marketing Plan?

A marketing plan is an outline of price, date and

quantity objectives used to generate a

reasonable return for the business given the existing market conditions.

Strategic Business Planning for Commercial Producers

Diagram of A Corn Marketing Plan

Date Triggers
March 15 Jan. 1 May 1 Harvest

Sell 20%
$2.50/bu

Sell 20%
$2.40/bu Price Triggers

Sell 60%r
Existing Price

Strategic Business Planning for Commercial Producers

What Does A Marketing Plan Do?

Detached from the decision

Proper perspective
Introduces discipline Check your logic What if ...

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Steps In A Marketing Plan

Relationship between the business plan and marketing plan
Production history and expectations

Expected prices
Production costs Price and date targets

Review and evaluation

Strategic Business Planning for Commercial Producers

The Business Plan and the Marketing Plan

Marketing plan is implementation of the BP

Implementation consistent with objectives

What are important considerations?

Strategic Business Planning for Commercial Producers

Production History and Expectations

What is the farms history? Is there an underlying trend? How variable is production? Write down expected production. How does expected production relate to pre-harvest sales?

Strategic Business Planning for Commercial Producers

Price Expectations
Assess the situation
Historic patterns (seasonal) Basis patterns

The current situation

Outlook source Market advisors (?!?)

Strategic Business Planning for Commercial Producers

AgMAS An Objective Study of Market Advisory Services

25 Firms subscribe to each service. Observe and follow recommendations Compare to a benchmark price answer Questions:
Do they consistently beat the benchmark? Do they reduce risk and increase returns? Are they as good with corn as with soybeans? http://www.farmdoc.uiuc.edu/agmas/

Strategic Business Planning for Commercial Producers

The Difference
Whats the difference between the market advisory service and the marketing plan?
Beat the Market vs. Accepting What the Market is Giving. Active Marketing = Private Information Active Marketing vs. Passive Marketing

Strategic Business Planning for Commercial Producers

Cost of Production
What are the costs? What revenue cover costs? What price is needed to cover the costs? Is this price realistic?

Strategic Business Planning for Commercial Producers

Price, Date and Quantity Objectives

Identify price and date triggers ..
When should pre-harvest sales be made? What prices are acceptable? Prices attainable?

Set quantity objectives according to

Financial need Risk perceptions

Strategic Business Planning for Commercial Producers

Evaluate and Review Stay disciplined! Evaluate your actions. Are conditions changing?

Strategic Business Planning for Commercial Producers

A Little Marketing Philosophy ...

Bad outcomes still happen Never compare to the market high .. Your plan for your operation ...

Strategic Business Planning for Commercial Producers

Strategic Business Planning for Commercial Producers