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
Strategic Business Planning for Commercial Producers
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
Strategic Business Planning for Commercial Producers
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
Strategic Business Planning for Commercial Producers
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
Strategic Business Planning for Commercial Producers
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
Strategic Business Planning for Commercial Producers
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
Strategic Business Planning for Commercial Producers
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 ...
Strategic Business Planning for Commercial Producers
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
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