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Agricultural
Marketing
 Marketing
A series of services involved in moving the
product from the point of production to the
point of consumption

Services
Point of production
Point of consumption

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Services
A function performed on or for a product
that alters its form, time, place or
possession characteristics. Services add
value to a product and are generally
performed to meet existing or anticipated
consumer demand
 Point of Production
The point of usual first sale by the
farmers, typically at the farm or at
the farmers home. At this point a
transaction occurs and a bonafide,
i.e. the farm price is established

Point of Consumption
The point where marketing
ends. The point of last
purchase/ sale
Marketing is productive because it
creates utility.
Utility is the process of making useful
goods and services. It is not a physical
quality of a thing itself, a want-satisfying
power of an object or service.
Utility
It is the want-satisfying power of an
object or services.

1 Form utility

2 Place utility

3 Time utility

4 Possession utility
Posession Utility
 Market
• A group of buyers and sellers with
facilities for trading each other
•A place where buyers and sellers meet to
exchange goods or services
Components of Agricultural
Marketing System

Flow
subsystem
Producer Functional
subsystem subsystem
Marketing
System
Channel Environment
subsystem subsystem
Consumer
subsystem
 Problem Areas in Agricultural
Marketing
1.Characteristics of the products
 Perishability
 Seasonality of production
 Bulkiness
 Non-homogeniety

2. Number of producers
3. Characteristics of the Consumers
4. Reflecting the demand of consumers
5. Market efficiency
 Poor condition of physical infrastructure

 Minimal flow of market information

 Small volume of market-oriented output

 Inadequate know-how on the part of farmers and traders,

especially on grading and handling

 Absence or lack of definitive public marketing policies and

the non-enforcement of public regulatory prices
 
Table 1. Typology of access to market
Type Access
Small farmers Poor
Large farmers Poor to fair
Traders, middlemen, Fair to good
assemblers
Private corporation Good to very good
 Some Marketing Practices under the
“suki” system are the following:
1. “Tawad” – is a practice in which the buyer asks for a
reduction in price or an additional unit of a commodity.
2. “Price by piece” or “Tingi” – this is a practice of selling
bits and pieces rather than the whole standard size.
3. “Por kilo” – another economy packaging activity wherein
instead of selling the whole piece, e.g., the whole chicken,
the meat is chopped into pieces and packed by the sellers.
4. “Buena mano” – a term used to describe first sale buyer
for the day. The first buyer is usually given special
treatment because the seller believes that if the first sale
is good, then all the others will also be good.
 Approaches to the Study of
Agricultural Marketing

A. The Commodity Approach

 
It is product oriented rather than
marketing function-oriented. The
study may cover the characteristics of
the product, the market demand and
supply situation at the domestic and
international levels, the behavior of
the consumers in relation to a specific
product, and prices either at the farm,
wholesale or retail level.
B. The Institutional Approach

Study at the various agencies and business

structures involved in the marketing process. It
attempts to answer the question “ who”.
Considers the nature and character of the various
middlemen and related agencies and also the
arrangement and organization of the marketing
machinery.
Middlemen
are those individuals or business concerns
that specialize in performing the various
marketing functions involved in the purchase
and sale of goods as they are moved from
producers to consumers
1. Merchant Middlemen

They own the product they handle. They buy

and sell for their own gain.

a. Contract buyer

b. Grain millers

c. Wholesalers

d. Retailers
2. Agent middlemen

Act only as representative of their clients. They

do not take title to, and therefore do not own, the
products they handle. Agent middlemen
received their incomes in the form of fees and
commissions.

a. Commission agent

b. Broker
3. Processors and manufacturers
Primarily undertake some action of production to
change their own.
4. Facilitative organizations
Aid the various middlemen in performing their
tasks. Such organizations do not directly participate
in the marketing process.
5. Market Associations
Are active in buying and selling of goods and often
have far-reaching influence on the nature of
marketing
C.Functional Approach
Major specialized activity performed in
accomplishing the marketing process. The function
approach attempts to answer “ what” in the
question “ who does what?”.

1. Exchange function
Are active in buying and selling of goods and often
have far-reaching influence on the nature of
marketing
a. Buying (assembling ) function
b. Selling functions
2. Physical Function
Are those that involved handling, movement and
physical change of the actual commodity itself.
They are involved in solving the problem of when,
what and where in marketing

a. Storage function

b. Transportation function

c. Processing function
3. Facilitating Function
Are those which make possible the smooth
performance of the exchange physical functions

a. Standardization function

b. Financing function

c. Risk-bearing function

d. Market intelligence function

e. Market research

f. Demand creation
D. The Market Structure- Conduct
Performance Approach
 
1. Market Structure

 Refers to how a market is organized

 Determine the relationship among the various
sellers buyers in the market
 Influences the nature of competition and
pricing within the market structure
 Types of Market Structure

1. Purely competitive market

 Large no. of buyers and sellers
 Homogenous products

2. Absolute monopoly
 Single seller
3. Monopolistic competition
 Large number of sellers
 Differentiated products

4. Oligopoly
 Few large sellers
a. Pure oligopoly
 homogeneous product

b. Differentiated oligopoly
 producing a similar but not identical
product
 2. Market conduct
 Refers to the way firms adjust to the market in
which they are engaged as buyers or sellers.

 Marketing practices

3. Market Performance
This is the appraisal on how the firm achieve
its relevant socio-economic goals.
 Price Determination
Terminologies

 Utility- is the attribute of an item that makes it

capable of satisfying wants

 Value- quantitative expression of the power of

product has to attract other products in
exchange.

 Price- amount of money which needed to

acquire in exchange some combine assortment
of a product and its accompanying service
Price Determination in Perfect Market

Price Increase
 ↑Demand, no ∆ in Supply
 ↓Supply, no ∆ in Demand
 ↑Demand Price, ↓Supply
Price Decrease
 ↓ Demand, no ∆ in Supply
 ↑ Supply, no ∆ in Demand
 ↑ Supply , ↓ Demand
 If ∆ in Demand = ∆ in Supply,
the equilibrium price will tend to remain unchanged

Price Determination in Imperfectly

Competitive Market
1. Monopoly
 The seller will attempt to set a price that will
maximize his profit.

2. Monopolistic competition and oligopoly

 The equilibrium price (and output) is based on
equating marginal revenue and marginal cost
Price Behavior over Time

1. Seasonal Price Variation

 Uniform pattern within a year

2. Annual Price Variation

 year-to-year product variations

3. Trends
 ∆ in tastes and preferences of consumers
 ↑ in production and income
 ↑ technological changes in production
5. Cyclical Price Variations
If there is ↑ in production ,↓ in prices
If there is ↓ in production ,↑ in prices

Large
Produc
tion
High Large
Price Supply

Small
Low
Producti Prices
on
6. Random or Irregular Movement in Price
unexpected and unpredictable price shifts caused by
unanticipated forces like inventions, strikes, physical
destruction from typhoons

Operational Aspects of the Pricing Process

1. Individual Negotiations
Bargaining between individual buyers and sellers for
each transaction
2. Organized Market

a. Commodity exchange
Spot/ Cash Market
Future Contracts
b. Auction market- buyers are able to observe each
lot of product. Prices are then determined by
progressively bidding for each transaction

c. Terminal livestock exchanges- livestock

producers consign their animals to a commission
firm at the terminals
3. Administered Prices

Administered pricing in agriculture is almost exclusively

a government function

4. Collective Bargaining

There are now procedures of some farm products who

have organized themselves to the point that they have
been able to collectively bargain with handlers of the
product
 
 Pricing Strategies

Manufacturers Pricing Strategy

1. Skimming the market

2. Moving down the demand curve
3. Penetrating pricing
4. Pre-emptive pricing
5. Extinction pricing
6. Formula pricing
7. Tie-in pricing
 Pricing Strategies

Retailers Pricing Strategy

1. Competitive pricing

2. Psychological pricing

3. Unit pricing

4. Price lining

5. Special prices
 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
Example of Major Segmentation
Variables
Variables Typical Breakdowns
Density Urban, Rural, Sub-urban

Demographic
Age Under 6, 6-11 ,12-19, 20-34
Sex Male, female
Household Size 2-3, 4-5, 5+

Religion Catholic, Protestants, INC, etc.

Psychographic
Social Class Class A, B, C, D, E
Lifestyle Conservative, modern, ultra-modern
Education Grade school, high school, high school
graduates, college, college graduates
Competitor Analysis
According to Kotler, the following are the
firm’s competitors:
a.) those who are producing the same
product
b.) those who are producing different
products but giving the same benefit or
service
 Classification of Agribusiness
Products
1. Fresh Agricultural Products
These are products freshly or directly
harvested from the farms, which do not
pass higher level of transformation.
Fresh agricultural products are cleaned,
sorted, and graded according to
standards or grades desired by the
markets
 Classification of Agribusiness
Products
2. Semi-processed
Agribusiness Products
These are products that underwent
secondary or second level of transformation.
These are in forms which are for use by other
industries and processors but may not be
consumed directly
 Classification of Agribusiness
Products
3. Finished Products

These are agribusiness products

that may be directly consumed by
buyers. These are not intended for
further processing
 Marketing Mix Strategies
● Marketing Mix
The set of controllable tactical marketing
tools- products, price, place and promotion–
that the firm blends to produce the response
it wants in the target market
● Market Positioning
Arranging for a product to occupy a clear,
distinctive, and desirable place relative to
competing products in the minds of target
consumers
1. Product Mix
 refers to the number of products a
firm is handling. In farming,
product mix may also be termed
as crop mix/livestock mix.
Product Mix may be described as:
a. wide if there are a lot of
product lines
b. deep if there are several
products within each line
2. Branding
 a brand is a letter, word or symbol
used to identify products. It has three
parts:
a. The name – part of the brand which
is utterable or which can be
vocalized.
b. The mark – part of the brand which
is not utterable but is distinctive
enough to be easily associated with a
product or with a company.
c. The trademark – part of the brand
which is given legal protection.
3. Packaging
 is the total presentation of the product, known as
the silent salesman.

Type of Containers/Packages at Selected

Phases of Marketing
Phase Types

At the farm Sacks, baskets, boxes

At long distance Metal containers, cartons

Transport and storage Refrigerated vans

At final distribution Cans, plastic bags, bottles

 Characteristics of a Good
Package
1. Attractive
2. Recognizable
3. Informative
4. Immediate
5. Textural
6. Functional
7. Dependable
8. Labeling
 MARKETING CHANNELS

Refers to an inter-organizational system made

up of a set of interdependent institution and
agencies involved in the task of moving products
from their point of production to the point of
consumptions
Factors in choosing the marketing channels

1.Nature of the product

• Perishability

• Unit value

• Newness of the product

Factors in choosing the marketing channels

2. Nature of the market

• Consumer buying habits

• Size of average sale

• Total sales volume

• Concentrations of purchases

• Seasonality of sales
 Marketing Channels of Selected Farm
Products

1. Contract-buyers

2. Whole-saler retailers

3. Assembler-wholesalers

4. Butcher-retailers

5. Retailers
 MARKETING MARGIN AND COSTS

Marketing Margins

The difference between what the consumers pays

and what the producers receives for his agricultural
produce. Known as “price spread”.
 Misconception of Marketing
Margin

 A general misconception about marketing

margin concerns it size. It is alleged that a
wide margin means high prices to
consumers and low prices and incomes to
producers.
Components of Marketing Margin

Marketing costs
These include wages as a return to labor, interest
as a return to borrowed capital; rent as a return to
land and buildings; and profits as a return to
entrepreneurship and risk capital.
Marketing Charges

These include 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
 Reasons for Excessive Marketing
Costs
1.Weak position of many producers when bargaining
with wholesale buyers because of:
a.)indebtedness to wholesaler
b.)lack of capital
c.)inadequate knowledge of prices and market
conditions; and
d.) lack of competition between buyers at the
farm level which allow the wholesalers to obtain
higher than necessary profits at the expense of
the farmers
 Reasons for Excessive Marketing
Costs
2. Wholesalers and retailers themselves may incur high
cost because of the following:

a.) inadequate transport, storage and handling

facilities and methods which cause heavy losses of
produce, deterioration in quality and enhanced
market risk.
b.) Lack of marketing training and poor organization
c.) Lack of price and quality information on the part of
consumers
d.) Absence of effective competition at the retail level
e.) lack of consumer organization and public measures
to protect their interests.
Types of Margins

Absolute Constant Margins- absolute are expressed

in terms of pesos and are constant over all quantity
ranges
Percentage Margins-absolute difference in price, i.e.
the absolute margin divided by the selling price.

Combinations of constant and percentage margins

- in this case, middlemen set a fixed margin in addition
to the percentage margin he could obtained
 GRADING AND STANDARDIZATION

Standardization
Practice of making the quality specifications of grades
uniform among buyers and sellers and from place to
place and time to time.

Grading
Is the sorting of
products into lots or
units or units according
to one or more of their
quality attributes.
 Advantages of Uniform Product Grading

1. Pricing efficiency
a. It increases the meaningfulness of price
quotations as reported in market news
b. It increases the precisions of the price
formation process through greater
knowledge
c. It may increase the level of competition in
the market
d. It permits a more systematic allocation of
the available supplies of a commodity to the
different demands in the market
 Advantages of Uniform Product Grading

2. Operational efficiency
 It concerns with the relationship of input and
output. Anything that increases or achieves a given
level of output for a reduced quantity of inputs
means increases in the operational efficiency of
agricultural markets

 Uniform grading can reduce marketing costs. A

standardized grading system may increase output-
input ratios
 Problems of Developing and Using Grades

1. Number of grades of classes

2. Grade terminology

3. Quality deterioration
 Advertising

Purpose of Advertising Farm

Products
 
To inform consumers what is
available for purchase

To change the demand for the

product
 
 Problems in advertising food products

Wide variation in quality-uniform quality at all levels

Perishability- difficulty in standardizing and marketing

large volumes of uniform products

Inelastic demand for most products

Competition among food products is primarily in price,

not in emotional or other appeal

Difficulty of getting funds for advertising

 
Market Information
Provided to producers and those involved in
marketing agricultural products so that all will be
informed of market conditions and prices

Consumers want to pay the lowest possible price for

the product they purchase

Farmers want to received the highest possible price

from the sale of their product

Marketing individuals and / or institutions want to

earn money from the services and functions they
perform
 Thank You!

GOD Bless!