ABM 353:

MARKETING IN AGRIBUSINESS

LECTURE NOTES
BY:

DR. DAVID BOANSI

Dept. of Agric. Economics, Agribusiness & Extension, KNUST, Kumasi-Ghana

LEAD FACILITATOR:DR. MRS GIFTY BOAKYE APPIAH

 Course Objective & Outcomes

Objective:
• To enable the students understand the importance of marketing in agribusiness; the nature
of the agribusiness system, role of marketing in the agribusiness system, challenges of the
system, and the potential influence of key actors in the system

Learning Outcomes:

At the end of the course, students should be able to:

– Define agribusiness and marketing

– Understand how the agribusiness system functions and identify some of the potential
challenges in the system
– Identify the role of marketing in the agribusiness system
– Document the types of markets in the agribusiness system
– Understand the concepts of value chain, marketing environment, consumer behaviour,
business to business marketing, and some general marketing concepts
 Course Outline
i. Marketing in agribusiness– Overview

ii. Concept of value chain

iii. The marketing environment

iv. Consumer behaviour

v. Business to business marketing

vi. Marketing concepts

 Course Assessment

• Continuous Assessment – 40%

• End of Semester Examinations – 60%

NB: MINI-PROJECT FOR THE SEMESTER –

Developing an appropriate value chain for an
agricultural product/commodity of your choice
1. Marketing in agribusiness– Overview
 The Agribusiness System
• The Agribusiness system includes
- The people and firms that provide inputs for
production (Agricultural input sector)

- The people that farm/cultivate the land

(Production sector), and

- The people/organizations that process the output,

transport and sell the final products to consumers
(Processing/manufacturing sector)
 Definition of Agribusiness
- All operations involved in the manufacturing and
distribution of farm suppliers; processing, and
distribution of the resulting commodities and items (John
Davis and Ray Goldberg, 1957)

- Coordination of all activities that contribute to the

production, processing, marketing, distribution, financing
and development of agricultural commodities and
resources (e.g. food, wood products, horticulture, natural
resource, etc.) (Daisy Odunze)
 Scope of Agribusiness Marketing

A series of services involved in moving a product from the

production to the point of consumption;

Inter-connected activities – planning, production, growing

and harvesting, grading, packing, transport, storage, agro-
food processing, distribution and sale (Daisy Odunze)
Input Government Intervention
suppliers

Middlemen
11

Farmers (assembly, processing, 11

Consumers
wholesaling,retailing)

Macroeconomic Factors
 Labor laws, trade policy –taxes,
Fertilizer, subsidies
seed,
chemical,
labor, credit

Village collectors/assemblers,
11
agro-processors/millers, 11
Consumers
Farmers
wholesalers, retailers

Exchange rates, interest rates,

disposable income, inflation
Seeds Potatoes Chips Flavoring Packaging Location

Value addition with movement along the chain

 Why the need for marketing?
Conflicting needs of producers and consumers
 Producers try to
 Maximize profit over short, medium to long term
 Sell large quantities of fewer products
 Obtain the highest prices

 Consumers try to
 Maximize the utility/satisfaction derived from the products they
buy with their limited income
 Buy small quantities of many products
 Obtain the lowest prices

Marketing bridges the gap between the differing needs of the two
actors
 Marketing helps producers to decide on what to produce and
when, while it helps consumers to know what products are
available and at what prices

 Greater satisfaction to consumers and higher profits to

producers

 Marketing helps to overcome the barriers/separations of

space, time, information and ownership between producers
and consumers
 Characteristics of agricultural commodities and food
markets
 Bulkiness of agricultural commodities/ low per unit value
 Biological nature/weather
- Uncontrollable output
- Perishable goods
- Supply dependent on weather
 Demand generally inelastic
 Price volatility
 Various market modes exist (perfect and imperfect
competition)
 Political influence
 Very influential politically
 Government regulation issues
 Problems in marketing agricultural
goods/commodities
 Low marketable surplus of agricultural goods
 Producer does not determine the price
 Lack of storage
 Problems in transportation
 Long chain of middlemen
 Malpractices in the market
 Lack of information
 Inelastic demand
 Lack of grading
 Bulky nature
 Approaches to studying agribusiness marketing
 Institutional approach – Study of various individuals,
agencies and businesses that perform/affect the marketing
processes e.g. farmers, producers, manufacturers, assemblers, processors, wholesalers, retailers

 Functional approach: Specialized activities performed within

the marketing process e.g. exchange process, processing, storage, transportation,
financing, market information, standardization

 Behavioral approach: Examining the performance of

management decisions made by coordinated and
interdependent firm e.g “Are producers responding to the needs of consumers”, “Are
producer receiving an adequate return on their investments” , “can changes be made in the marketing
system to lower the cost of food to consumers”
 Introduction to market
 What is a market?

 A group of buyers and sellers of a particular good or service

 Buyers as a group determine demand

 Sellers as a group determine the supply of the product

 An area of potential exchanges (Philip Kotler)

 Marketing means different things to different people
(Abbot and Makeham)

 To the housewife, marketing means shopping for

food

 To the farmer it means the sale of his product

 To the fertilizer distributor, marketing means selling

to the farmer
 Marketing is the set of human activities directed at
facilitating and consumating exchanges to satisfy needs and
wants

 Marketing deals with customers. It is the delivery of

customer satisfaction at a profit

 Marketing has twofold goals

 Attract new customers by promising superior value and

 Keep current customers by delivering satisfaction

 Marketing involves all activities performed from the stage

of production to the stage of consumption
 Components of a market
 Conditions to be satisfied for a market to exist
 The existence of a good or commodity for transaction (not
necessarily physical existence)

 The existence of buyers and sellers

 Price at which the commodity is transacted or exchanged

 Business relationship/intercourse between buyers and sellers; and

 Demarcation of area such as place, region, country or the whole

world
 Forms of a market
 Perfect/Competitive markets
 A perfect market is characterized by the following condition
 Large number of buyers and sellers

 All buyers and sellers in the market have a perfect knowledge of

demand, supply and prices

 Prices at any one time are uniform over a geographical area, plus or
minus the cost of getting supplies from surplus to deficit areas
(transaction cost)

 The price of different forms of product are uniform, pluss or minus

the cost of converting the product from one form to another
(processing/transformation cost)
 Imperfect markets (conditions of perfect competition are lacking)
 Monopoly market
 A market situation in which there is only one seller of a commodity,
and he excercises sole control over quantity and price of the
commodity. Higher price than in other markets

 Monopsony market
 When there is only one buyer of a product

 Duopoly market
 A market with only two sellers of a commodity. May mutually agree
to charge a common price, higher than the price in a common
market

 Duopsony market
 Market with only two buyers of a commodity
 Imperfect markets (conditions of perfect competition are lacking)
 Oligopoly market
 A market with more than two but still a few sellers of a commodity

 Oligopsony market
 A market having a few (more than two) buyers

 Monopolistic competition (e.g. In input markets)

 When a large number of sellers deal in heterogeneous and differentiated form of
a commodity
 Different trade markets of the products
 Different prices prevail for the same basic product e.g. Chosing between
various makes of insecticide, pumpsets, fertilizers and equipment
 Classification of markets
1. On the basis of location : village markets, primary wholesale
markets, secondary wholesale markets, terminal markets, seaboard
markets
2. On the basis of area/coverage: local/village markets, regional
markets, national markets, world markets
3. On the basis of time span: short-period markets, long-period
markets, secular markets
4. On the basis of volume of transaction: wholesale markets, retail
markets
5. On the basis of nature of transaction: Spot/cash market, forward
market
6. On the basis of number of commodities in which transaction takes
place: general markets, specialized markets
7. On the basis of degree of competition: Perfect markets, imperfect
markets
 Classification of markets
8. On the basis of nature of commodities: commodity markets (deals
with goods or raw materials), capital markets (bonds, share and
securities)
9. On the basis of the stage of marketing: producing markets,
consuming markets
10. On the basis of extent of public intervention: regulated markets,
unregulated markets
11. On the basis of type of population served: urban market, rural
market
12. On the basis of accrual of marketing margins
 Importance of marketing in agribusiness
 Optimization of resource use and output management
 Increase in farm income
 Widening of markets
 Growth of agro-based industries
 Price signals
 Adoption and spread of new technology
 Employment ...e.g. In packaging, transportation, storage, processing
 Addition/contribution to national income
 Better living
 Creation of utility
 Form utility- process into a form desired or needed by consumer
 Place utility – transport product to a location desired by consumer
 Time utility –store product until needed by consumer
 Possessing utility – allow consumers to gain ownership legally
 Marketing concepts
 Marketing concept has undergone some changes over the years
 Production concept of marketing:
 consumers will favour products that are available and highly
affordable – management should focus on improving production and
distribution

 Only holds when demand for a product exceeds the supply, and/or
when product/production cost is high

 Advertisement, quality and attractiveness are ignored

–when product is not attractive, even at low price, buyers may not buy
-consumers may not be aware of the product features and qualities
 Product concept of marketing:
 Making superior products and improving their quality over time,
they will be able to attract customer
 Customers favour quality, performance, innovative features, etc.
-Product is only one element of the marketing mix
- Better product at high price will not disturb customer budget???
- A producer may come up with a good quality product, while
consumer may look for better solution to a problem

 Selling concept of marketing:

 Make the consumers buy the products which otherwise will remain
unsold
 Customers if left alone, would not buy enough of the company‘s
product. - aggresive selling and promotional efforts
-Often consumers regret after purchasing the product
 Profit concept of marketing:
 There is a necessity for the marketing function to generate profit for
the organization

- Marketing personnel have to identify the right product and take it to

the right people at the right time at right price through the right
channel and with right promotion.

- force the production function to minimize its cost of production so

that marketing function can try to optimize its activities by
maximizing profit at minimum cost
 Modern marketing concept:
 Revolves around the customer – focuses on the ultimate customer
and undertakes to meet his requirement in full

 Organization has to understand customer requirements and deliver

the desired product more efficiently than the competitors

 Major shift from product to customer

 Customer sovereignty – maximize customer satisfaction and profit

 Customer complains are given utmost respect and importance –

customer complaints are best input for product improvement

 A change from seller‘s market to buyer‘s market

 Social marketing concept:
 Marketing activites should support and ensure social well-being
 Marketing should determine the needs, wants and interests of target
markets and deliver the desired satisfaction effectively

 Firm’s task is to determine the needs, wants and interests of target

markets and to deliver desired satisfactions in such a way that
preserves or enhances consumer’s and societies well-being

- excessive use of ground water resources to produce mineral water

and earn money will result in faster depletion of water source.

-use of harmful ingredients in product manufacturing/process, would

cause irreparable damage to human beings
 Role of marketing
 Marketing enables the removal of separations in agribusiness system
 Spatial separation

 Separation in time

 Separation of information

 Separation in value (Price)

 Separation in ownership

 Descrepancies of quantity

 Descrepancies in quality
 Selling or marketing?
 Selling is an important activity of marketing, but involves the sole
transferance of goods and services to the customers

 The main emphasis in selling is on profit maximization through sales

volume
Selling Marketing
1. Selling starts with the seller and is 1. Marketing starts with the buyer and focuses
preoccupied all the time with the needs of constantly on the needs of the buyer
the seller
1. Selling starts with the corporation’s 2. Under marketing, all activities and products take their
existing activities and products direction from the consumer and his needs

1. Selling emphasizes saleable surpluses 3. Marketing emphasizes identification of a market

within the corporation; seeks to convert opportunity; seeks to convert customer needs into
products’ into ‘Cash – emphasizes getting products – emphasizes fulfilling the needs of the
rid of the stocks; concerns itself with the customers
tricks and techniques of getting the
customers to part with their cash for the
products available with the salesman

1. Selling over emphasizes the exchange 4. Marketing concerns itself primarily and truly with the
aspect without caring for the value value satisfactions that should blow to the customer
satisfactions inherent in the exchange from the exchange
1. View business as a good producing 5. Views busines as a customer satisfying process
process
1. The seller determines what product is 6. what should be offered as a product is determined by
offered the buyer; the seller makes a total product offering that
would match and satisfy the identified needs of the
identified customers
Selling Marketing
1. Packaging is seen as a mere protection or a 7. In marketing, it is seen from the point of view of the
mere container for the product customer; it is designed to provide the maximum possible
convenience and satisfaction to the customer

1. Cost determines price 8. Consumer determines price; price determines costs

1. Transportation, storage and other 9. they are seen as vital services to be provided to the
distribution functions are perceived as mere customer – not grudgingly, but in the most willing manner
extensions of the production function

1. No coordination among the different 10. emphasis is on an integrated approach (4Ps)

functions of total marketing task
1. Different departments of the business 11. all departments of the business operate in close
operate as separate watertight compartments integration with the sole purpose of producing consumer
satisfaction
1. In firms practicing selling, production is the 12. Marketing is the central function; the entire company is
central function; sales are a subordinate or organized around the marketing function
secondary function
13 . selling views the customer as the last link to 13. Marketing views the customer as the very purpose of
the business the business; sees the business from the point of the
customer; Customer consciousness permeates the entire
organization, all department, and all people in organization
all the time
 Price/ People

Product & Physical

Evidence Promotion &
Target Customer Process

Place
(distribution)
 Functions of marketing
RESEARCH EXCHANGE FUNCTIONS OF FUNCTIONS
FUNCTIONS FUNCTIONS PHYSICAL FACILITATING
TREATMENT EXCHANGE

Exploring and Buying functions Standardization and Advertizing function

identifying marketing branding
opportunities
Selling functions Pricing function
Packaging functions
Product planning and
development Financing function
Storing/warehousing

Insurance function
Transportation
function