CHAPTER FIVE

5. AGRICULTURAL MARKETING
1 Marketing Characteristics
• Marketing is a total system of business activities designed to plan, price, promote and
distribute want satisfying products to target markets and to achieve organizational objectives.
• Agricultural marketing is the study of all activities, agencies, and policy involved in the
procurement of farm inputs and the movement of agricultural product from the farms to the
consumer.
It link between the farm and nonfarm sectors.
Difference in Marketing of Agricultural and Manufactured Goods
Perishability of the Product
Seasonality of Production
Bulkiness of Products
Variation in Quality of Products
Irregular Supply of Agricultural Products
Small Size of Holdings and Scattered Production
Processing
Importance of Agricultural and Food Marketing
The basis of all marketing is man’s effort to satisfy his wants.

Agriculture is the biggest single industry in developing countries

o Largest employer o Source of raw materials
o Market for manufactured goods
Economic growth and development in developing countries
o Increasing urbanization o Increasing incomes
o Increasing employment of women
Improvement of rural incomes in developing countries
o Reduce income inequality between the rural and urban areas
o Decrease rural-urban migration
Adoption of market liberalization and privatization policies
o Decreased participation of the public sector in marketing
o Increased participation of the private sector in marketing
2. FUNCTIONS and MIX of AGRICULTURAL MARKETING

• Agricultural Marketing functions are classified into three groups.

1. Exchange functions
• Buying and Selling
2. Physical functions
• Storage Transportation
• Processing
3. Facilitating functions
• Standardization Financing
• Risk bearing Market intelligence
MARKETING MIX

• Marketing goes well beyond selling and is often described in terms of the 4
P’s.

Place
A. Product
• Product – what is it that you are going to sell/buy
• Product Mix – range of PRODUCTS or SERVICES offered for sale
• Product Features – color, packaging, quality, brand name
• Product Support – maintenance, after-sales Service, pre-sale like advice and
quotations
B. Promotion
Promotion mix are:
• Advertisement
• Sales promotion
• Events and Public Relations
• Direct Marketing
• Personal Selling and Internet marketing.
C. Place
• Place is channel, distribution, or intermediary. It is the mechanism through which
goods and/or services are moved from the manufacturer/ service provider to the
user or consumer.
• Deals with product placement – the width of distribution.
Location - the place of the business "locate your business where the market is".
D. Price
Price acts as a primary cue for the customer. It helps the customer to evaluate the
worth of the offer that the marketer is making.
• Options to consider regarding price:
1) Price matching,
2) price making,
3) introductory penetration pricing, and
4) a competitive upgrade price strategy
3. Agricultural Marketing Agents and Enterprises
4 Integration and Diversification of Marketing
•Integration can be:
• Backward integration or Backward Vertical Integration
Stages marketing system integration

Stage Examples
Commodity buyers specializing in specific agricultural products, such
Stage 1: Assembly
commodities as grain, cattle, beef, oil palm, cotton, poultry and eggs, milk
Stage 2:
Independent truckers, trucking companies, railroads, airlines, etc.
Transportation
Grain elevators, public refrigerated warehouses, controlled
Stage 3: Storage
atmosphere warehouses, heated warehouses, freezer warehouses.
Stage 4: Grading
Commodity merchants or government grading officials
and classification
Food and fiber processing plants such as flour mills, oil mills, rice mills,
Stage 5: Processing
cotton mills, wool mills, and fruit and vegetable canning or freezing plants
Makers of tin cans, cardboard boxes, film bags, and bottles for food
Stage 6: Packaging
packaging or fiber products

Stage 7: Independent wholesalers marketing products for various processing plants to

Distribution and retailers (chain retail stores sometimes have their own separate warehouse
Retailing distribution centers)
Diversification
• This is where we market completely new products to new customers.
• There are two types of diversification.
1. Related diversification means that we remain in a market or industry with which
we are familiar.
2. Unrelated diversification is where we have neither previous industry nor market
experience.
Bases for market segmentation (Diversification)
•Market segments are based on customer or product characteristics.
Product characteristics are different sizes, prices and colors
Customer characteristics are age, sex, income, social class, geographical
location, personality, product usage rate, degree of brand loyalty, occasions of
product usage.
Strategic approaches to market segmentation
• Once the market has been segmented an agribusiness must decide which of these
segments it can profitably serve.
1. Concentrated marketing: The organization concentrates on serving a single
market segment. This is also known as niche marketing.
2. Differentiated marketing: Here the organization elects to serve two or more of
the market segments identified. A distinct marketing mix is employed for each
market segment which the organization is seeking to penetrate.
3. Undifferentiated marketing: This is the antithesis of market segmentation in
that the organization seeks to attract as many buyers as possible with a single
marketing mix.
5 Transaction costs and marketing efficiency

Marketing efficiency: focuses on reducing marketing costs without reducing output

or results
It include operational efficiency and pricing efficiency.
•Operational efficiency is increased when marketing costs are reduced whilst
outputs are either maintained or expanded.
•Pricing efficiency is concerned with the efficient allocation of resources by a
marketing system. Reducing budget.
Marketing costs include labour, transport, packaging, containers, rent, utilities
(water and energy), advertising, selling expenses, depreciation allowances and
interest charges.
•Marketing costs vary from commodity to commodity and product to product.
Because
- The more wastage, the greater the proportion of customers’ expenditure which
goes on marketing costs
- The more perishable the product, the greater the marketing costs
- The more processing of the commodity, the greater the marketing costs
- The greater the amount of produce handling and transportation, the greater the
marketing costs.
Marketing margins
• A marketing margin is the percentage of the final weighted average selling price
taken by each stage of the marketing chain.
Example of Margins, shares and costs and marketing efficiency

• NOTE: Though margins are often used in the analysis of the efficiency of
marketing systems they have to be interpreted cautiously.
While higher marketing margins might reflect inefficiency of the marketing system
it is not always the case.