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7/29/2019 Agricultural Marketing Review
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AGRICULTURAL
MARKETING
Prepared by: Dr. Aida S. Ong
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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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Market
a place where buyers and sellers meet to
exchange goods and services
Why is Marketing Productive?
Because it creates utility
Types of Utility
- Form - Place
- Time - Possession
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Marketing System
Characteristics
has objectives or goals to achieve
has components
needs institutional arrangements needs planning and management
decisions
has spatial and temporal dimensions
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Marketing
Components/Subsystem
o Producer Subsystem
o Channel Subsystem
o Flow Subsystem
o Functional Subsystem
o Consumer Subsystemo Environment Subsystem
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The Role of Marketing in Economic
Development
o What to produce and how to prepare it
for sale
o When and where to sello Who will do the task
o What to do to expand the market
o Which marketing arrangements are
desirable
o
What practices necessarily be changed
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Problems Areas in Agricultural
Marketing
o Characteristics of the Products
o Number of Producers
o Characteristics of the Consumers
o Reflecting the demand of consumers
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Approaches to the Study of
Agricultural Marketing The Commodity Approach
The Institutional Approach The Functional Approach
The Conduct Performance
Approach
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Middlemen
are those individuals or
business concerns that
specialize in performing thevarious marketing functions
involved in the purchase and
sale of goods as they movedfrom producers to
consumers.
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Classification of Middlemen
Merchant Middlemen
Agent middlemen
Processors and manufacturers
Facilitative Organizations
Market Associations
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Classification of Marketing
(Functional Approach)
Exchange Function
Physical Function
Facilitating Function
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PRICES
the amount of money plus goods which is
needed to acquire in exchange of some
product and its accompanying services
Utility
- the attribute of an item that makes it capable of
satisfying wants
Value
- is the quantitative expression of the power a
product has to attract other products in
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Roles of Price
tell producers what and how much to
produce
keep supplies coming forward in linewith consumer demands
rationing and allocating function
guide the channel of trade
ration the goods and services to
those who demand them
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PRICE DETERMINATION
In a Perfectly Competitive
Market, price is determined by
supply and demand.
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Causes of Price Fluctuations
Fluctuations in demand
Fluctuations in supply
Experimentation in the price-
discovery process
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Types of Price Fluctuations
Seasonal
Annual
Trends
Cyclical
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Pricing Strategies
1. Manufacturers Pricing Strategies
Skimming the Market
Moving down the demand curve
Penetration Pricing
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Pre-emptive Pricing
Extinction Pricing
Formula Pricing
Tie-in Pricing
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1. Retailer Pricing Strategies
Competitive Pricing
Psychological Pricing Unit pricing
Price Lining
Special Prices
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MARKETING CHANNELS
refers to the set of interdependent
institutions and agencies involved in the
task of moving products from theirpoint of production to the point of
consumption
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Nature of Marketing Channels
It varies according to the types of
commodity handled, time and
location
Producer
Retailers
Consumers
Sample Marketing Channel with
One Middlemen
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Factors that Affect the Choice of
Marketing Channel
Nature of Product
Nature of the Market
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Marketing Channels of Selected
Farm Products
Contract buyers
Wholesalers
Commission agents Assembler Wholesalers
Butcher Retailers
Retailers
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MARKETING MARGINS AND
COSTS
Marketing Margin refers to the
difference between what the
consumer pays and what theproducer receives for his
agricultural produce.
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C f
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Components of Marketing
Margins
Wages as return to labor
Interest as return to borrowed
capitalRent as return to land and
buildingsProfit as return to
entrepreneurship
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Types of Margins
Absolute constant margin constant
regardless of quantity
Percentage margins
absolutemargin divided by the selling price
Absolute margin% Margin Selling Price x 100
where:Absolute margin = Selling Price Buyingprice
Absolute margin
%Mark-up Buying Pricex 100
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Price and Price Margins
Pr = a + b(Pf)where:
Pr = retail price
Pf = farm price
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Marketing Costs
Marketing cost and the farmers share of the
consumer peso
Marketing cost differ among products
Are marketing costs too high
Marketing efficiency
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Ways of Measuring Marketing
Efficiency
Using marketing margins
Input-output measurements
Evaluation of product loss and waste
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A h ffi i b
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Areas where efficiency may be
develop
Cost of marketing
Marketing system
Volume of businessLocation of business
Changes in marketing methods
Integration of present marketing
agencies
One organization
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GRADING AND
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GRADING AND
STANDARDIZATION
Size
Weight
Shape
Color
Odor
Length
Diameter
Strength
Density
Texture
Uniformity
content
Grading is the sorting of products into lots or units
according to one or more of their quality
attributes.
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Standardization
is the practice of making the quality
specifications of grade uniform
among buyers and sellers andfrom places to places and time to
time.
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Advantages of Grading
Pricing Efficiency
Operational Efficiency
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Determination of Standards
The objective of ideal standard
is to aid the consumer in
telling the producer what heconsiders desirable in a
product.
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Criteria for Good Standards
Built on characteristics that users
consider important and easily
recognizable
Built on factors that can be accurately
and uniformly measured and
interpreted.
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Should use terminologies in grading
meaningful to all kinds of users
Should consider the quality of theproduct produced
Should pass the adequacy of
standard in acceptance use
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P bl f D l i d U i
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Problems of Developing and Using
Grades
Number of grade classes
Grade terminology
Quality deteriorationRelevant quality characteristics
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Space Dimension of Marketing
Transportation
Primary Concern of Transportation
Time and Transfer Cost
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Effects of Transportation Cost
Location of Production
Market Area Served
Farm of Product Marketed Size and quality of product marketed
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Who Pays Transportation Cost
If demand for the product is inelastic
buyers will bear the transportation
cost
If demand and supply have the same
elasticitiesboth buyers and sellers will bear the
added cost equally
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Time Dimension of Marketing
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Time Dimension of Marketing -
Storage
Types of Normal Storage Operations
Seasonal production matches to thepattern of demand
Storage at all times
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Reasons for Storing Farm
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Reasons for Storing FarmProducts
Seasonal nature of production
Demand for the different products throughout the
year
Time required to perform the various marketing
services
The need for a carry-over into the following
seasons.
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Objectives of storage
o
To help balance supply and consumption or tobalance periods of plenty and periods of
scarcity.
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Place of Storage
Farms
Production areas
Terminal markets
Consuming centers
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Cost of Storage (Types)
cost that provide and maintain the physical
facilities for storage
Repairs
Depreciation
Insurance against loss
Handling feeForklift hire
Electrical power consumption
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interest on the amount of capital
invested in the stored products
quality deterioration, shrinkage duringstorage, insect and rodent damage
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Risk of Storage
Loss from fire, theft
and natural causes
Natural productdeterioration (insect
and pest damage)
Loss due to price
changes
- can be eliminated or
reduced by use of
insurance
- use of proper, well-
operated
- buying and selling of
contracts for future
delivery goods
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Time of Storage
The size and nature of a crop is a
major consideration in storage.
Who should store?
Farmer
Commercial storage operatorFood processor
Speculator
etc.
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ADVERTISING
It is used to influence customer
buying of particular brands of
products.
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Purposes of Food Advertising
To inform consumers what is
available for purchase.
To change the demand for theproduct.
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Problems in Advertising Food
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Problems in Advertising Food
Products
Food products have a number of
unique characteristics
Food products have to be processedbefore use by consumer
Demand for most products is inelastic
(purchase of products remainuniform, even with changes in
prices.)
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Competition among food products is
in price.
Food products have few emotionalappeals.
Difficulty of getting sufficient funds for
conducting and advertising program.
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Effectiveness of Advertising Farm
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Effectiveness of Advertising Farm
Products
Recognition of the difficulty in
effective advertising
A regional identificationProduction and marketing should be
in the hands of an organized group of
farmersAdvertising program must be
coordinated with other marketing
activities
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Farm product advertising is most
successful for commodities
moving to the consumers in fresh.There should be substantial
amount of money intended for
advertisement.
Use commodity advertising.
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