Upload
sabina-rice
View
216
Download
0
Tags:
Embed Size (px)
Citation preview
Chapter 14Chapter 14
Processor MarketingProcessor Marketing
Food Processing asFood Processing asBig BusinessBig Business
Processing cost share in 2004: $220 Processing cost share in 2004: $220 billionbillion
More value added in food processing than More value added in food processing than in farm productionin farm production
Leading food manufacturers are very large Leading food manufacturers are very large conglomerate operationsconglomerate operations
Two-thirds of processor output goes to Two-thirds of processor output goes to consumer sector; remainder to other consumer sector; remainder to other processors, government, export, othersprocessors, government, export, others
Components of Food andComponents of Food andBeverage ManufacturingBeverage Manufacturing
Retail vs. Food ServiceRetail vs. Food Service
Retail store market still largest market for Retail store market still largest market for processorsprocessors
However, food service market growingHowever, food service market growing– Between 1955 and 2006, food service share Between 1955 and 2006, food service share
increase: from 25% to 47.5%increase: from 25% to 47.5%
In food service market, prices, In food service market, prices, convenience reliable supply important; convenience reliable supply important; marketing/advertising less important marketing/advertising less important
Macrochannels BetweenMacrochannels BetweenFood Processors and StoresFood Processors and Stores
Two macrochannels existTwo macrochannels exist First, organized by core of large First, organized by core of large
processors:processors:– Processors market highly advertised and Processors market highly advertised and
promoted brand items to retailerspromoted brand items to retailers Second, organized by food chains:Second, organized by food chains:
– Chains procure generic/store brandsChains procure generic/store brands– Processors have little control over marketing Processors have little control over marketing
in this channelin this channel
Four Four PPs of Marketing Mixs of Marketing Mix
Marketing mix: attention to a set of Marketing mix: attention to a set of activities including product design activities including product design promotion, channel organization, and promotion, channel organization, and pricing. pricing.
These activities designated “Four Ps”:These activities designated “Four Ps”:– ProductProduct– PromotionPromotion– PlacePlace– Price Price
ProductProduct
Product: output of a firm that has some Product: output of a firm that has some value added to the original raw commodityvalue added to the original raw commodity
Marketer must cater to needs to potential Marketer must cater to needs to potential customerscustomers
Selling set of satisfactions concerning Selling set of satisfactions concerning product, its packaging, and imageproduct, its packaging, and image
Marketer motivated to keep developing Marketer motivated to keep developing new products or new versionsnew products or new versions
PromotionPromotion
Promotion: communication of good, Promotion: communication of good, positive aspects of the marketer and positive aspects of the marketer and product to potential customersproduct to potential customers
Includes:Includes:– AdvertisingAdvertising– Personal sellingPersonal selling– Other: free samples, displays, coupons, etc.Other: free samples, displays, coupons, etc.
PlacePlace
Marketing manager tries to develop best Marketing manager tries to develop best conduit to customersconduit to customers
Decisions:Decisions:– Intensive distribution?Intensive distribution?– More selective distribution?More selective distribution?– Use existing channels or try to integrate Use existing channels or try to integrate
vertically?vertically?– Develop sales force or rely on brokers?Develop sales force or rely on brokers?
PricePrice
Price important part of marketing mix; can Price important part of marketing mix; can be perceived as indicator of qualitybe perceived as indicator of quality
Processor typically cannot control the Processor typically cannot control the retail price, but can influence itretail price, but can influence it
Factors include product newness and Factors include product newness and uniqueness, costs, desired margins, sales uniqueness, costs, desired margins, sales projections, etc. projections, etc.
Processors’ ApproachProcessors’ Approachto Productto Product
““Convenience sells”Convenience sells” Packaging: protective, attractive, Packaging: protective, attractive,
easy to open and reseal, sized easy to open and reseal, sized correctlycorrectly
Highly differentiated, successfully Highly differentiated, successfully branded products mostly highly branded products mostly highly processed dry groceriesprocessed dry groceries
New ProductsNew Products
New products defined:New products defined:– Innovative items, completely differentInnovative items, completely different– Distinct products new to a firmDistinct products new to a firm– Product line extensionsProduct line extensions– Product improvementsProduct improvements
Estimated 20% of sales are from new Estimated 20% of sales are from new productsproducts
Estimates of new product success varyEstimates of new product success vary
Product Life CyclesProduct Life Cycles
Processors’ UseProcessors’ Useof Promotionof Promotion
Food the most heavily advertised/promoted of all Food the most heavily advertised/promoted of all consumer productsconsumer products
Goals of advertising:Goals of advertising:– CategorizeCategorize
– Compete (brand insistence, brand preference, Compete (brand insistence, brand preference, brand recognition)brand recognition)
– RemindRemind
Personal selling (salespeople, brokers)Personal selling (salespeople, brokers) Sales promotion (samples, coupons, Sales promotion (samples, coupons,
sweepstakes, bonus packs, point-of-purchase)sweepstakes, bonus packs, point-of-purchase)
Processor DecisionsProcessor DecisionsAbout PlaceAbout Place
Most food products move from processor Most food products move from processor to distribution centerto distribution center
Physical distribution more efficient nowPhysical distribution more efficient now Vertical integration of wholesaler-retailer Vertical integration of wholesaler-retailer
(WR)—processor selling to wholesaler (WR)—processor selling to wholesaler also selling to retaileralso selling to retailer
Some additional vertical integration of Some additional vertical integration of processors and wholesale-retailprocessors and wholesale-retail
Processor PricingProcessor Pricing
Large, national-brand processors are price Large, national-brand processors are price makersmakers
Pricing new products:Pricing new products:– Requires consideration of costs and demandRequires consideration of costs and demand– Return on investment: TR Return on investment: TR – TC / Investment– TC / Investment– Break-even point may be consideredBreak-even point may be considered
Break-even Point AnalysisBreak-even Point Analysis
Pricing TacticsPricing Tactics
Prices change over time for various Prices change over time for various reasons:reasons:– Changes perceived in demandChanges perceived in demand– Changes in costsChanges in costs– To promote WR interestTo promote WR interest
Processors must follow government Processors must follow government regulations in pricingregulations in pricing
Class ExerciseClass Exercise
Your instructor will assign five food Your instructor will assign five food categories.categories.– Visit a local grocery store and interview the Visit a local grocery store and interview the
appropriate manager to learn about food appropriate manager to learn about food products introduced in a categoryproducts introduced in a category
– Ask about successes and failures of new Ask about successes and failures of new productsproducts