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Strategic Business Planning for Commercial Producers
How Do I Develop A Strategic Marketing Plan?
Strategic Business Planning for Commercial Producers
Types of Marketing Planning •Strategic Marketing
– Encompasses the entire farm strategy– Deals with the broader issue of determining
firm’s strategic position in the market and how to create value from that position
•Product Marketing/Pricing– Deals with the tactical side of selling a product– Similar to a set of standard operating
procedures for marketing a particular product.
Strategic Business Planning for Commercial Producers
Marketing Defined . . .
Marketing is anticipating the needs and wants of targeted customers and managing the process through which these needs and wants are satisfied . . . profitably
Strategic Business Planning for Commercial Producers
Management PhilosophiesProduction
ConceptMarketing Concept
Starting Point Product Market
Focus Product Quality and Features
Customer needs
MeansImproving
production & distribution efficiency
Integrated Marketing
Ends Profits through sales volume
Profits through
customer satisfaction
Strategic Business Planning for Commercial Producers
Building A Strategic Marketing Plan
Strategic Business Planning for Commercial Producers
Strategic Marketing Plan1. Environmental Analysis (SWOT) 2. Identifying Customers3. Competitor/Value Creation Analysis4. Marketing Mix: The 4 P’s5. Financial Analysis and Budget6. Implementation and Control Plan
Strategic Business Planning for Commercial Producers
1. Know Your Marketplace• Strengths, Weaknesses,
Opportunities, and Threats (SWOT)
• Trends and changes:– Market analysis
– Segmentation
– Prioritizing target markets
Strategic Business Planning for Commercial Producers
2. Who Are Your Customers?
Customer: firm or person that buys
your productConsumer: firm or person
that eventually uses your product
Customersvs.
Consumers
Strategic Business Planning for Commercial Producers
Customer/Consumer Trends
Customers• Just-in-time
inventory• Business to
business (B2B)• Manufacturing
mentality• Industrialization of
agriculture
Consumers• Households with
fewer people• Active, on-the-go
lifestyles• Concern over the
health aspect of food, with a desire for good taste
• Less time for meal prep
Strategic Business Planning for Commercial Producers
Know What Is Important to Your Customer• Get inside the mind of your customers• Find out why they would buy from you
. . . or why they would not• Truly understand their needs
– Intentional listening– Customer analysis– Solve their problems
Strategic Business Planning for Commercial Producers
3. Competitor/Value Creation Analysis
•Competitive analysis
•Reallocation of resources if necessary
•Positioning
Make sure you are distinctively differentfrom your competitionin areas of importanceto your customers
Strategic Business Planning for Commercial Producers
The Value ChainFirm Infrastructure
Human Resource Management
Technological Development
Procurement
InboundLogistics Operations Outbound
LogisticsMarketing& Sales
Service
MARGIN
MARGIN
Supporting
Activities
Primary
Activities
Relationship with Suppliers Relationship with Buyers
Strategic Business Planning for Commercial Producers
4. Determining the Marketing Mix•The set of controllable variables
that will accomplish the marketing objectives:
• Product strategy• Place (distribution) strategy• Promotion (communication) strategy• Pricing strategy
Strategic Business Planning for Commercial Producers
Product Strategy• Portfolio of Products
– Corn, soybeans, hogs, dairy, cattle, value-added grain, fruits and vegetables, custom farming operations, custom feeding operations
– Fits your strengths and weaknesses– Provides acceptable risk/return tradeoff– Meets needs of a particular customer segment
• Quality– No. 1 versus No. 2 – GMO vs. non-GMO
• Service– Timely custom operations– Pre-sorting of grain or livestock quality
• Volume– Large and small quantities– Guaranteed volumes (contract)
Strategic Business Planning for Commercial Producers
McDonald’s Product Package
• Food• Fast service• Fun for the kids• Variety• Non-smoking• Consistent product
Strategic Business Planning for Commercial Producers
Waxy Corn• Corn with specific type of starch• Delivery Schedule• Specific hybrids • Quality requirements• Purity level
Strategic Business Planning for Commercial Producers
Place Strategy•Storage
– On-farm vs. off-farm– Segregated or IP
•Timing– On-demand– Equal amounts throughout the year
•Location– Delivery to multiple points
•Assortments– Delivery of different amounts to different places at
different times
Strategic Business Planning for Commercial Producers
American Crystal Sugar (ACS)
• M&M Mars changed from a commodity focus for inputs to a quality assurance focus.
• ACS keeps the sugar silo at the M&M Mars plant full.
• ACS shifted from a warehouse next to the ACS factory in Minnesota to an ACS warehouse in Pennsylvania near the candy plant.
Strategic Business Planning for Commercial Producers
Spring Wheat Bakers
• Farmer-owned cooperative that processes wheat, grown on Northern Plains into flour
• Frozen and par-baked bread factory in Atlanta, Georgia, a population center
Strategic Business Planning for Commercial Producers
Promotion Strategy•Advertising
– Creating brochures and other advertisements on the products your farm provides and what value they add
– Creating a farm logo•Personal Selling
– Telling your customers how you create value– Meeting your grain elevator manager for coffee– Having lunch with the lender– Taking a Christmas pie to your landlord(s)
•Public Relations– Being a good neighbor– Being involved in the community– Open house days
Strategic Business Planning for Commercial Producers
Price StrategyPrice is the cost the customer must bear in
order to obtain the product. It includes:• list price• discounts• allowances• payment period• credit terms
Strategic Business Planning for Commercial Producers
Pricing Methods• Value-Based Pricing
– Set price based on buyers’ perception of value (rather than on the seller’s costs)
• Cost-Based Pricing– Add a standard markup to the cost of the
product• Competition-Based Pricing
– Set price based on following competitors’ prices
Strategic Business Planning for Commercial Producers
Value-Based Pricing
• Customer Oriented• Based on customer’s perceived value
• Match price to perceived value• Brand loyalty
Strategic Business Planning for Commercial Producers
Competition-Based Pricing • Price decision
based on actions of competition
• Less attention on cost or product demand
• Large firms all charge the same price
• Smaller firms follow lead of large firms, may offer a slightly lower price
Strategic Business Planning for Commercial Producers
5. Financial Analysis and Budgeting
• Estimate the demand given the pricing and promotion strategy.
• Determine expenses associated with production and marketing.
• Determine anticipated cash flows.• Will strategy cash flow? When?• What are the critical assumptions of the
financial analysis and what are the impacts of changes in those assumptions?
Strategic Business Planning for Commercial Producers
6. Implementation and Control• Focus attention of everyone on
delivering what the customer wants– Management of people– Monitoring and control
Strategic Business Planning for Commercial Producers
How Do I Build A Product Pricing Plan in A Commodity Market?
Strategic Business Planning for Commercial Producers
Commodity Marketing• Homogeneous Product –
differentiation in services, not product.
• Low-cost strategy
• What about the price received?– Does every producer get the same price?
• Marketing plans – systematic pricing strategies.
Strategic Business Planning for Commercial Producers
What Is A Marketing Plan?
A marketing plan is an outline of price, date and quantity objectives used to generate a reasonable return for the business given the existing market conditions.
Strategic Business Planning for Commercial Producers
Diagram of A Corn Marketing Plan
Price Triggers
Date Triggers
Jan. 1March 15 May 1 Harvest
$2.50/bu $2.40/bu
Sell 20% Sell 20% Sell 60%r
Existing Price
Strategic Business Planning for Commercial Producers
What Does A Marketing Plan Do?
• Detached from the decision
• Proper perspective
• Introduces discipline
• Check your logic
• What if …...
Strategic Business Planning for Commercial ProducersSteps In A Marketing Plan• Relationship between the business plan
and marketing plan• Production history and expectations• Expected prices• Production costs• Price and date targets• Review and evaluation
Strategic Business Planning for Commercial Producers
The Business Plan and the Marketing Plan
• Marketing plan is implementation of the BP
• Implementation consistent with objectives• What are important considerations?
Strategic Business Planning for Commercial Producers
Production History and Expectations
• What is the farm’s history?• Is there an underlying trend?• How variable is production?• Write down expected production.• How does expected production
relate to pre-harvest sales?
Strategic Business Planning for Commercial Producers
Price Expectations• Assess the situation
– Historic patterns (seasonal)– Basis patterns
• The current situation– Outlook source– Market advisors (?!?)
Strategic Business Planning for Commercial Producers
AgMAS – An Objective Study of Market Advisory Services• 25 Firms – subscribe to each service.• Observe and follow recommendations• Compare to a benchmark price answer
Questions:– Do they consistently beat the benchmark?– Do they reduce risk and increase returns?– Are they as good with corn as with soybeans?– http://www.farmdoc.uiuc.edu/agmas/
Strategic Business Planning for Commercial Producers
The Difference• What’s the difference between the
market advisory service and the marketing plan?– “Beat the Market” vs. “Accepting What
the Market is Giving.”– Active Marketing = Private Information– Active Marketing vs. Passive Marketing
Strategic Business Planning for Commercial Producers
Cost of Production• What are the costs?• What revenue cover costs?• What price is needed to cover
the costs?• Is this price realistic?
Strategic Business Planning for Commercial Producers
Price, Date and Quantity Objectives
• Identify price and date triggers ..– When should pre-harvest sales be made?
– What prices are acceptable?– Prices attainable?
• Set quantity objectives according to – Financial need
– Risk perceptions
Strategic Business Planning for Commercial Producers
Evaluate and Review
•Stay disciplined!•Evaluate your actions.•Are conditions changing?
Strategic Business Planning for Commercial Producers
A Little Marketing Philosophy ...
• Bad outcomes still happen …• Never compare to the market
high ..• Your plan for your
operation ...
Strategic Business Planning for Commercial Producers
Strategic Business Planning for Commercial Producers