The Role of Marketing in Agribusiness Firm

Dr.Jangkung Handoyo Mulyo,MEc.

Laboratory of Food and Agricultural Policy

Department of Agricultural Economics

Gadjah Mada University

Background…

Nowadays marketing has become more sophisticated in response to the changing economic situation.

Therefore, the more sophisticated approach to marketing is needed by agribusiness firms in order to compete successfully in today’s more demanding marketplace.

Five approaches to the market…

1. The Production Approach One of the oldest concepts guiding sellers. Consumers will favor those products that are

widely available and low in cost. Managers of production-oriented

organization concentrate on achieving high production efficiency and wide distribution coverage.

Five approaches to the market: The Production Approach

Two types situations: a) demand for a product exceeds

supply. Therefore customers are more interested in obtaining the product than in its fine points. The suppliers will concentrate on finding ways to increase production.

b) Product’s cost is high and has to be brought down through increased productivity to expand the market.

Five approaches to the market: The Production Approach

“get-out the production, cut the price”…>> Henry Ford’s philosophy.• to expand the automobile market• Texas Instrument• Some Japanese companies

Marketing means “bringing down the price to the buyers”.

Five approaches to the market: The Product Approach

Consumer will favor those products that offer the most quality, performance, and features.Managers focus their energy on making good products and improving them over time.Managers assume that buyer admire well-made products, can appraise product quality and performance, and are willing to pay more for product “extras”.The product concept leads to “marketing myopia”, an undue concentration on the product rather than the need (of costumers).

Five approaches to the marketFive approaches to the market:: The Selling Approach The Selling Approach

Consumers, if left alone, will ordinarily not buy Consumers, if left alone, will ordinarily not buy enough of the organization’s products.enough of the organization’s products.

The organization must therefore undertake an The organization must therefore undertake an aggressive sellingaggressive selling and and promotion effortpromotion effort..

Most firms Most firms practice selling concept when they practice selling concept when they have overcapacityhave overcapacity..

Their aim is to sell what they make rather than Their aim is to sell what they make rather than make what they can sell.make what they can sell.

Selling, to be effective, must be preceded by Selling, to be effective, must be preceded by several marketing activities such as need several marketing activities such as need assessment, marketing research, product assessment, marketing research, product development, pricing, and distribution.development, pricing, and distribution.

Five approaches to the marketFive approaches to the market:: The Selling Approach The Selling Approach

Indeed, marketing based on hard selling Indeed, marketing based on hard selling carries hard risks. It assumes that customers carries hard risks. It assumes that customers who are coaxed into buying the product will who are coaxed into buying the product will like it; and if they don’t, they won’t bad-like it; and if they don’t, they won’t bad-mouth it to friends or complain to customer mouth it to friends or complain to customer organizations. And they will possibly forget organizations. And they will possibly forget their disappointment and buy it again. These their disappointment and buy it again. These are are indefensible assumptions to make indefensible assumptions to make about customers.about customers.

One study showed that disappointed One study showed that disappointed customers bad-mouth the product to eleven customers bad-mouth the product to eleven acquaintances, while satisfied customers may acquaintances, while satisfied customers may good-mouth the product to only three.good-mouth the product to only three.

Five approaches to the market: The Marketing Approach

The key achieving organizational goals consist in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors. Need is a state of felt deprivation of some basic

satisfaction. Wants are desires for specific satisfiers of these

deeper needs. Demands are wants for specific products that are

back up by purchasing power.

Five approaches to the market: The Marketing Approach

Several expressions in marketing approach:Find wants and fill themMake what will sell instead of trying to sell what you can makeLove the customer and not the productTo do all in our power to pack the customer’s dollar full of value, quality, and satisfaction

Starting point Focus Means Ends

Factory Product Selling Profits through

Promotion sales volume

A. The selling concept

Market Customer Coordinate Profit through

needs marketing customer

satisfaction

B. The marketing concept

Inside-out perspective

Outside-in perspective

Five approaches to the market: The Marketing Approach

Market Focus:No company can operate in every

market and satisfy every needCompanies do best when they define

the boundaries of their markets carefully.

They do best when they prepare a tailored marketing program for each target market.

Five approaches to the market: The Marketing Approach

Customer Orientation: Requires the company to carefully define

customer needs from the customer point of view, not from its own point of view.

To satisfy the customer is important because a company’s sales each period come from two groups: new customers and repeat customers.

It is always most costly to attract new customers than to retain current customers.

Five approaches to the market: The Marketing Approach

Customer Orientation: Customer retention is more critical than

customer attraction. The key to customer retention is customer orientation.

A satisfied customer:Buys againTalks favorably to others about the companyPay less attention to competing brands and

advertisingBuys other products that the company later adds to its

line

Five approaches to the marketFive approaches to the market:: The Marketing Approach The Marketing Approach

Coordinated marketing:Coordinated marketing: 2 meaning of coordinated marketing:2 meaning of coordinated marketing:

• The various marketing function (sales force, The various marketing function (sales force, advertising, marketing research, etc) must advertising, marketing research, etc) must be coordinated among themselves.be coordinated among themselves.

• Marketing must be coordinated with the Marketing must be coordinated with the other department in the company. other department in the company. Marketing does not work when it is merely Marketing does not work when it is merely a department; It only works when all a department; It only works when all employees appreciate how they impact on employees appreciate how they impact on customer satisfaction.customer satisfaction.

Five approaches to the market: The Marketing Approach

Profitability: The purpose of the marketing concept is to help

organizations achieve their goals. In the case of private firms, the major goal is profit. In

the case of non profit and public organizations, it is surviving and attracting enough funds to perform their work.

A marketing department does not assure a market oriented company. The company has marketing operations, and yet it may fail to see the big picture and adapt to changing consumer needs and changing competition.

Five approaches to the market: The Marketing Approach

Most companies do not really grasp or embrace the marketing concept until driven to it by circumstances:1) Sales decline. When companies experience falling sales, they panic and start looking for answer.2)Slow sales growth.3)Changing buying pattern.4)Increasing competition.5)Increasing market expenditure.

Pd

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MktMktPrs

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Mkt as equal funct Mkt as more importnt funct

Mkt as major funct

Evolving View of Marketing’s Role in the Company

Initially marketing is seen as one of several equally important business function in a-check and balance relationship

A dearth of demand then leads marketers to argue that their function is somewhat more important than the others

A few marketing go enthusiast, say mrkt is the major funct. of enterprise. They put mkt at the center, other as support functions

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Mkt

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Cst Cst

Customer as control function

Cust as contrl function, and mkt as integrating function

Evolving View of Marketing’s Role in the Company

This view anger the other managers. Marketers clarify by putting customer rather than marketing at the center of the company

Some marketers say that marketing still needs to command a central company position if customers’ needs are to be correctly interpreted and efficiently satisfied

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Pd

Pd

Pd

Pd

Fin

Fin

Fin

Fin

Fin

Mkt

Mkt

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Prs

PrsPrs

Prs

Prs

Mkt

Mkt

Cst Cst

Mkt as equal funct Mkt as more importnt funct

Mkt as major funct

Cust as control funct Cust as contrl function, and mkt as integrating function

Evolving View of Marketing’s Role in the Company

Five approaches to the market: The Societal Marketing Approach

In recent years, some people have questioned whether the marketing concept was an appropriate organizational philosophy in an age of environmental deterioration, resource shortage, explosive population growth, world hunger, and poverty and neglected social services.

The question is whether companies that do an excellent job of sensing, serving, and satisfying individual consumer wants are necessarily acting in the best long-run interest of consumers and society.

Five approaches to the market: The Societal Marketing Approach

The marketing concept sidesteps the potential conflicts between consumer wants, consumer interests, and long-run societal welfare.Fast-food hamburger (tasty but not nutritious food,

high-fat content).

Soft-drink industry (convenience way but great waste, not biodegradable)

Detergent (whiter clothes but offering a product that polluted rivers and stream, killed fish, and injured recreational opportunities).

Five approaches to the marketFive approaches to the market:: The Societal Marketing ApproachThe Societal Marketing Approach

The societal marketing concept The societal marketing concept calls upon marketers to balance calls upon marketers to balance three considerations in setting three considerations in setting their marketing policies, namely:their marketing policies, namely: Company profitCompany profit Consumer want satisfactionConsumer want satisfaction Public interestPublic interest

Five approaches to the market: The Societal Marketing Approach

Company profits

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ant satisfactio

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Societal MarketingApproach

Marketing Mix “ the set of marketing tools that the firm uses to

pursue its marketing objectives in the target market” McCarthy: Four Ps, product, price, place (distribution)

and promotion. Target market:

The relatively homogeneous group of consumers whose unmet needs the firm hopes to fill efficiently, effectively, and profitably.

Product: The firm must develop the right product to give

maximum satisfaction to the members of the target market.

Marketing MixMarketing Mix

PricePrice: : The right product must carry the right price The right product must carry the right price in light of market condition.in light of market condition.

PlacePlace: : The right product, at the right price, must The right product, at the right price, must be in the right place to be purchased by the be in the right place to be purchased by the members of the target market.members of the target market.

PromotionPromotion::Telling the members of the target market in Telling the members of the target market in the right way that the right product, at the the right way that the right product, at the right price is available at the right location. right price is available at the right location.

Target market

Marketing Mix

Product Place

Price Promotion

Quality

Features

Options

Style

Brand name

Packaging

Size

Service

Warranties

List price

Discount

Payment period

Credit terms

Advertising

Personal selling

Sale promotion

Public relation

Channel Coverage

Location

Inventory

Transport

Marketing management…

Marketing management is the planning, organizing, controlling, and directing of all the firm’s business activities that help satisfy consumer demands and help the firm accomplish its goal of maximizing its long-run profits.

Besides marketing to current customers, marketing managers are always looking for new market opportunities, new consumers, and better ways to meet customer needs.