The Role of Marketing in Agribusiness Firm

1. 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

2. 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.

3. 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.

4. 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.

5. 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”.

6. 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).

7. Five approaches to the market: The Selling Approach • Consumers, if left alone, will ordinarily not buy enough of the organization’s products. • The organization must therefore undertake an aggressive selling and promotion effort. • Most firms practice selling concept when they have overcapacity. • Their aim is to sell what they make rather than make what they can sell. • Selling, to be effective, must be preceded by several marketing activities such as need assessment, marketing research, product development, pricing, and distribution.

8. Five approaches to the market: The Selling Approach • Indeed, marketing based on hard selling carries hard risks. It assumes that customers who are coaxed into buying the product will like it; and if they don’t, they won’t bad-mouth it to friends or complain to customer organizations. And they will possibly forget their disappointment and buy it again. These are indefensible assumptions to make about customers. • One study showed that disappointed customers bad-mouth the product to eleven acquaintances, while satisfied customers may good-mouth the product to only three.

9. 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.

10. Five approaches to the market:The Marketing Approach • Several expressions in marketing approach: • Find wants and fill them • Make what will sell instead of trying to sell what you can make • Love the customer and not the product • To do all in our power to pack the customer’s dollar full of value, quality, and satisfaction

11. Starting point Focus Means Ends Factory Product Selling Profits through Promotion sales volume A. The selling concept Inside-out perspective Market Customer Coordinate Profit through needs marketing customer satisfaction B. The marketing concept Outside-in perspective

12. Five approaches to the market: The Marketing Approach • Market Focus: • No company can operate in every market and satisfy every need • Companies 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.

13. 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.

14. 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 again • Talks favorably to others about the company • Pay less attention to competing brands and advertising • Buys other products that the company later adds to its line

15. Five approaches to the market: The Marketing Approach • Coordinated marketing: • 2 meaning of coordinated marketing: • The various marketing function (sales force, advertising, marketing research, etc) must be coordinated among themselves. • Marketing must be coordinated with the other department in the company. Marketing does not work when it is merely a department; It only works when all employees appreciate how they impact on customer satisfaction.

16. 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.

17. 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.

18. Evolving View of Marketing’s Role in the Company Pd Pd Fin Pd Fin Mkt Prs Mkt Prs Mkt Prs Fin Mkt as more importnt funct Mkt as equal funct Mkt as major funct 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

19. Evolving View of Marketing’s Role in the Company Pd Fin Mkt Pd Cst Mkt Cst Mkt Fin Prs Mkt Prs Customer as control function Cust as contrl function, and mkt as integrating function 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

20. Evolving View of Marketing’s Role in the Company Pd Pd Fin Pd Fin Mkt Prs Mkt Prs Mkt Prs Fin Mkt as more importnt funct Mkt as equal funct Mkt as major funct Pd Fin Mkt Pd Cst Mkt Cst Mkt Fin Prs Mkt Prs Cust as contrl function, and mkt as integrating function Cust as control funct

21. 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.

22. 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).

23. Five approaches to the market:The Societal Marketing Approach • The societal marketing concept calls upon marketers to balance three considerations in setting their marketing policies, namely: • Company profit • Consumer want satisfaction • Public interest

24. Five approaches to the market:The Societal Marketing Approach Company profits Societal Marketing Approach Consumer want satisfaction Public interest

25. 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.

26. Marketing Mix • Price: The right product must carry the right price in light of market condition. • Place: The right product, at the right price, must be in the right place to be purchased by the members of the target market. • Promotion: Telling the members of the target market in the right way that the right product, at the right price is available at the right location.

27. Marketing Mix Quality Features Options Style Brand name Packaging Size Service Warranties Channel Coverage Location Inventory Transport Product Place Target market Price Promotion List price Discount Payment period Credit terms Advertising Personal selling Sale promotion Public relation

28. 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.