DOCUMENT RESUME SO 027 924 ED 416 139 Welch, Mary A., Ed. AUTHOR Strategic Marketing for Agribusiness. TITLE Purdue Univ., West Lafayette, IN. School of Agriculture. INSTITUTION 1993-00-00 PUB DATE 25p.; For other booklets in this series see SO 027 NOTE 918-929. School of Agriculture, Office of Academic Programs, Purdue AVAILABLE FROM University, 1140 Agricultural Administration Building, West Lafayette, IN 47907-1140. -- Guides - Non-Classroom Serials (022) Collected Works PUB TYPE (055) Economic Issues for Food, Agriculture, and Natural JOURNAL CIT Resources; n7 Win 1993 MF01/PC01 Plus Postage. EDRS PRICE *Agribusiness; *Agriculture; Business; *Economic DESCRIPTORS Development; *Economics; Food; *Marketing; Natural Resources; Secondary Education; Social Studies; Strategic Planning; Technology ABSTRACT The steps for strategic market planning are discussed (1) assessing the situation with market conditions, customers, including: competitors, and your firm; and (2) crafting a strategy to prioritize target markets, develop a core strategy, and create a marketing mix. Examples of agribusiness successes are presented. The booklet concludes with a student quiz. 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Strategic Marketing ." for Agribusiness ABOUT THE COVER Students studying in one of several programs in Purdue's Department of Agricultural Economics work as a team to analyze a demand curve in prepara- tion for an in-class presentation. ECONOMIC ISSUES for Food, Agriculture and Natural Resources is published by the Office of Academic Programs, Mary A. Welch, Editor. Wititer-.1993.N6.7 . ,. . . . :1,017A:Na INTRODUCTION Originally the term "market" stood for the physical place where buyers and sellers gathered to exchange goods. This gathering place was usually located in the. village square. Today, economists use the term market to refer to a collection of. buyers and sellers who are interested in trading a particular, product. For example, a commodity market is a specialized kind of market where futures contracts (promise to buy or sell a commodity at a specified date in the future) for grain, livestock, precious metals, and lumber are bought and sold. A discussion of com- modity markets appears in ECONOMIC ISSUES for Food, Agriculture and Natural Resources Fall-Winter 1989-90. Business managers, however, define a market differently. For business managers, the sellers of the product constitute the industry and the buyers of the product constitute the market.. Firms that find ways to deliver value to their customers survive and prosper; those who don't deliver customer value struggle and disappear. Value to a customer is defined as the tangible and intangible features of a product or service. An example of something tangible that delivers customer value might be a pair of black, high-top Nike Air Jordan tennis shoes. The intangible feature would be Nike's guarantee or the image you project by wearing Air Jordans. Illustrations of the importance of . delivering customer value abound. In the highly. acclaimed bestselling book, In 4 3 . . Search of Excellence, :co-authoii Tom- Peters and Bob Waterman interviewed managersfrom 43 high-performing: . companies suchas,Hewlett;Packard,-,. Frito-Lay .( PepsiCo), Proeier..& Gamble, 'Marriott:'.-Among the:basickuSiness., principles that made all of these firms a deep respect for customer successful .w the - needs; in other-words "staying close to customer." Professor Philip Kotler, authotof Marketing Management, 'Analysis ,PIOn-. notes Control,', riing,. Implementation; and that some of the most successful-compa- flies ofthe late 1970s struggle. in today's world because they failed to understand the changing market and the need to provide value to their customers. Kotler says, "Too many U.S. corporate leaders in the 1970s and 1980s focused their . attention on the stock market and not on the real market. They relied on selling, not marketing. They pursued profits first and customer satisfaction second." What does Professor Kotler mean.by the statement, "they relied on selling, not marketing" ? In the 1970s and early 1980s many companies operated on the selling philosophy. The selling philosophy says that you build a good product and then convince (sell) the customer that they need the product. By the mid to late 1980s, most successful companies had moved away from this approach of doing business and adopted a marketing philosophy. Under the marketing philoso- phy, companies work to determine what the customer needs and then design,. produce, and distribute a product which customer-focused meets these needs. This bilsiness,approach is,howmost successful firms are operating in the 1990s. Marketing is the process by which firms implement the marketing philosophy. 4 ... :4; From a businessmanages'viewpoint,. marketing is satisfying customer needs and wants while still"making.a piofit. This simple definition of marketing captures the essence of the idea, but Professor Kotler provides a definition of marketing- thatis more complete:- marketing is a social and managerial process by which individuals' and groups obtain what they need and want throUgh creating, offering, and exchanging products of value with others.. A growing number of U.S. companies are recognizing the importance of turning from a selling philosophy, to a marketing philosophy. Two hundred and fifty senior managers from major American corpora- tions recently identified their number-one planning challenge to be: developing, improving, and implementing competi- tive marketing strategies. The need for good marketing is even more critical with international customers. The United States no longer can survive by selling just to itself. Successful marketers must be able to understand customer wants and deliver the real value to their target markets, whether those markets are located in Attica, Indiana or in Nairobi, Kenya. Marketing skills distinguish between success and failure in the global markets that everyone aspires to conquer. Marketing philosophy is becoming especially important to food and agribusiness firms. The needs and wants of BEST COPY AVAILABLE consumers with respect to food are changing very rapidly. People want safe food. They want convenient food. They want to choose from a variety of foods. They want food low in fat. And, the list of goes on and on. When the needs consumers change so fast, a strong marketing effort is needed for a successful food firm to-continue delivering what the customer wants. The same thing is happening to firms supplying farmers with inputs such as feed, seed, fertilizer, and pesticides. Not so long ago, farmer was a farmer. Now, there are many different types: of farmers, each.with unique needs. Some farms are large commercial operations; others are small part-time or hobby operations. It takes a smart marketer to make certain that the agricultutal input firm continues to meet all of the different needs of today's farmer. The key for a manager in a modem food or agribusiness firm is knowing how to put the marketing philosophy into practice. How does a manager find out what customers need and want? How does the firm create value for their customers through products and services? How do they offer or communicate that value to their customers? To answer these questions, many successful firms developed a process called strategic market planning. In this process, firms study their market and their competition. They rake a long look at their own strengths and limitations and set goals for their marketing effort. Based on this knowledge of their market, managers develop a marketing strategy that provides and communicates value to their customers. Let's take a closer look at this process. BEST COPY AVAILABLE STRATEGIC MARKET PLANNING The steps involved in the strategic market planning process are shown in Figure A. First, we will look at each step in the process by using a food product to illustrate how strategic market planning works. Then, we will take an actual S. agribusiness firm case study to provide a =-''%4 ..Vrtc.t* 6 Ar&r,PrAT intr. more in-depth lookat strafegic marketing for agribusiness . STEP I. ASSESSITUATION Figure A. ASSESS SITUATION IDENTIFY SWOT STRENGTHS, WEAKNESSES, OPPORTUNITIES, THREATS SET GOALS CRAFT STRATEGY DEVELOP CORE STRATEGY POSITION IMAGE MARKETING MIX PRODUCT, PRICE, PEOPLE, PROMOTION Market Candicians.aie.ei;entS that occur outside the firm's direct control. These may include government policy, 7 S interest rates, unemployment,,weather, etc. Here; we want to define the main opportunities and threats that_must be considered by the marketer. FOod.Finn Example: More and more regulation's relating to food Safety, . labeling, and waste disposal. are being implemented each year. As.an example, regulations relating to Waste.diSposal have an impact on food packaging design. Customers are the buyers and potential buyers for a product or service,Good marketers.must.understand their custom- ers and be. alert to any changes taking place in the customers' buying behavior. Food Firm Example: Food firm custom- ers-are a diverse group. They may be working mothers and fathers, children home from school with soccer practice at 5:30 p.m.,a single man or woman playing tennis three times a week coming home to dinner at 8:00 p.m., senior citizens busy with volunteer-jobs and day trips, etc. The highly varied needs and wants of these groups must be closely monitored by marketers. Competitors are other firms selling to the same customers. A marketer needs to know who these companies are, what they do well, and what they don't do well. Food Firm Example: In most food markets, there is no shortage of competi- tion. Your new food product will likely be copied and improved on by the competi- tion if it is a good idea. The challenge for a good marketer is to stay a step ahead of the competition by knowing and serving the market better. Your Firm. What does your firm do well? What advantage do you have over the competition? Where is your company or your product vulnerable? A strategic marketing plan-must answer these . nuestions. 8 Food Firm, Example:- Perhaps you are a well-established and trusted food proces- sor who has done well ih the industry. But-, you have.not inirOduced a really - successful new food product in eight years. Your challenge:as a marketer iS to find out why-and.cOrrect the problem. STEP.11. CRAFT STRATEGY Prioritize Target Markets. What particular group of customers will you focus on, i.e., who is your target market?. Marketing strategies are.much more . successful.When they are focused on the specific needs of a target group: 'Food Firm Example: A substantial number of potential consumers who profess a.need for your product may exist. Your target market for a new thirst- quenching drink might be high school students who are active in sports. Note that interest in your product is not enough. The target market must be affluent enough to afford the new food product. Develop Core Strategy (Your Position or Image). The core strategy or position is what you want your customers to think about your product. Some products are positioned as gourmet, some as conve- nient, some as dependable, and some as state-of-the art. Developing a solid position or image is crucial to marketing success. Food Firm Example: An example of a position is the "milk kick" commercials developed by the Dairy Council. The BEST COPY AVAILABLE position they want to achieve is shown in their advertisements in which they convey, `-`you will be energetic, have beautiful skin, and be a fun-loving and very healthy person ifyoirdrinlc milk." Marketing Mix (Product, Price, Promotion, Place). Here, marketers must 9 r