Means Creating Win-Win Situation
Producers must be proficient in growing their product, but marketing that product is just as important to being a successful operation. The intent of this article is to foster a better understanding of why consumers buy your products, and of how marketing activities can help this process and give you a competitive edge.
Marketing goes beyond the narrow viewpoint of being only retailing, promotion, and advertising. Using a broader perspective, successful marketing today means the seller must consider the buyer, and act to facilitate the exchange of products or services so that both parties gain in some way. This emphasizes several points:
1. Successful marketing involves an exchange process. Usually, the grower trades product for money, and the buyer trades money for product.
2. Although there may be several exchanges, the money ultimately comes from the final consumer. So, producers need to think of the final consumer as the buyer.
3. To participate in the exchange, the producer-seller must gain, or will not survive in the long run. If there are several exchanges, each seller must gain.
4. To participate in the exchange, the product must provide what the buyer needs or wants. The buyer must get enough value or satisfaction from the grower's product to justify the price. If there are several exchanges, each buyer must gain. Again, the buyer is ultimately the final consumer.
Starting with the raw product, various marketing activities or marketing functions can create value or satisfaction for the buyer in five ways. There is value from form, location, time, ownership, and information.
First, consider value from the form of the product. Growers can produce the best sugar beets, or wheat, or cattle. However, most people do not want and probably will not know what to do with sugar beets, wheat, or cattle because they are in the wrong form. Sugar beets have more value, or provide more satisfaction to most people if its form is changed to sugar, and even more if sugar is changed to candy or soft drinks. Wheat gives more satisfaction as flour, or bread and pasta. A steer provides more satisfaction as steaks or hamburger. There is also value in clean and uniform apples, crisp lettuce, and tray packs of tomatoes.
So, marketing functions might maintain product form (quality), or convert raw materials to finished goods--something the final consumer wants and is willing to pay for. Specific functions include cooling, processing, cleaning, sorting, and packing.
Second, satisfaction can be obtained from the location of a product. Producers can grow beautiful vegetables in California's Central Valley, but they are useless (can't make money) if not shipped to Los Angeles, New York, or some other city. The product is in the wrong place.
Looking at it as a final consumer, a juicy hamburger with all the trimmings gives me the most satisfaction and value as I bite into it. There is a little less utility if I have to drive to the restaurant to get one, and even less if that restaurant is clear across town. For the final consumer, the hamburger is almost useless if it's running around a pasture somewhere. As a side note, the restaurant has french fries and milkshakes, as well as other menu items besides the hamburger. It provides assortment.
So the hamburger's location is very important, and can add value. The notion of pizza or flowers being delivered to your door also builds on value from location. Similarly, produce gains value as it moves from the farm to the packing house to the wholesalers/retailers and finally to the shopper. Marketing functions that increase value via location include transportation, aggregation or the accumulation of products, disaggregation or breaking bulk shipments, and creating or providing an assortment.
Third is value from having product at a desired time. Two examples of the wrong time are the Christmas tree grower that delivers on December 26, and turkey growers who have turkeys ready one week after Thanksgiving. Not much can be done with the trees, but the turkeys may have the option of being frozen and sold at a later date.
Thus, being able to control when a product reaches the market can add value. It could be quite profitable to either be the first with apples on the market, or to hold the crop in a controlled atmosphere reefer until after the main harvest. Going back to our restaurant and its customers, satisfaction from time also means not receiving hamburger, buns, cheese, lettuce, and tomatoes on different days, but rather at the same time and in manageable amounts. Buyers typically want predictable, consistent supplies. Marketing activities that can help create time value include storage and scheduling.
Fourth is utility associated with ownership or possession of a product. Possession typically comes with the conclusion of an exchange and the transfer of ownership from seller to buyer. Sheep grazing in a meadow and golden fields of grain are nice, but the value is realized only at the sale. Further, producers may have several options for timing the transfer of ownership. This has certain risk and control aspects, such as who bears costs of spoilage, loss, or price declines, and who pays freight and insurance. Hedging, and credit and financing issues may also be involved. A cash discount or favorable credit terms might be the deciding factor in making a sale.
Finally, we consider value and satisfaction from information on products. Information typically communicates what consumers want to know. Newspaper ads tell consumers of a special on lettuce, grades might convey the tenderness of a steak, store signs explain whether sweet corn is fresh, and labels list the nutritional contents of a loaf of bread. Kona Coffee and Washington apples get a price premium because of the information conveyed by their names, as might "organic" produce or those that are "USDA certified." Typical marketing functions that create information value include advertising and promotion, labelling, packaging and the activities associated with market news and statistics.
The value that final consumers place on a product ultimately determines the price that growers will receive. The price, in turn, should be compared against costs to determine if it pays to create the value. An understanding of how the combination of form, location, time, ownership, and information contribute to the satisfaction of buyers can help producers and agribusinesses direct their marketing activities toward a more successful operation.
Stuart Nakamoto is a member of the Western Extension Marketing Committee and is an Extension Economist at the Dept. of Agricultural and Resource Economics, University of Hawaii at Manoa.
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