Lecture 9 Marketing of Food Products: Processor Marketing Systems

1. Lecture 9Marketing of Food Products: Processor Marketing Systems Required Text: Chapters 3 and 14

2. Marketing of Food Products • Agribusiness marketing can be categorized into two broad categories • Marketing of Agricultural Commodities • Production, handling and sales of farm products • Marketing of Food Products • Commodity procurement • Processing • Wholesaling • Retailing

3. Marketing of Food ProductsProcessor Marketing • Food processing is big business • The processing cost share of U.S. foods : • 1994 - $120 billion • 2004 - $220 billion • The leading food manufacturers are very large • Cargill, ADM, ConAgra, Excel, Tyson’s • About two-thirds of processor output goes directly to the consumer sector (retail stores and restaurants). • Nearly one-fifth goes to other processors • The rest goes to export, govt. purchases, or other uses

4. Marketing of Food ProductsProcessor Marketing Systems Retail Stores Restaurants Processor Other Processors Export Govt. Purchase Other Uses

5. Marketing of Food ProductsProcessor Marketing • The four Ps of the marketing mix: Successful marketing requires careful attention to a set of activities including: • Product Design • Promotion • Place (Channel Organization) • Pricing • These activities, integrated and balanced to complement one another, are called a marketing mix

6. Marketing of Food ProductsProcessor Marketing Product • The output of a firm that has some value added to the original raw commodity is designed in terms of maximizing customer appeal against the real constraints of costs. • Products are catered to the needs of potential customers • Image, packaging, etc. • In a progressive society, it may be advantageous to introduce “new” product periodically. • Car manufacturers overhaul the models every four or five years.

7. Marketing of Food ProductsProcessor Marketing Promotion • Promotion is the communication of good, positive aspects of the marketer and its products to potential customers. • Promotion includes • Advertising • Personal communication – direct sales to buyers • Non-personal communication – free samples, display materials, coupons, and contests (sales promotion) • Communication with potential customers is essential to their purchase decision

8. Marketing of Food ProductsProcessor Marketing Place • Place refers to channel organization to carry goods to consumers – various ways to reach consumers. • Retail stores – intensive vs. selective • Door-to-door sales • Catalog or TV based sales • Online sales

9. Marketing of Food ProductsProcessor Marketing Price • Lower price attract more sales, other things being equal • But, low prices may squeeze the margins of the seller • Also, the level of price may convey an image of quality • Pricing policy is complex • Perfect competition – many buyers and sellers determine the price • Monopoly – the single seller sets the price (no close substitute) • Price discrimination • Monopolistic competition – each seller sets the price of its commodity with close substitutes • Oligopoly – strategic price setting • Tacit collusion, price war (trigger pricing), low price guarantee • Pricing to eliminate rivals – Limit Pricing, predatory pricing

10. Marketing of Food ProductsProcessor Marketing • How national-brand processors manage the four Ps • The processors’ approach to the product • The product represents a set of satisfactions that revolve around nutrition, taste, quality, sanitation and healthfulness, convenience, packaging, positive and negative associations, etc. • Products are consumed in many different circumstances. • Timing • Occasions • Convenience • Fast food • Microwavable packages of food • The packaging • Food preservation • Packaging of varying sizes − Individual or family pack

11. Marketing of Food ProductsProcessor Marketing • Brands - highly processed and differentiated products • Differentiated higher quality and convenience • Product life cycles – start, growth, maturity, and decline • New product enters the market • Sales grow with promotion and stabilizes over time (saturation) • Rival imitates – sales declines and eventually vanishes unless replaced with a “new” product Sales profits

12. Marketing of Food ProductsProcessor Marketing • Processors use of promotions • Advertising – institutional or product oriented • Sales through personal communication – direct sales • Sales through non-personal communication – sales promotion • Goals of Advertising • Informational – at the beginning of the life cycle of the product • Competitive – at the growth phase • Brand recognition and brand insistence – • Reminder -

13. Marketing of Food ProductsProcessor Marketing • Tasks of sales persons and food brokers • Persuade the buyers to try a new product • Check the retail displays to ensure proper merchandising • Obtain orders • Inform store managers and involve them in special product promotions • Relay sales intelligence back to the processor • Sales promotion • Point-of-purchase (POP) displays • Sales contests • Trading stamps and sweepstakes • Free samples and bonus packs • Deals on packages • Coupons distributed to consumers • Exhibits at trade shows