strategic marketing plan

Strategic Business Planning for Commercial Producers

How Do I Develop A Strategic Marketing Plan?


Types of Marketing Planning •Strategic Marketing

– Encompasses the entire farm strategy

– Deals with the broader issue of determining firm’s strategic position in the market and how to create value from that position

•Product Marketing/Pricing– Deals with the tactical side of selling a product

– Similar to a set of standard operating procedures for marketing a particular product.


Marketing Defined . . .

Marketing is anticipating the needs and wants of targeted customers and managing the process through which these needs and wants are satisfied . . . profitably


Management Philosophies

Production Concept

Marketing Concept

Starting Point

Product Market

Focus Product Quality and Features

Customer needs

Means

Improving production & distribution efficiency

Integrated Marketing

Ends Profits through sales volume

Profits through

customer satisfaction


Building A Strategic Marketing Plan


Strategic Marketing Plan

1. Environmental Analysis (SWOT) 2. Identifying Customers3. Competitor/Value Creation Analysis4. Marketing Mix: The 4 P’s5. Financial Analysis and Budget6. Implementation and Control Plan


1. Know Your Marketplace

• Strengths, Weaknesses, Opportunities, and Threats (SWOT)

• Trends and changes:

– Market analysis

– Segmentation

– Prioritizing target markets


2. Who Are Your Customers?

Customer: firm or person that buys

your product

Consumer: firm or person that eventually uses

your product

Customersvs.

Consumers


Customer/Consumer Trends

Customers• Just-in-time

inventory• Business to

business (B2B)• Manufacturing

mentality• Industrialization of

agriculture

Consumers• Households with

fewer people• Active, on-the-go

lifestyles• Concern over the

health aspect of food, with a desire for good taste

• Less time for meal prep


Know What Is Important to Your Customer

• Get inside the mind of your customers• Find out why they would buy from you

. . . or why they would not• Truly understand their needs

– Intentional listening– Customer analysis– Solve their problems


3. Competitor/Value Creation Analysis

•Competitive analysis

•Reallocation of resources if necessary

•Positioning

Make sure you are distinctively differentfrom your competition

in areas of importanceto your customers


The Value ChainFirm Infrastructure

Human Resource Management

Technological Development

Procurement

InboundLogistics

Operations Outbound Logistics

Marketing& Sales

Service

MA

RG

IN

MA

RG

IN

Supporting

Activities

Primary

Activities

Relationship with Suppliers Relationship with Buyers


4. Determining the Marketing Mix

•The set of controllable variables that will accomplish the marketing objectives:

• Product strategy• Place (distribution) strategy• Promotion (communication) strategy• Pricing strategy


Product Strategy• Portfolio of Products

– Corn, soybeans, hogs, dairy, cattle, value-added grain, fruits and vegetables, custom farming operations, custom feeding operations

– Fits your strengths and weaknesses– Provides acceptable risk/return tradeoff– Meets needs of a particular customer segment

• Quality– No. 1 versus No. 2 – GMO vs. non-GMO

• Service– Timely custom operations– Pre-sorting of grain or livestock quality

• Volume– Large and small quantities– Guaranteed volumes (contract)


McDonald’s Product Package

• Food• Fast service• Fun for the kids• Variety• Non-smoking• Consistent product


Waxy Corn

• Corn with specific type of starch• Delivery Schedule• Specific hybrids • Quality requirements• Purity level


Place Strategy•Storage

– On-farm vs. off-farm– Segregated or IP

•Timing– On-demand– Equal amounts throughout the year

•Location– Delivery to multiple points

•Assortments– Delivery of different amounts to different places at

different times


American Crystal Sugar (ACS)

• M&M Mars changed from a commodity focus for inputs to a quality assurance focus.

• ACS keeps the sugar silo at the M&M Mars plant full.

• ACS shifted from a warehouse next to the ACS factory in Minnesota to an ACS warehouse in Pennsylvania near the candy plant.


Spring Wheat Bakers

• Farmer-owned cooperative that processes wheat, grown on Northern Plains into flour

• Frozen and par-baked bread factory in Atlanta, Georgia, a population center


Promotion Strategy•Advertising

– Creating brochures and other advertisements on the products your farm provides and what value they add

– Creating a farm logo

•Personal Selling– Telling your customers how you create value– Meeting your grain elevator manager for coffee– Having lunch with the lender– Taking a Christmas pie to your landlord(s)

•Public Relations– Being a good neighbor– Being involved in the community– Open house days


Price Strategy

Price is the cost the customer must bear in order to obtain the product. It includes:

• list price• discounts• allowances• payment period• credit terms


Pricing Methods• Value-Based Pricing

– Set price based on buyers’ perception of value (rather than on the seller’s costs)

• Cost-Based Pricing– Add a standard markup to the cost of the

product• Competition-Based Pricing

– Set price based on following competitors’ prices


Value-Based Pricing

• Customer Oriented

• Based on customer’s perceived value

• Match price to perceived value

• Brand loyalty


Competition-Based Pricing

• Price decision based on actions of competition

• Less attention on cost or product demand

• Large firms all charge the same price

• Smaller firms follow lead of large firms, may offer a slightly lower price


5. Financial Analysis and Budgeting

• Estimate the demand given the pricing and promotion strategy.

• Determine expenses associated with production and marketing.

• Determine anticipated cash flows.• Will strategy cash flow? When?• What are the critical assumptions of the

financial analysis and what are the impacts of changes in those assumptions?


6. Implementation and Control

• Focus attention of everyone on delivering what the customer wants– Management of people– Monitoring and control


How Do I Build A Product Pricing Plan in A Commodity Market?


Commodity Marketing

• Homogeneous Product –differentiation in services, not product.

• Low-cost strategy

• What about the price received?– Does every producer get the same price?

• Marketing plans – systematic pricing strategies.


What Is A Marketing Plan?

A marketing plan is an outline of

price, date and quantity objectives

used to generate a reasonable return

for the business given the existing

market conditions.


Diagram of A Corn Marketing Plan

Price Triggers

Date Triggers

Jan. 1

March 15 May 1 Harvest

$2.50/bu $2.40/bu

Sell 20% Sell 20% Sell 60%r

Existing Price


What Does A Marketing Plan Do?

• Detached from the decision

• Proper perspective

• Introduces discipline

• Check your logic

• What if …...


Steps In A Marketing Plan• Relationship between the business plan

and marketing plan

• Production history and expectations

• Expected prices

• Production costs

• Price and date targets

• Review and evaluation


The Business Plan and the Marketing Plan

• Marketing plan is implementation of the

BP

• Implementation consistent with objectives

• What are important considerations?


Production History and Expectations

• What is the farm’s history?• Is there an underlying trend?• How variable is production?• Write down expected production.• How does expected production

relate to pre-harvest sales?


Price Expectations

• Assess the situation– Historic patterns (seasonal)– Basis patterns

• The current situation– Outlook source– Market advisors (?!?)


AgMAS – An Objective Study of Market Advisory Services• 25 Firms – subscribe to each service.• Observe and follow recommendations• Compare to a benchmark price answer

Questions:– Do they consistently beat the benchmark?– Do they reduce risk and increase returns?– Are they as good with corn as with soybeans?– http://www.farmdoc.uiuc.edu/agmas/


The Difference

• What’s the difference between the market advisory service and the marketing plan?– “Beat the Market” vs. “Accepting What

the Market is Giving.”– Active Marketing = Private Information– Active Marketing vs. Passive Marketing


Cost of Production

• What are the costs?• What revenue cover costs?• What price is needed to cover

the costs?• Is this price realistic?


Price, Date and Quantity Objectives• Identify price and date triggers ..

– When should pre-harvest sales be made?

– What prices are acceptable?

– Prices attainable?

• Set quantity objectives according to

– Financial need

– Risk perceptions


Evaluate and Review

•Stay disciplined!•Evaluate your actions.•Are conditions changing?


A Little Marketing Philosophy ...

• Bad outcomes still happen …• Never compare to the market

high ..• Your plan for your

operation ...

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