Strategic Marketing Plan

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					Strategic Business Planning for Commercial Producers

How Do I Develop A Strategic Marketing Plan?

Strategic Business Planning for Commercial Producers

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.

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

Management Philosophies
Production Concept Starting Point
Product

Marketing Concept
Market Customer needs

Focus

Product Quality and Features
Improving production & distribution efficiency

Means

Integrated Marketing

Ends

Profits through sales volume

Profits through customer satisfaction

Strategic Business Planning for Commercial Producers

Building A Strategic Marketing Plan

Strategic Business Planning for Commercial Producers

Strategic Marketing Plan
1. 2. 3. 4. 5. 6. Environmental Analysis (SWOT) Identifying Customers Competitor/Value Creation Analysis Marketing Mix: The 4 P’s Financial Analysis and Budget Implementation and Control Plan

Strategic Business Planning for Commercial Producers

1. Know Your Marketplace
• Strengths, Weaknesses, Opportunities, and Threats (SWOT) • Trends and changes:
– Market analysis – Segmentation – Prioritizing target markets

Strategic Business Planning for Commercial Producers

2. Who Are Your Customers?
Customers vs. Consumers
Customer: firm or person that buys your product Consumer: firm or person that eventually uses your product

Strategic Business Planning for Commercial Producers

Customer/Consumer Trends
Consumers Customers • Households with • Just-in-time fewer people inventory • Active, on-the-go • Business to business lifestyles (B2B) • Concern over the • Manufacturing health aspect of food, with a desire mentality for good taste • Industrialization of • Less time for meal agriculture prep

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

3. Competitor/Value Creation Analysis
Make sure you are distinctively different from your competition in areas of importance to your customers
• Competitive analysis
• Reallocation of resources if necessary

• Positioning

Strategic Business Planning for Commercial Producers

The Value Chain
Firm Infrastructure

Supporting Activities

Human Resource Management Technological Development Procurement

Inbound Operations Logistics

Outbound Marketing Service Logistics & Sales

Relationship with Suppliers

Relationship with Buyers

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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)

Strategic Business Planning for Commercial Producers

McDonald’s Product Package
• • • • • • Food Fast service Fun for the kids Variety Non-smoking Consistent product

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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.

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

Value-Based Pricing
• Customer Oriented
• Based on customer’s perceived value • Match price to perceived value • Brand loyalty

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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?

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

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.

Strategic Business Planning for Commercial Producers

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.

Strategic Business Planning for Commercial Producers

Diagram of A Corn Marketing Plan
Date Triggers

March 15
Jan. 1 Sell 20%

May 1
Sell 20%

Harvest
Sell 60%r

$2.50/bu

$2.40/bu
Price Triggers

Existing Price

Strategic Business Planning for Commercial Producers

What Does A Marketing Plan Do?
• Detached from the decision
• Proper perspective • Introduces discipline • Check your logic • What if …...

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

The Business Plan and the Marketing Plan
• Marketing plan is implementation of the
BP

• Implementation consistent with objectives
• What are important considerations?

Strategic Business Planning for Commercial Producers

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?

Strategic Business Planning for Commercial Producers

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

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

Strategic Business Planning for Commercial Producers

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/

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

Cost of Production
• What are the costs? • What revenue cover costs? • What price is needed to cover the costs? • Is this price realistic?

Strategic Business Planning for Commercial Producers

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

Strategic Business Planning for Commercial Producers

Evaluate and Review

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

Strategic Business Planning for Commercial Producers

A Little Marketing Philosophy ...
• Bad outcomes still happen … • Never compare to the market high .. • Your plan for your operation ...

Strategic Business Planning for Commercial Producers

Strategic Business Planning for Commercial Producers


				
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