How Do I Develop A Strategic Marketing Plan by crawfordhanes

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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           Marketing
                           Concept              Concept

     Starting Point         Product              Market

                      Product Quality and
        Focus              Features
                                              Customer needs


                          Improving
                         production &           Integrated
        Means             distribution          Marketing
                           efficiency


         Ends                                 Profits through
                      Profits through sales
                                                 customer
                             volume
                                                satisfaction
Strategic Business Planning for Commercial Producers




Building A Strategic Marketing Plan
Strategic Business Planning for Commercial Producers




 Strategic Marketing Plan
 1.    Environmental Analysis (SWOT)
 2.    Identifying Customers
 3.    Competitor/Value Creation Analysis
 4.    Marketing Mix: The 4 P’s
 5.    Financial Analysis and Budget
 6.    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         Consumer: firm or person that
    that buys your product           eventually uses your product
Strategic Business Planning for Commercial Producers


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

               Human Resource Management
Supporting
Activities




               Technological Development


               Procurement



             Inbound                       Outbound Marketing Service
                       Operations
             Logistics                     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      May 1           Harvest
 Jan. 1
                    Sell 20%      Sell 20%       Sell 60%r


                     $2.50/bu     $2.40/bu         Existing
                                                   Price
                                Price Triggers
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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