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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 Product Market
Point
Product Quality
Focus and Features Customer needs

Improving
production & Integrated
Means distribution Marketing
efficiency

Profits
Ends Profits through through
sales volume customer
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 C o n su m e r: firm o r p e rso n


person that buys th a t e v e n tu a lly u se s
your product y o u r p ro d u ct
Strategic Business Planning for Commercial
Producers

Customer/Consumer
Trends Consumers
Customers

• Just-in-time • Households with


inventory fewer people
• Active, on-the-
• Business to go lifestyles
business (B2B)
• Concern over
• Manufacturing the health
mentality aspect of
• Industrialization of food, with a
agriculture desire 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
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

T h e V a lu e C h a in
Firm Infrastructure

Human Resource Management

MA
Supporting

RG
Activities

Technological Development

IN
Procurement

Inbound Outbound Marketing Service


Operations
Logistics Logistics & Sales

IN
Activities
Primary

RG
MA
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
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
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

D ia g ra m o f A C o rn
M a rk e tin g P la n
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?
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