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 firms 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 Marketing Concept Starting Point ProductMarket Focus Product Quality and Features Customer needs Means Improving production & distribution efficiency 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.Environmental Analysis (SWOT) 2.Identifying Customers 3.Competitor/Value Creation Analysis 4.Marketing Mix: The 4 Ps 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? Customer: firm or person that buys your product Consumer: firm or person that eventually uses your product Customers vs. Consumers

Strategic Business Planning for Commercial Producers 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

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 Competitive analysis Reallocation of resources if necessary Positioning Make sure you are distinctively different from your competition in areas of importance to your customers

Strategic Business Planning for Commercial Producers The Value Chain Firm Infrastructure Human Resource Management Technological Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN Supporting Activities Primary Activities 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 McDonalds 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 sellers 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 customers 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 Price Triggers Date Triggers Jan. 1 March 15May 1Harvest $2.50/bu$2.40/bu Sell 20% Sell 60%r 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 farms 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 Whats 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