1. Developing a Marketing Plan John D. Lawrence, Ph.D. Extension Livestock Economist Iowa State University

2. Definitions l Market – What, When, Where, Who l Plan – Forethought – Written – Decisions – Implementation

3. Why develop a marketing plan l Internal audience – Support business goals – Provide decision framework » Budgets, analysis l External audience – Exhibit management ability – Demonstrate stability of cash flow

4. Components of a marketing plan l Current operation l Goals l Objectives l Decision rules l Evaluation

5. Support business goals l Identifies needs of business – Long-term profitability – Short-term liquidity l Quantifies and manages risk l Incorporates current market environment – Marketing alternatives – Market outlook

6. Incorporate Current Information l Market outlook – Raw data and information – Analysis – Advice l Sources – Public: Universities and USDA – Private companies

7. Market Outlook l Time horizon – Multi-year – Annual or crop year – Quarterly – Monthly – Weekly – Daily – Within day

8. Market Outlook l Avenues – Newsletters » Mail, electronic, call-in – Advisory services » Real-time comments » Prescription – Marketing services

9. Examples of Services http://www. aces.uiuc.edu/~agmas econ.iastate.edu/faculty/lawrence/ exnet.iastate.edu econ.iastate.edu/publications/ifo/ mannlib.cornell.edu/reports/erssor/ http://lmic1.co.nrcs.usda.gov/

10. Managing market risk l Sources of price risk – Futures – Basis l Types of risk – Sinking the ship – Missing the boat

11. Define current operation l Quality and quantity – Marketings – Purchases l Marketing philosophy l Attitude toward risk

12. Marketing goals l Consistent with business goals l Long-term focus l Achievable and measurable l Examples: – Average 5% over Iowa top by 2005 – Sort loss under $0.30/cwt in 2003 – Average $10/profit 2003-2005

13. Marketing objectives l Procedures to reach goals l Short-term focus l Incorporate current – Production levels – Production costs – Market conditions l Balance profitability, liquidity, and risk

14. Risk objectives l Acceptable probability of failing to meet a price objective l Examples: – 90% sure of covering direct costs – 60% sure of covering overhead costs

15. Price objectives: Cattle Feeding Example Cost itemCost $/cwt Feeder$47.60 Feed61.04 Interest62.96 Trucking64.16 Vet Med65.28 Yardage69.60

16. Decision rules l Triggers – Indicate that a decision is needed l Actions – Predetermined decision to implement l Examples: – Hedge 50% if futures fall below $42 – Buy 10,000 bu corn if below $2.30

17. Risk management alternatives l Education and experience essential – Courses and marketing clubs – Otherwise tuition can be quite high l Futures l Options on futures l Forward deliverable contracts l Long-term packer agreements

18. Marketing plan evaluation l Track market information l Compare to stated goals and objectives l Hindsight is discouraging l Decisions versus implementation l Learn from mistakes