2. How Do I Develop A Strategic Marketing Plan?

3. 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.

4. 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

5. 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

6. Building A Strategic Marketing Plan

7. 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

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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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)

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

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

18. 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

19. 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.

20. 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

21. 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

22. 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

23. 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

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

25. 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

26. 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?

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

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

29. 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.

30. 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.

31. 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

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

33. 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

34. The Business Plan and the Marketing Plan Marketing plan is implementation of the BP Implementation consistent with objectives What are important considerations?

35. 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?

36. Price Expectations Assess the situation – Historic patterns (seasonal) – Basis patterns The current situation – Outlook source – Market advisors (?!?)

37. 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/ http://www.farmdoc.uiuc.edu/agmas/

38. 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

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

40. 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

41. Evaluate and Review Stay disciplined! Evaluate your actions. Are conditions changing?

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

43. Strategic Business Planning for Commercial Producers