The agricultural marketing system has two distinct dimensions. One of these dimensions involves the institutions, organizations, and enterprises that participate in a market, while the other is the functions these participants perform. The functions of agricultural marketing are categorized into three classes: exchange, physical, and facilitating functions.
Functions of Agricultural Marketing
Exchange Functions
- Buying
- Selling
- Storage
Physical Functions
- Transportation
- Processing
- Standardization
Facilitating Functions
- Financing
- Risk Bearing
- Market Intelligence
Exchange Functions
1. Buying: The marketing concept emphasizes the importance of meeting customer needs. A producer becomes market-oriented in production activities by tailoring output to meet specific demands or market opportunities. For example, a contract farmer aiming to supply a food processor manufacturing sorghum-based malted drinks will focus on purchasing improved sorghum seeds.
Inputs that might negatively affect storage or processing properties of sorghum will be avoided, and better inputs will be sought to add value to the product from the customer’s perspective. Buying decisions are influenced by the goal of increasing the product’s attractiveness in the target market.
The buyer’s motive is to maximize profits, not necessarily to provide the best quality. In striving to produce an attractive product for the buyer, it is essential to remain conscious of additional costs. The most successful agribusiness is one that achieves the largest difference between prices obtained and costs incurred.
2. Selling: Among the various marketing functions, selling is one that is most easily associated with marketing. Many firms follow the selling concept when they have excess capacity, aiming to sell what they can produce rather than producing what they can sell. This function enables enterprises to practice selling effectively.
While ‘high-pressure selling’ is sometimes practiced, it is not considered true marketing, as it neglects customer interests. True marketing focuses on providing customer satisfaction, realizing that long-term objectives are achieved through this. Unlike selling, which may create a consumer, marketing is about creating and maintaining long-term relationships with customers.
3. Storage: Two characteristics of agricultural production—perishability and seasonality—make storage an important marketing function. While production is seasonal, demand for agricultural products remains constant throughout the year.
Storage is necessary to ensure a steady and uninterrupted flow of products into the market. Additionally, the biological nature of agricultural products limits the ability to immediately respond to changes in demand, unlike in manufacturing industries.
In the agricultural sector, particularly in Nigeria and other less developed countries (LDCs), supply often exceeds demand in the post-harvest period. This surplus lowers producer prices, and wastage rates can be extremely high.
During the off-season, supply drops, leading to increased prices for basic agricultural products. A well-executed storage function ensures the availability of agricultural products year-round, benefiting both producers and consumers.
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Physical Functions
1. Transportation: Transportation is essential in ensuring that agricultural products are available where they are needed without significantly increasing overall costs. Effective transportation requires evaluating alternative routes and modes of transport to achieve timely delivery, maintain product quality, and minimize shipping costs. Proper transport management is critical for efficient agricultural marketing.
In less developed countries (LDCs), poor road infrastructure often results in higher transportation costs, which in turn raise marketing costs and the final price of products, making them unaffordable for many low-income earners.
2. Processing: Most agricultural produce is not immediately suitable for consumption after harvest and must undergo some changes before it can be used. The processing function is considered a marketing function because it involves altering the form of the product, adding value through form-changing activities.
For example, processing cassava into gari or livestock feed, converting palm fruit bunches into palm oil, or transforming maize into animal feed increases the product’s value by enhancing its utility to the buyer. Marketing decisions often determine how the form of the produce will be changed and the methods used in the transformation process.
3. Standardisation: Standardisation is concerned with establishing and maintaining uniform measurements of produce quality and quantity. This function simplifies buying and selling while reducing marketing costs by allowing buyers to specify their exact requirements and enabling suppliers to communicate their offerings in terms of quality and quantity.
Without standard weights and measures, trade becomes more expensive or even impossible. In Nigeria, various weights and measures are used for different agricultural products, often varying from state to state. For example, cassava tuber measurements differ across regions, and the same applies to plantains, bananas, fruits, and vegetables.
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The merits of uniform standards include:
i. More meaningful price quotations.
ii. The possibility of selling commodities by sample or description.
iii. The ability to assemble small lots of commodities produced by many small producers into economic loads if they are similar in grade or quality.
iv. A range of graded produce available, allowing buyers to choose the quality that meets their preferences and budget.
4. Facilitating Functions: Facilitating functions include product standardisation, financing, risk bearing, and market intelligence. These activities support the exchange process, though they do not directly involve the transfer of title or the physical movement of produce.
5. Financing: In most production systems, there are inevitable delays between investing in raw materials such as seeds, fertilizers, feeds, and agrochemicals and receiving payment from the sale of produce. Financing is essential to bridge this gap, but in Nigeria, it is difficult to secure.
Banks are often hesitant to finance agricultural ventures due to the inherent risks and uncertainties of the sector. As a result, agribusiness owners typically rely on personal savings, money lenders, and cooperative societies for funding. However, these sources often provide limited funds, and money lenders charge high interest rates, making it challenging for agribusinesses to scale up.
6. Risk Bearing: The potential for losses is ever-present in both the production and marketing of produce. Physical risks include destruction or deterioration due to fire, extreme temperatures, pests, floods, and other natural events.
Market risks involve unfavorable changes in the value of produce between production and consumption, as shifts in consumer preferences can reduce the appeal of a product. These risks are borne by organizations and individuals involved in the production and marketing processes.
7. Market Intelligence: Market intelligence refers to the process of collecting, interpreting, and distributing information relevant to marketing decisions. In agribusiness, marketing decisions should be based on sound information due to the inherent risks in the industry.
Market intelligence helps reduce the uncertainty in decision-making by providing insights into customer needs and preferences. It also informs decisions regarding product development, distribution channels, promotion strategies, and pricing. In Nigeria, however, marketing research is underfunded, and the limited findings that do exist often do not reach business owners due to a lack of extension services.
This article has discussed the key marketing functions, which are divided into three main categories: exchange, physical, and facilitating functions. Exchange functions consist of buying, selling, and storage, while physical functions include transportation, processing, and standardisation. Facilitating functions cover financing, risk bearing, and market intelligence.
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