Tips for Effective Agribusiness Marketing System

In any environment, marketing connects two primary functions: production and consumption. It involves activities such as assembling, transporting, sorting, cleaning, grading, storing, packing, processing, locating suppliers and consumers, searching for outlets, financing, risk-bearing, grading, and standardization.

It is established that any time a bargain is made regarding goods and services, marketing is happening. Marketing is, therefore, the process through which buyers and sellers, producers and consumers of goods and services come into contact for business transactions. Such contact can take various forms, including face-to-face, mail, e-mail, phone, telex, or fax.

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Overview of Agribusiness Marketing

Key considerations in agribusiness marketing include: what, when, where, how, and whom. "What" refers to the product or produce, while "when" relates to time utility.

"Where" addresses place utility, as agricultural products need to be transported from surplus regions to areas of scarcity.

Processing and product transformation refer to the "how" aspect of the produce. Taking personality into account, "whom" is about considering the consumer.

It is clear that consumers always aim to purchase goods and services at the lowest price, whereas farmers and sellers aim to sell at the highest possible price.

Firms engaged in marketing tasks also focus on the profitability of their business operations, but ultimately, the overall ruler and coordinator of agribusiness marketing activities in any society is the consumer.

The path that goods take from the producer to the final consumer is called the marketing channel. The type and complexity of the agribusiness marketing channel vary depending on the commodity.

A direct marketing channel, which is from producer directly to consumer, is very simple. However, most agribusiness products undergo further processing at different levels of the marketing channel and pass through many firms before they reach the ultimate consumer.

In the farm supply industry, the farmer is the consumer, and the basic manufacturer of farm supplies is the producer. Farm supplies flow from the manufacturer to the farmer in much the same way, with the same marketing functions performed as in the marketing of agricultural products to consumers.

Sub-systems in Agribusiness Marketing

According to Rosson (1974), agribusiness marketing systems consist of four main sub-systems: production, distribution, consumption, and regulation. The key players in the chain of activities that connect food and agriculture are the farmer (or other producers such as fishermen), intermediaries, food processors, and the consumer.

In practice, each player views the agricultural/food marketing system from a perspective of self-interest, which sometimes results in conflicts. The farmer's interest lies in maximizing returns from produce, usually seeking maximum price for unlimited quantities.

Manufacturers seek high-quality produce at the lowest cost, so they can sell it competitively and profitably. Traders and retailers require reliable supplies from the manufacturer or farmer at the most competitive prices. Consumers, on the other hand, focus on obtaining high-quality products at the lowest prices.

Agribusiness Marketing Functions

Agribusiness marketing functions refer to the activities performed by the marketing system in relation to the characteristics of agricultural produce or products.

These functions include assembling products from various production centers, processing commodities into forms suitable for consumption, and making arrangements to distribute these commodities to consumers. These functions are essential for getting farm products to consumers when they want them and in the form they desire.

Agribusiness Marketing Approaches

Agribusiness marketing can be analyzed through three common approaches: functional, institutional, and market structure.

1. Functional Approach (Marketing Services): This approach involves various supporting services required to carry out marketing functions. These include the exchange functions of buying and selling (buyers and sellers' coordination), physical functions such as transportation, storage, processing, and packaging, and facilitating functions such as grading, standardization, financing, risk-bearing, marketing research, and market information provision.

Buying involves sourcing supply and assembling products, while selling includes activities such as determining the proper unit of sale, choosing the right marketing channel, selecting suitable packaging materials, and promoting sales through advertisements.

2. Institutional Approach: This approach focuses on the different agencies involved in performing various marketing functions. These agencies or market intermediaries can be categorized into five groups: merchant middlemen (wholesalers and retailers), agent middlemen (commission agents and brokers), speculative middlemen, facilitative organizations, and processors.

3. Market Structure Approach: This approach examines the structure of the market in terms of the degree of concentration, product differentiation, integration, and conduct. Market structure influences competition and the process of price formation. Key characteristics include the size and number of buyers and sellers, ensuring adequate price and quality competition, and allowing freedom of entry and exit from the market.

Three common market models are analyzed under this approach: perfectly competitive markets, oligopolistic markets, and monopolistic markets.

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Agribusiness Marketing Channels and Channels of Distribution

The sequence of intermediaries or middlemen, along with the markets through which goods pass from producers to consumers, is called the marketing channel. A channel of distribution refers to any series of firms or individuals involved in the flow of goods and services from the producer to the final consumer.

Distribution plays a crucial role in agricultural marketing, as goods must be transported to consumers for consumption to take place. Whatever is produced must be consumed if the farm or agribusiness firm is to remain in operation. Marketing channels may be simple or complex and are usually commodity-specific and determined by the region or country.

i. Basic Channels Geometry

Distribution channels can have several levels. According to Kotler (1991), the simplest level is direct contact with the end-users (consumers/customers) without intermediaries (zero-level channel).

This is considered the direct channel of distribution, while other levels featuring intermediaries are regarded as indirect channels of distribution. The next level, the "one-level" channel, involves just one intermediary (e.g., a retailer for consumer goods or a distributor for industrial goods).

Members of the channel include manufacturers, intermediaries, and customers or consumers. Distribution channels for consumer goods differ from those for industrial goods. For instance, the sale of industrial goods usually involves manufacturers' agents (regional representatives of manufacturers who sell from samples or catalogs).

The number of intermediaries determines the channel levels, and channels generally describe the forward movement of products. However, backward channels may also exist, such as in the case of recycling solid wastes.

ii. Channel Geometry (Consumer Goods)

For consumer goods, channels of distribution feature different intermediaries who move the product from the producer to the final consumer.

iii. Industrial Goods

Producers of industrial goods may also choose different channels to reach their target market.

In Nigeria, six classes of middlemen have been identified in the agricultural sector, with some of them performing overlapping functions. These include farm-gate middlemen, commissioned agents, non-commission agents, cooperative marketing agencies, wholesalers, and retailers.

The farm-gate middlemen or country buyers include itinerant farmers moving from one farm to another and wholesale merchants who buy from two or three markets and transport the assembled produce to urban areas.

Wholesalers have three sub-groups: the wholesaler agent, the wholesaler transporter, and the wholesaler retailer. Together, they perform various marketing functions and rarely sell to consumers unless those consumers are industrial users.

Retailers are divided into three sub-groups: sedentary or stall retailers, itinerant retailers (hawkers), and farmer-retailers.

Commissioned agents, though independent operators, usually do not take title to the commodities they handle. They facilitate contact between farm-gate middlemen and wholesalers and play a significant role in price formation.

Non-commissioned agents, however, take title to the commodity they handle, offering significant transportation and storage facilities. They may sell to wholesalers, retailers, or even consumers.

The production cycle is incomplete without marketing. Agribusiness marketing activities bring together sellers and buyers/consumers of agricultural products for easier transactions. In carrying out these activities, the role of sub-systems and distribution channels cannot be overemphasized.

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