Spring/Summer 2010 - Robert M. Kerr Food & Agricultural Products ...

processed at a loss of only fifty cents
per unit. If the loss per unit is cut in
half, and the savings are passed on to
the customer, even more units can be
sold.
The result was increased production,
but margins continued to be thin,
missing, or minus. By today’s standards,
this is not a sustainable marketing
strategy.
According to the American Marketing
Association, “Marketing is the
activity, set of institutions, and processes
for creating, communicating,
delivering, and exchanging offerings
valuable to customers, clients, partners,
and society at large.”
Thus, it is a system to add value
by increasing customer awareness and
delivering differentiated products and
services. Having a marketing plan can
lead to increased margins for small
and large producers and can be a winwin
for processors and end users.
It is not unusual that about 80
percent of the margins result from sale
of about 20 percent of the products.
Remember the “80/20 rule?”
In the example above, volume and
low price did not result in significant
margins. Therefore, the business-marketing
strategy shifted toward reducing
the commodity side (80 percent) of the
business and increasing the processed
side (20 percent), or to shift product
mix from commodities to consumer
branded products. To shift away from
commodity products, marketing gurus
were hired and given the assignment
to “work their magic.”
The marketing gurus began by
hosting a series of endless meetings to
plan, develop, and sell the new strategy.
The result was a plan to expand
existing brands with new products,
create new brands, and phase out commodity
products, where possible.
My role was to keep a steady
stream of new or redesigned products
in the pipeline to meet marketing objectives
and help keep the gurus employed.
The marketing gurus expected
new products to fit a customer need
(perceived or real) and meet specific
financial targets.
In most cases, actual product development
did not take place until a
financial analysis was conducted. Market
research became
part of the package
and was used to
determine what consumers
would like
and if specific features
were of interest.
Focus groups
were conducted to
test proposed concepts,
product acceptance,
and interest in purchasing.
Information learned through market
research was used to support new
product development and presentations
to buyers. It provided reasons
why buyers should stock the new and/
or revised products.
During time, a paradigm shift took
place within the sales force as marketing
plans expanded beyond volume
and price.
The customer now became part of
the equation. Sales personnel relied on
features and benefits including “price”
as a factor, but not the only factor to
consider when selling product.
On time delivery, accurate invoicing,
credits, product support, and marketing
allowance were non-product
features used to differentiate products
from the competition and support
buyer satisfaction.
Operating according to Dilbert, “If
you lower the price, you can sell more
food processing
By David Moe
FAPC Pilot Plant Manager
david.moe@okstate.edu
units, or if you increase the price, you
will sell fewer units” slowly became
a concept of the past. The new strategy
of adding value to products and
services continued after the marketing
gurus moved on.
Marketing is a way of offering
“something,” a competitive product
not offered in another market. This
brings to mind the story of a new store
opening next door to compete with an
existing store.
The new store put up a sign saying,
“best deals.” When another new
store opened on the other side of the
original store, they put up a sign saying,
“lowest prices.” When sales at the
original store dropped, they put a sign
over its door saying, “main entrance.”
Of course, this is not a true story,
but shows how a “marketing plan” can
deliver the customer to your product,
at least short range.
When customers expect only low
price, they move on if price does not
meet their target. However, if price,
quality, and service all exceed their
expectations, they will soon learn the
“best price” is not always the lowest.
Having a well thought out brand
and marketing strategy, is part of a
system to identify, keep, and satisfy
the customer. Another part of the system
is to provide consistent products
and services.
In a nutshell, “why marketing?”
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