CHAPTER 3: MARKETING

PRODUCT

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SUB-TOPIC
3.1 Characteristics of Products and Productions
3.2 Form Utility
3.3 Problems related with Marketing of Agricultural Commodity
Products

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 DEFINITION OF PRODUCT
Any physical goods and services or ideas that satisfies wants and needs of
the consumers.

⦿ Physical goods
◼ In a raw forms such as fruits, vegetables produced by farmers
◼ Services
? The farmers will store the goods so that the physical appearances of

the goods will be at original conditions

◼ Ideas
? The farmers will deliver the information of how to plant vegetables to

the customer

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PRODUCT LIFECYCLE

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 1. INTRODUCTION STAGE
⦿ The product idea undergoes research and development
⦿ Have a little to no competition in the market place

Product Establish the brand and quality level of the product, obtained the patents
and trademarks.
Pricing May be low penetration pricing to build market share or high skim price to
recover the development costs.
Place Place of distribution is selective until customers show acceptance of the
product.
Promotion Aimed at innovators and early adopters. Marketing communications seeks to
build product awareness and educate consumers about the product. Eg: in
store demonstration/tv or radio advertisement.

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 2. GROWTH STAGE
⦿ The firm seeks to build preferences and increase market
share.
⦿ Competition is low.
⦿ Sales volume grows rapidly
Product Product quality is maintained and additional features and services may be
added.
Pricing Price is maintained as the firm enjoys increasing Dd with little competition.
Place Distribution channels are added as Dd increases and customers accept the
product.
Promotion Wider promotion of the product. Eg: card reward

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 3. MATURITY STAGE
⦿ The demand levels off and sales volume increases at slower
rate.
⦿ Competition may appear with similar products,
⦿ The firm may reduce prices to maintain market share and
support sales.
Product Need to enhance the product features to differentiate from the competitors.
Pricing Lower the price because of new competition.
Place Intensive distribution of product to compete with competitors.
Promotion Lower in promotion

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 4. DECLINE STAGE
⦿ Demand will remain or slowly decline.
⦿ Sales volume decreases.
⦿ The products are eventually phased out and discontinued
(stop production).
⦿ Highly numbers or competitors.
⦿ Offer the products at lower prices.

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 3.1 CHARACTERISTICS OF PRODUCTS
1. Raw material
◼ Output largely a raw material
◼ E.g: livestock to meat, wheat to cereal
◼ From farm product to food
◼ Successful farmers must be more market oriented

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 3.1 CHARACTERISTICS OF PRODUCTS
2. Bulky and perishable product
◼ Agricultural products are more bulky and perishable
◼ Bulk effect marketing functions with physical handling
◼ How to reduce bulkiness?
? Transport high value or value added instead of raw

material
? This perishable products require speedy handling and
often special refrigeration

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 3.1 CHARACTERISTICS OF PRODUCTS
3. Quality variation
◼ Varies from year to year and season to season
◼ Standardization and grading to facilitate the sorting of different
variation in grades
◼ Variation in quality and price may due to:
Level of grading of products
Natural disasters such as earthquake, floods
Changing marketing strategies, demand and supplies
Management in efficiencies in dealing with crops practices
◼ How to control quality variation?
Use the same planting material
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 3.1 CHARACTERISTICS OF PRODUCTIONS
1. Total output
Upward trend in food production because of
increased in population
Increased per capital food supplies
Population growth faster than agricultural
growth so its difficult to maintain fair prices
What happen when output decreased???

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 3.1 CHARACTERISTICS OF PRODUCTIONS
2. Annual variability in production
Aggregates farm output varies from year to year due
to farmer responses to price government programs
and uncontrollable factors such as weather and
disease
This changes influence the food marketing process
Give an impact to the need for storage

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 3.1 CHARACTERISTICS OF PRODUCTIONS
3. Seasonal variability in production
Agricultural production is highly seasonal, some products
are produced all year round while some are seasonal eg:
fruits
How do we solve the problem of seasonal variation?
Fruits should be processed and tinned or canned immediately
required so supply can be maintained
The efficiency and availability of transportation and management in
handling the products

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 3.1 CHARACTERISTICS OF PRODUCTIONS

4. Geographic concentration of production

Geographic specialization of farm production
Depend on climate, soil and environmental factors
Eg: Sarawak (pineapple)

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 3.1 CHARACTERISTICS OF PRODUCTIONS
5. Varying cost of production
Costs of production varies by regions and among farmers
Factors that might contribute to the varying cost of
production are
i. Weather
ii. Technology
iii. Types of management in handling plantation or land tenure

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 3.1 CHARACTERISTICS OF PRODUCTIONS
6. The farm supply industry
Farmers are both buyers and sellers
They participate in procurement as well as products
markets
The farm supply industry provides such as
agricultural inputs as chemicals, seeds, machinery,
feeds, capital, labour, credit, and land
The growth and importance of the farm affects
farmers in several ways

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 3.2 FORM UTILITY
⦿ Change raw materials to a finished
products.

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 3.3 PROBLEMS RELATED WITH MARKETING OF
AGRICULTURAL COMMODITY PRODUCTS
1. Farmers do not have any control over the output of their
production activities (S> Qd)
❑ Farmers find it difficult to adjust precisely their production
schedule to meet changing market conditions.
❑ Farmers must estimate how much of his product he can sell at a
price estimated nearly a year in advance.
2. Farmer faced difficulty in improving their prices through
independent or group activities (market stability)

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 3.3 PROBLEMS RELATED WITH MARKETING OF
AGRICULTURAL COMMODITY PRODUCTS
3. Cost-price squeeze problem
⦿ The cost-price squeeze is known in economist circles as the
‘terms of trade’.
⦿ The‘terms of trade’, is a measure of prices received for goods
produced (outputs) relative to the prices paid for inputs.
⦿ cost-price squeeze refers to a period of increasing costs and
simultaneous decreasing or stable prices.
⦿ Within agriculture, a typical scenario involves commodity crop
farmers facing increasing costs of inputs (fertilizer, seeds, etc.)
and decreasing crop prices.
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 3.3 PROBLEMS RELATED WITH MARKETING OF
AGRICULTURAL COMMODITY PRODUCTS
4. The superior bargaining powers of buyers farm products as compared with
that of farmers

5. Changing food market pricing efficiencies

⦿ The efficiency of a marketing system is measured in terms of the level or costs

to the system of the inputs, to achieve a given level of output.
⦿ Such inputs are generally in the form of land, finance, time, manpower and
materials.
⦿ Typical outputs include the movement of a given amount of product to markets
at specific distances, the supply of a particular level of service to target
market segments and the supply of products at a target price.

Sources taken from: I.M. Crawford (1/11/2020) retrieved from

http://www.fao.org/3/w3240e/W3240E00.htm#TOC

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 3.3 PROBLEMS RELATED WITH MARKETING OF
AGRICULTURAL COMMODITY PRODUCTS
6. Increasing gulf between the farmers sectors and food marketing sectors
⦿ Ageing farmers and shortage of domestic skilled labour
⦿ A lack of incentives and technological know-how
◼ Farming is still fairly labour-intensive, and exactly how much of farm work in Malaysia has been
mechanised is not known.
◼ bringing farm machinery within the reach of farmers is to improve labour productivity

7. It takes long periods to change materially the production of some commodities.

⦿ The agricultural cycle is the annual cycle of activities related to the growth and harvest of a
crop.

8. Changes in consumer tastes may find large amounts of agricultural resources being devoted to
the production of something that is no longer so greatly desired.

9. The free-rider problem

⦿ an inefficient distribution of goods or services that occurs when some individuals are allowed to consume
more than their fair share of the shared resource or pay less than their fair share of the costs.

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CURRENT PROBLEMS OF AGRICULTURAL MARKETING
1. Gross Domestic Product in 2009 to 2019 has declined in the
contribution of GDP even though the value-added products
of agriculture has increased

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CURRENT PROBLEMS OF AGRICULTURAL MARKETING
2. Land expansion has been a obstacle because some of the arable
land has been allocated for industrialization, urbanizations and
housing projects.

3. Market protection less has been taken into consideration as

compared to automobile industries. Eg: Export taxes

4. Trade and fiscal measures has been disadvantage for export

purpose

5. Fiscal incentives did not favour in agriculture so that’s why large

companies did not enjoy such incentives as compared to
manufacturing industries.
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6. Adjusting Demand and production of agriculture
The production of agriculture products such as fruit are seasonal in nature
Annual crops takes eight months to harvest where as crops like oil palms, rubber
and cocoa takes 4-8 years to harvest
Consumers demand change from time to time
7. Orientations towards customer/ Demand of the customer towards the
producer
Price of products will reflect the demand of certain agricultural products
As a producer, they will get feedback directly from the consumer if they sell
their products to the consumers on how much the price of the consumer willing to
pay and what types of products does the customer needs
Marketing research
To identify customer needs, taste or preferences
8. Cost of marketing
Cost of distribution is high because cost of transportation, storage and
processing is part of the major distribution cost
Lack of planning will increase administration cost
Spoilage is high during transportation process due to lack of efficiencies in
handling

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HOW TO OVERCOME THE PROBLEMS
• Credit • Management
facilities Efficiencies

Proper
Improved
Management
Technologies
Practices

The Availability The Need of

of Storage
Transportation Facilities

• Efficiencies in
Transportation • Storage
Facilities

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