DEVELOPING A STRATEGIC MARKETING PLAN For Horticultural Firms

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DEVELOPING A STRATEGICMARKETING PLANFor
Horticultural Firms

• Prepared by
• Gerald B. White
• Professor
• Department of Agricultural, Resource, and
  Managerial Economics
• Cornell University
• Ithaca, NY 14853

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Characteristics of Strategic Planning

• Strategic planning is more of an art than a
  science it is more intuitive, systematic and
  analytical, not quantitative.

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Some characteristics of strategic planning are

• Looks at the Big Picture
• Leads to substantial changes
• Considers future environmental forces in the
  Industry
• Anticipates the reactions of competitors
• Looks at a longer time horizon

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WHY STRATEGIC MARKET PLANNING IS NOW A
HOT TOPIC

• Globalization

• Growing concentration in the retail sector

• Changes in wholesaling

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• Depressed commodity prices

• Workforce availability

• Availability of pesticides (FQPA)

• Changes in consumer attitudes

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The Purpose of Strategic Planning

• Strategic planning attempts to identify and
  isolate present actions and forecast how results
  can be expected to influence the future.

Reasons a firm can gain a competitive advantage
from the strategic planning process include
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• Establishing goals, objectives, priorities and
  strategies to be completed within specified time
  period hence, a clear direction for management
  and employees to follow

• Defining in measurable terms what is most
  important for the firm

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• Establishing a basis for evaluating the
  performance of management and key employees

• Providing a management framework which
  can be used to facilitate timely response to
  changed conditions, unplanned events, and
  deviations from plans

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• Anticipating problems and taking steps to
  eliminate them

• Allocating resources more efficiently to
  meet changes including labor, machinery and
  equipment, buildings, and capital

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Target Market
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PRODUCTSTRATEGY
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Description of products/services

• The products and services offered by most
  horticultural businesses are generic

• It is a challenge to differentiate horticultural
  products, but it is the only way to enhance
  product prices

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• One of the most important aspects of marketing
  is to
• give your customers a reason to buy your products

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• The following questions can help to position your
  products/services!

• What are your products and services?

• What are their benefits?

• How do they differ from competitors products
  and services?

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TARGETMARKETS
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Target Markets
Target market a group of customers (people or
firms) at whom the company aims its marketing
effort.
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• Target markets help to give focus to all aspects
  of the market plan, especially promotion and
  pricing.

• Your choice of target markets will determine your
  production and marketing practices, not vice
  versa.

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• A target market is not simply whoever is now
  buying, or will buy your horticultural products!

• The target market consists of the individuals or
  businesses that you identify as the most
  desirable customers.

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• The group identified is not necessarily your
  current customers.

• Determining a target market can help identify a
  competitive advantage for the firm in the market.

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COMPETITIVESTRATEGIES
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Competitive Strategies

• For firms which are price-takers

? Exploit quality differences (size, color,
taste, varieties,etc.) which command higher
prices.
? Integrate vertically--move forward into the
marketing chain toward retail to capture more of
the value-added revenue.
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Integrate horizontally -- become larger by
marketing products from other production areas to
spread fixed marketing costs over more units and
to become a year-round supplier.

• ? Identify new markets, either for other
  commodities or enterprises, or new buyers.

? Add services (delivery, unloading, etc.)
? Reduce risk (crop insurance, hedging, forward
contracting -- except for crop insurance, not
often available for horticultural
commodities diversification)
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Competitive Strategies

• For firms which have some degree of control over
  pricing, consider Porters four generic
  competitive marketing strategies

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SOURCE OF COMPETITIVE ADVANTAGE
Porters four generic business strategies
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• Cost leadership strategy - requires serious
  commitment to reducing expenses that, in turn,
  lowers the price in a relatively broad array of
  market segments

• Differentiation strategy - requires uniqueness or
  significant points of differences in product
  offerings

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• Cost-focus strategy - involves controlling
  expenses and, in turn, lowering prices in a
  narrow range of market segments

• Differentiation focus strategy- utilizes
  significant points of difference to one or a few
  market segments

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• A fifth generic strategy sometimes appears in
  some treatments of Porters generic strategies
  Best-cost provider- giving customers more value
  for the money by combining an emphasis on low
  cost with an emphasis on upscale differentiation

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• PRICE
• STRATEGY

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Some aspects of pricing strategy

• Qualitative - What firms can use to guide pricing
  is a qualitative technique, judging price
  sensitivity from customers reaction to price
  increases or high prices in the following ways

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• Unique value - If they believe the product offers
  values that cannot be found in other products,
  they are willing to pay more

• Substitute awareness - If they are aware of close
  substitutes, they will be sensitive to price
  changes

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• Difficult comparisons - If they have difficulty
  comparing prices, prices will be less important,
  within reasonable limits

• Total expenditure relative to income - Most
  people wont agonize over a 10 percent increase
  in the price of a bag of apples, but the same
  people might over a 10 percent increase in the
  price of a car.

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Some aspects of pricing strategy

• Some other pricing techniques

• Relative to its competitors. Increasingly used
  to describe the practice of adopting a lower
  price while maintaining the products basic value.

• Skim pricing- When introducing a new, innovative
  product, charge a high price, implying that you
  are skimming the cream.

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• Penetration pricing- When a firm wants to
  increase their presence in a given market, they
  often do so by setting a low price with the
  specific intention of gaining market share. This
  strategy can also be employed at a later stage in
  the products life cycle.

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• Psychological pricing

• Prestige pricing- Use price to help you position
  a product as high quality or exclusive.

• Odd-even pricing- Prices are set at uneven (or
  odd) amounts.

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• PLACE
• OR
• DISTRIBUTION
• STRATEGY

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• Place or Distribution Strategy Marketing Channels

Fresh market growers typically have the following
alternative outlets
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• Consignment through a packer-shipper

• Orchard or field run sales

• Growers own packing-shipping facilities (product
  sold by the grower, sales agents or brokers)

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• Organized wholesale markets or terminal markets

• Individual wholesale marketers (wholesale
  distributors, sales agents, brokers)

• Marketing cooperatives

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Another important outlet is marketing-
Direct to consumers-The potential volume which
can be marketed direct is greatest near large
population centers---an advantage often enjoyed
by Northeast growers!
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• U-pick, Pick-Your-Own

• Roadside stand, farm market, and retail store.

• Local farmers market (Ithaca Farmers Market)

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• Urban farmers market (Greenmarket in NYC)

• Mail order, E-commerce

• Direct to business users (produce to restaurants,
  ornamental plants to business offices)

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• Processing produce growers typically have the
  following outlets

• Sell to proprietary or investor- owned processors

• Processing cooperatives

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• Grower has own processing facilities-usually in
  combination with direct marketing (apple cider,
  home-made jam, specialty food products)

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• PROMOTION
• STRATEGY

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• Ask yourself what is the role of promotion in
  your marketing strategy?

• To provide information about products

• To stimulate demand

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• To differentiate products and/or to build a brand
  image

• To remind current customers about product benefits

• To counter competitors

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• To respond to negative news, or to take advantage
  of positive news (new health research results).

• To smooth out seasonal demand fluctuations.

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• Promotion strategy

• Advertising

Marketers can choose from a wide range of
communications media to convey their messages to
target audiences. In choosing among
communication media, a number of considerations
are significant -
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1) the medium will actually reach the target
audience
2) the medium is appropriate for the message
conveyed and
3) cost differences among media are important
when establishing an effective communication mix.
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• Public relations
• Public relations is a broad, overall
  communications effort to influence publics
  attitudes toward the firm or its products.
  Publicity is a promotion technique that uses
  non-paid communications presented by the media.

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• Sales promotion activities
• Sales promotion activities include coupons,
  premiums, in-store displays, trade shows,
  samples, in-store demonstrations, and contests.
  A major function of sales promotion is to
  supplement and coordinate efforts in the
  advertising and personal selling efforts.

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Some horticultural businesses are primarily
service providers or have a substantial service
component to them. To market their services,
firms may consider three additional Ps
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• Processes- Some businesses need to develop
  orderly, efficient processes to take care of
  customers- e. g. U-pick operations need to design
  a systematic way to handle customers- parking,
  containers, assigning rows or areas to pick, and
  handling the cash register.

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• People- In most horticultural businesses,
  personnel expenses represent the largest category
  of cash expenses, so effective Human Resource
  management is extremely important for attaining
  profitability.

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But with businesses which have an important
service component, people or employees, assume an
even greater importance because they are the
customers contact point with the business.
Services typically cannot be separated from the
creator-seller of the service.
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• Presentation- This could be considered as the
  packaging of a service business. Customers
  often form opinions of a company and its service
  on the basis of the service encounters.

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Target Market