Page 1 of 3 New Food and Farming Ventures - Resource Manual Sept.

2003
Chapter 3 Marketing
!e Four P"s of Mar#eting
1
Successful businesses need a strong focus on marketing. A starting point is an understanding of
the Four Ps of Marketing.
!e Four P"s of Mar#eting$
Product what to produce to satisf the wants and needs of customers
Promotion how to promote products to create demand among potential customers
Place %distri&ution' where to sell products! including the marketing channels through
which products are distributed to customers
Price what to charge for products
Product
A product is anthing offered for ac"uisition that satisfies a want or need. Products can be
phsical ob#ects or ser$ices. Products should be thought about on three le$els:
%& The actual product ' its features (i.e. si)e& and attributes (i.e. organic&
*& The core product needs that are met or benefits that are recei$ed (i.e. better health&
+& The augmented product measures taken to help customers put the product to sustained use
(i.e. recipes&
Success in product de$elopment hinges on two considerations. ,ne is de$eloping products that
consistentl satisf the needs of customers while pro$iding them with direct and $aluable
benefits. -he other is differentiating products b de$eloping features and attributes that make
them better than competitors.
Promotion
Promotion is an communication that helps make a sale and build customer relationships.
./amples include brochures! newspaper ads! and pro$iding product samples. Promotion is
marketing in the purest sense of the term. Successful promotions increase consumer perception
of value, thereb increasing consumer demand and willingness to pa the prices set for products.
-he best wa to increase consumer perception of $alue is b promoting the uni"ue differences of
products from those of competitors. 0reating percei$ed differences helps products be less price
sensiti$e. 1t also makes products harder for others to effecti$el compete against. 1f promotional
acti$ities do not ade"uatel differentiate products! the supplier will simpl be another me too
compan forced to compete based on price to gain or maintain markets.
%
Adapted from -he Specialt 0heese Market. ,ctober *22%. Prepared for the 3orth 0entral 1nitiati$e for
Small Farm Profitabilit b -he Food Processing 0enter! 4ni$ersit of 3ebraska'5incoln. Full report
a$ailable at http677www.foodmap.unl.edu7report8files7-he8Specialt80heese8Market.pdf.
Page 2 of 3 New Food and Farming Ventures - Resource Manual Sept. 2003
Chapter 3 Marketing
9ifferentiating ones compan is also important. :hat is the compans image; 1s the compan
a discount seller or a gourmet producer; 1t is important to decide on the compans image and
make sure promotional acti$ities accuratel portra that image.
Place %(istri&ution'
Place (distribution& includes acti$ities that make purchasing products con$enient for target
customers. ./amples include farmers markets! roadside stands! restaurants! or grocer stores.
Place in$ol$es the geographic area to be co$ered. Place also in$ol$es the number and tpes of
markets ser$ed. <oth impact a ke aspect of marketing! which is phsicall transporting product
from where it is produced to locations where customers make purchases. -ransportation of
products utili)es what are known as distribution channels. -he three common distribution
channels include consumer direct! retail! and foodser$ice.
)onsumer (irect (istri&ution
0onsumer direct channels include selling to the customer at a farm! at a farmers market! through
mail distribution $ia catalog sales! or through other a$enues such as weekl produce deli$eries
during the growing season (known as 0ommunit Supported Agriculture&.
-he ad$antage of selling direct to consumers is that profits are not split with anone outside the
business. -he farmer controls who the market to and how. -he are able to tell their stor on
how the product was produced to each customer $ia their interactions and their promotions.
-he disad$antage of selling direct is that the farmer is responsible for all of the marketing!
in$oice collection! ad$ertising! and transportation functions. -he growth of the business is
dependent on how much time the can put into marketing their product.
Retail (istri&ution
=etail distribution in$ol$es $arious tpes of retail stores that sell products for home use. =etail
stores $ar greatl in the fle/ibilit the ha$e in selecting products to carr. :ith some retailers!
decisions are made at corporate head"uarters where buers! merchandisers! and categor
managers make all decisions! which are passed down to the indi$idual stores. 1n these situations!
suppliers attempting to gain entr into the market must work directl with the corporate office.
,ther retailers gi$e indi$idual stores a great deal of autonom in making decisions relati$e to
product selection! pricing! and promotion. A supplier attempting to gain entr into this tpe of
retail market would work with indi$idual stores on product introductions. After a product has
established a successful track record at the indi$idual store le$el! then corporate ma take an
interest and work with the supplier.
. . . and justice for all
The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color,
national origin, gender, religion, age, disability, political beliefs, seual orientation, and marital or family status. (!ot all prohibited
bases apply to all programs.) "any materials can be made available in alternative formats for ADA clients. To file a complaint of
discrimination, #rite USDA, $ffice of %ivil &ights, &oom '()*+, +hitten ,uilding, -.th and /ndependence Avenue, S+,
+ashington, D% (0(10*2.-0 or call (0(*3(0*12)..
Page 3 of 3 New Food and Farming Ventures - Resource Manual Sept. 2003
Chapter 3 Marketing
Foodser*ice (istri&ution
Foodser$ice distribution in$ol$es an facilit that ser$es food to people. -he foodser$ice
industr is e/tremel fragmented! with each segment filling different consumer needs. 1n
general! foodser$ice can be partitioned into two sectors6 the commercial sector and the non'
commercial sector.
-he commercial sector includes independent and chain restaurants! delis! hotels and professional
catering. Menus in these facilities are shaped b the fact that consumers can choose where to eat
and what to purchase! which means these facilities are more responsi$e to consumer demands.
-he result is that the commercial foodser$ice sector ma be the most lucrati$e non'direct market
for specialt products. 1ndeed! there has been an increase in the use of these products b
restaurant chefs! especiall those working in independentl owned high'end restaurants.
-he non'commercial (institutional& segment includes hospitals! nursing homes! schools! and
prisons. -his is a capti$e market where consumers tpicall ha$e limited choice in menu
selection. <ecause this is a capti$e market! the can be less interested in specialt products!
although there has been some success in selling products to colleges and uni$ersities.
Price
1n the narrowest sense! price is the amount of mone charged for a product. More broadl! it is
the sum of all the $alues in$ol$ed in a product. 1ncreasing customer perception of value through
differentiation and effecti$e promotion increases demand for products> premium'priced products
not supported b customer demand will fail due to insufficient $olume.
Price is the onl element in an organi)ations marketing functions that produces re$enue> all
other elements represent costs. Price is also one of the most fle/ible elements of the marketing
functions. 4nlike product features and distribution channels! price can be changed "uickl.
Pricing and price competition is the number one problem facing food and farming $entures. A
common mistake is setting prices without considering all marketing functions. For e/ample!
promotional costs! such as ad$ertising e/penses and time spent making sales presentations! need
to be built into price. Another significant cost is distribution! or phsicall mo$ing the product
from its place of production to the place where customers make purchases. 0osts can also come
from broker fees! spoilage! and re$enue collection. An cost in$ol$ed in the production!
promotion! distribution! and ser$icing of products should be built into prices set for products.
1t is important to guard against under pricing for another reason6 price lends a value to the
product in the mind of the customer! and under pricing can lead the consumer to belie$e the item
is of little $alue. :hen pricing products! suppliers place a $alue on their product and compan.
-he are not #ust selling a product. -he are selling a package that includes the uni"ue features
and benefits of the product! compan! and customer ser$ice.