NQF Level: 1 US No:

Transcription

1 NQF Level: 1 US No: Learner Guide Primary Agriculture Demonstrate an understanding of the importance of marketing My name:. Company:. Commodity: Date: The availability of this product is due to the financial support of the National Department of Agriculture and the AgriSETA. Terms and conditions apply.

2 2 Before we start Dear Learner - This Learner Guide contains all the information to acquire all the knowledge and skills leading to the unit standard: Title: Demonstrate an understanding of the importance of marketing US No: NQF Level: 1 Credits: 2 The full unit standard is attached at the end of this module. Please read the unit standard at your own time. Whilst reading the unit standard, make a note of your questions and aspects that you do not understand, and discuss it with your facilitator. This unit standard is one of the building blocks in the qualifications listed below. Please mark the qualification you are currently doing: Title ID Number NQF Level Credits Mark National Certificate in Animal Production National Certificate in Mixed Farming Systems National Certificate in Pant Production Please mark the learning program you are enrolled in: Your facilitator should explain the above concepts to you. Are you enrolled in a: Yes No Learnership? Skills Program? Short Course? You will also be handed a Learner Workbook. This Learner Workbook should be used in conjunction with this Learner Guide. The Learner Workbook contains the activities that you will be expected to do during the course of your study. Please keep the activities that you have completed as part of your Portfolio of Evidence, which will be required during your final assessment. You will be assessed during the course of your study. This is called formative assessment. You will also be assessed on completion of this unit standard. This is called summative assessment. Before your assessment, your assessor will discuss the unit standard with you. Enjoy this learning experience!

3 3 How to use this guide Throughout this guide, you will come across certain re-occurring boxes. These boxes each represent a certain aspect of the learning process, containing information, which would help you with the identification and understanding of these aspects. The following is a list of these boxes and what they represent: What does it mean? Each learning field is characterized by unique terms and definitions it is important to know and use these terms and definitions correctly. These terms and definitions are highlighted throughout the guide in this manner. You will be requested to complete activities, which could be group activities, or individual activities. Please remember to complete the activities, as the facilitator will assess it and these will become part of your portfolio of evidence. Activities, whether group or individual activities, will be described in this box. Examples of certain concepts or principles to help you contextualise them easier, will be shown in this box. This box indicates a summary of concepts that we have covered, and offers you an opportunity to evaluate your own progress and / or to ask questions to your facilitator if you are still feeling unsure of the concepts listed. My Notes You can use this box to jot down questions you might have, words that you do not understand, instructions given by the facilitator or explanations given by the facilitator or any other remarks that will help you to understand the work better....

4 4 What are we going to learn? What will I be able to do?... 5 What do I need to know?... 5 Learning Outcomes 5 An Introduction the importance of marketing... 5 Session 1 What is meant by "marketing concept"... 7 Session 2 Session 3 Session 4 Marketing and Farming Practices.... Principals of supply and demand.... Marketing and Customer Needs Bibliography. 31 Terms and Conditions.. 32 Acknowledgements 32 SAQA Unit Standard

5 5 What will I be able to do? When you have achieved this unit standard, you will be able to: Demonstrate an understanding of the importance of marketing within the agricultural production process. Understand the importance of the application of business principles in agricultural production with specific reference to marketing and delivery. Operate farming practices as businesses and will gain the knowledge and skills to move from a subsistence orientation to an economic orientation in agriculture. Gain the knowledge and skills to access mainstream agriculture through a business-orientated approach to agriculture. What do I need to know? No learning is assumed to be in place. Learning Outcomes When you have achieved this unit standard, you will have a basic knowledge and understanding of: - The marketing concept and what it entails within agricultural production. The differences between production versus demand driven agricultural production. The components of the marketing mix and how it may impact on prices. The role of demand and supply within price formulation. An Introduction The importance of marketing in Agriculture Before you can trade the produce you grow, you first have to market your products. When marketing your products you need to ask the following important questions: When should I market my products? Where should I market the produce? How much should I charge for the produce?

6 6 It is sometimes difficult for a farmer to make these decisions. The farmer must keep record of all the expenditure. This includes the cost to plant or the care for stock up to the day of sale. Only if the income from the sale of the produce is higher than the expenditure, will he be earning a profit. If he does not show a profit, it means he has been farming at a loss. What this shows is that it is critical to keep record of all the income and expenditure. An extension officer in your area could help you to determine the potential expenditure and income before you start your farming operation. The marketing of agricultural produce in general is regarded as unique and deserving of specialised attention. This is because the product is perishable (short shelve-life) and bulky (large volume). In addition these products are basic foodstuffs and therefore governments consider their distribution as strategic. To this end legal institutions have been set up within the agricultural marketing sector. The structure and role of these legal institutions have been the cause of much debate internationally. My Notes

7 7 Session 1 Marketing Introducing the concept After completing this session, you should be able to: SO 1: Understand what is meant by "marketing concept". In this session we explore the following concepts: What is marketing? The elements included in the marketing: Supply and demand; pricing; information, regulations and standards; and distribution channels. The role of price in marketing. The role of supply and demand within marketing processes. The importance of produce quality within the marketing process. The legal environment that impacts on the marketing process. Please complete Activity 1 in your learner workbook My Notes What is Marketing? Marketing: Determining what customers want and setting out to meet their needs, provided it could be done at a profit. Marketing includes market research, deciding on products and prices, advertising promoting distributing and selling.

8 8 Marketing is more than just sales. Marketing is made up of a number of activities designed to attract your potential customer's attention. Once you have the customer s attention these activities motivate them to buy, convincing them to buy and finally convincing them to buy again (and again ). Marketing takes into account the way in which you define your product, promote it, distribute it, and how you maintain a long-term relationship with your customers. Marketing is usually targeted at a specific group of potential customers that you select to market your product to. This group is known as the target market. If you are looking to segment the market, you need to determine the different target markets for each segment. Before you start your marketing campaign you need to identify your target market and also your potential competition. The sector of the economy made up of agriculture, forestry, hunting and fishing is known as the Agricultural Sector. Please complete Activity 2 in your learner workbook My Notes The elements of marketing Marketing is an important organizing tool. There are four basic parts of marketing that provide the corner stones of a marketing campaign. These are often called the "four P's". The four P s are: Product: Price: Promotion: Provision: the item or service you sell. the amount of money you charge for your product or service. the way in which you inform your target market about your product and where they can find it. the way in which you get the product to the customer. Marketing focuses on the satisfaction of customer needs, wants and requirements. The marketing plan you develop should be made clear to involve the production of the crop you will sell. The future needs of your client have to be identified and anticipated. Where necessary your production system can be adapted to accommodate changing needs of the client. The main reason for marketing your produce is so that the farm will be profitable.

9 9 Please complete Activity 3 in your learner workbook My Notes The role of supply and demand in marketing Economic theory is based on choice. The consumers make choices around the produce they want to buy and use. The producers make choices around how to produce their products, their quality, quantity etc. These choices made by producers and consumers, determine supply and demand for a product.

10 10 The supply and demand process can be represented graphically by plotting the price of the produce against the available quantity thereof. In general, the greater the demand, the greater the price, and the greater the supply the lower the price. The intersection of the two curves represents the balance price of a given product. What ultimately determines supply and demand is the market itself. People and their daily decisions determine prices. Product supply refers to the quantity of a product that the producer is willing to sell at a specific price. Demand on the other hand refers to the quantity of a product that a consumer is willing to buy at a specific price. It is therefore that the two are linked. The ideal situation is created when the supply and demand can be balanced. The table below summarises the link between supply and demand and indicates the possible effect of the price of a product and the profit. Supply Demand Price and Profit If there is a large amount of a high quality product available. If a small amount of an outstanding quality product is available. If an average amount of an average quality product is available. If there is too much produce (over supply). If a large amount of a poor quality product is available. Everybody wants to buy the product. Only few people can afford to buy the product. An average number of people will want and be able to buy. The market is flooded, and only few customers will buy it before it is spoilt. Nobody wants to buy it. The price of the product is likely to be average and the profit margin on the produce will be low. The producer will show an average to good profit overall due to high sales. The price will be high and the profit margin high. The profit overall will however be average to low. The price will be low to average and the profit margin will be average. The overall profit will be average to good. The price will be low and the profit margin low. The overall profit will be low to average. The price will be low and the profit margin will be low. The overall profit will be low.

11 11 Please complete Activity 4 in your learner workbook My Notes Marketing and the Law AGRICULTURAL LEGISLATION The Department of Agriculture (DoA) writes and administers laws that governs all Agricultural activities in South Africa and ensures that it is in line with the Constitution. The Department of Agriculture is currently responsible for over 30 pieces of legislation. The agricultural sector is continuously subjected to changes in the production and marketing environment. This means that the policies and legislative environment has to continuously be adjusted. These adjustments occur as amendments or replacements of pieces of legislation. It is therefore important that you keep up to date with the laws and regulations that might impact your specific field of agriculture. What follow is a list of Acts that reflects and elaborates the legislative mandate of the National Department of Agriculture. The Acts are presented here in chronological order. Performing Animals Protection Act, 1935 (Act No. 24 of 1935). Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act, 1947 (Act No. 36 of 1947). Animals Protection Act, 1962 (Act No. 71 of 1962). Livestock Brands Act, 1962 (Act No. 87 of 1962) To be repealed by the Animal Identification Act, 2002 (Act No. 6 of 2002). Fencing Act, 1963 (Act No. 31 of 1963). Subdivision of Agricultural Land Act, 1970 (Act No. 10 of 1970). Plant Breeders Rights Act, 1976 (Act No. 15 of 1976). Plant Improvement Act, 1976 (Act No. 53 of 1976).

12 12 Livestock Improvement Act, 1977 (Act No. 25 of 1977) To be repealed by the Animal Improvement Act, 1998 (Act No. 62 of 1998). Designated Areas Development Act, 1979 (Act No. 87 Repealed by the Agricultural Debt Management Act, of 1979) 2001 (Act No. 45 of 2001). Co-operatives Act, 1981 (Act No. 91 of 1981). Veterinary and Para-veterinary Professions Act, 1982 (Act No. 19 of 1982). Perishable Products Export Control Act, 1983 (Act No. 9 of 1983). Agricultural Pests Act, 1983 (Act No. 36 of 1983). Conservation of Agricultural Resources Act, 1983 (Act No. 43 of 1983). Animal Diseases Act, 1984 (Act No. 35 of 1984) To be repealed by the Animal Health Act, 2002 (Act No. 7 of 2002). Liquor Products Act, 1989 (Act No. 60 of 1989). Agricultural Research Act, 1990 (Act No. 86 of 1990). Agricultural Product Standards Act, 1990 (Act No. 119 of 1990). Agricultural Produce Agents Act, 1992 (Act No. 12 of 1992). South African Abattoir Corporation Act, 1992 (Act No. 120 of 1992). Groot Constantia Trust Act, 1993 (Act No. 58 of 1993). Societies for the Prevention of Cruelty to Animals Act, 1993 (Act No. 169 of 1993). Agricultural Development Fund Act, 1993 (Act No. 175 of 1993). Marketing of Agricultural Products Act, 1996 (Act No. 47 of 1996). Agriculture Laws Extension Act, 1996 (Act No. 87 of 1996). Genetically Modified Organisms Act, 1997 (Act No. 15 of 1997). Animal Improvement Act, 1998 (Act No. 62 of 1998) Date of coming into operation to be determined by the President by proclamation in the Government Gazette. Subdivision of Agricultural Land Act Repeal Act, 1998 (Act Date of coming into operation to be determined by the No. 64 of 1998) President by proclamation in the Government Gazette. Agricultural Laws Rationalisation Act, 1998 (Act No. 72 of 1998). Onderstepoort Biological Products Incorporation Act, 1999 (Act No. 19 of 1999). Meat Safety Act, 2000 (Act No. 40 of 2000). Agricultural Debt Management Act, 2001 (Act No. 45 of 2001).

13 13 Animal Identification Act, 2002 (Act No. 6 of 2002) Date of coming into operation to be determined by the President by proclamation in the Government Gazette. Animal Health Act, 2002 (Act No. 7 of 2002) Date of coming into operation to be determined by the President by proclamation in the Government Gazette. Land and Agricultural Development Bank Act, 2002 (Act No. 15 of 2002). KwaZulu Cane Growers Association Act Repeal Act, 2002 (Act No. 24 of 2002). (For Further information contact: The Head, Legal Services, Private Bag X250, Pretoria Tel. (012) Fax: , or check the Department of Agriculture website). Please complete Activity 5 in your learner workbook My Notes Concept (SO 1) 1. Explain the concept of marketing ( marketing concept"). 2. The elements included in the marketing concept: Supply and demand. Pricing. Information, regulations and standards. Distribution channels. 3. The role of price in marketing. 4. The role of supply and demand within marketing. 5. The importance of product quality in marketing. 6. The legal environment that impacts on marketing. I understand this concept well Questions that I still would like to ask

14 14 Session 2 Marketing and Farming practices After completing this session, you should be able to: SO 2: Understand the differences between and the value of demand and production driven farming practices. In this session we explore the following concepts: The differences between and the value of demand and production driven farming practices. The dangers involved within production-driven agricultural production. The need for, and advantages of, demand-driven agricultural production. Concepts of demand and supply in plant production Price. Quality. Consumer preferences. The relationship between supply and demand of crops. The importance of and the need for quality products and services are defined. 2.1 Value driven production versus demand driven production Demand Driven Farming & Marketing: Determining what the needs of the customers are, then setting out to meet their needs, provided it could be done at a profit. The marketing process includes market research, deciding on products and prices, advertising promoting, distributing and selling.

15 15 Production Driven Marketing: Planting a crop and producing it for maximum profits through volume (and sometimes quality), without concern as to what a specific target market might want or need. These products are marketed to any market that might be willing to take it at a special price. 2.2 The differences between, and the value of, demand and production driven farming practices In the past Governments of the World intervened in Agricultural Production by introducing price control regulation and subsidising the production of staple crops. This brought about a culture of Production Driven Farming. What this meant is that the farmer produced his products without paying any attention to market trends, customer needs and changes in the markets. Often the farmer did not explore alternative production methods as the price for his product was set year in and year out. The agricultural sector is however changing. Historical patterns of Government support for produce as well as controls on export and import are changing. These changes away from control on the pricing of agricultural produce are occurring internationally. Agricultural businesses are responding to these changes, and increasingly, their production, processing and trading decisions are based purely on market considerations. Farming has become market-driven and not production-driven. This naturally leads to greater instability in agricultural prices. It is however recognised that the impact of such instability can be managed through the implementation of recognised mechanisms such as future contracts. In this way one creates greater price stability. The challenge of managing price instability has reverted to those directly involved in the market now that the structures and institutional arrangements that supported agricultural commodity marketing and pricing policies have been abolished.

16 The risks of production-driven agricultural production As with all business models, there are very real risks related to production driven agriculture. These risks can be divided into three categories: Risks to the farmer The farmer may produce a crop based on a predicted market trend that does not realise. This could lead to a surplus of the product, which will have little or no value. The same situation will develop if many farmers have produced along the same forecasted trend. This will cause an over supply and lowered value of the product. Risks to the farmer & environment - The farmer might try to over produce due to perceived high market demand, thus damaging, exhausting or destroying natural resources such as grazing or biomes. Risks to the farmer, environment and consumer In order to meet demands, the farmer might turn to unsound farming practices, which could have an adverse long-term effect on both the environment and the consumer. My Notes

17 Advantages of demand-driven agricultural production Please complete Activity 6 in your learner workbook My Notes

18 The importance of product quality Produce Quality is an important aspect to maintain market share. The secret to achieving product quality is to tirelessly select the best seed, plants or animals for production. You should then follow through with economically, environmentally and scientifically sound farming practices. If your produce is of high quality you can charge a higher price. If your produce is of high quality you can target a more discerning market segment. If your produce is of high quality you will always find that your demand exceeds the supply. Concept (SO 2) 1. Value driven production and demand driven production. 2. The differences between and the value of demand and production driven farming practices. 3. The risks involved with production-driven agricultural production. 4. The need for, and advantages of, demand-driven agricultural production. 5. Individual concepts of demand and supply in plant productions: Price Quality Consumer preferences 6. The relationship between supply and demand of crops. 7. The importance of and the need for quality products and services. I understand this concept well Questions that I still would like to ask My Notes

19 19 Session 3 Principals of supply and demand After completing this session, you should be able to: SO 3: Identify the principles and factors of supply and demand and therefore basic price formulation. In this session we explore the following concepts: In this chapter we explore the principles and factors of supply and demand and how it relates to basic price formulation. We look at Climatic conditions, Economic conditions, Shifts in demand, Population growth, Soil restraints and Organic production. The following will be covered: Internal factors vs. external factors. Internal and external factors that impact on supply (production side). Internal and external factors that impact on demand (needs of clients). How price changes may impact on the production process? 3.1 The principles and factors of supply and demand Price: The firm amount of money for which something can be bought or sold.

20 20 The figure above summarises the potential impact of various factors on the price of produce. The principals and factors involved with the supply and demand system are defined below. Climatic Poor climatic conditions such as drought may cause a shortage of a particular product which is in demand. Should the farmer produce the product in order to fulfil a specific demand, a higher price could be charged. During warm or hot conditions, for example, the demand for fresh produce such as salad crops would be in higher demand. Economic Should the target market have more disposable income during prosperous economic times, the market will demand more of better quality or novelty products and will be willing to pay a premium price. Should your market have a shortage of disposable income, the demand will be for acceptable quality produce at a lower price. This could fulfil the markets basic nutritional needs.

21 21 Shifts in demand Health concerns will cause the target market to follow trends such as healthy eating and healthy cooking. This will give rise to an increase in demand for certain products and a decline in others. Population growth If a certain population segment grows faster than others then the demand for produce will change relative to the needs of that specific population group. Production restraints If there is too little land available for certain types of agriculture, then the price of your produce will benefit, as the supply might be lower than the demand. Organic produce There has been a trend towards Organic production methods over the past decade because customers perceive it as sustainable, environmentally friendly and probably healthier. Please complete Activity 7 in your learner workbook My Notes The effect of changing prices on production The term "prices received by farmers" is used in national accounting and is mentioned often when produce pricing is discussed. The term refers to the national average prices of individual commodities that farmers receive, irrespective of its grade, kind and variety. These prices are determined at the farm gate or first point-of-sale of the produce. These are known as "Producer Prices". Farm gate prices are the prices received by farmers for their produce on farm. This means that costs of transporting produce from the farm to the market has been accounted for. The market charges for selling the produce are not included.

22 22 If the market price is known it should be adjusted to arrive at farm gate prices. In some countries produce is sold at the farm-gate. It could also occur that the produce is sold at markets or delivered to the buyer. In developing countries where agricultural marketing is not well organised the farmers will use the entire range of distribution channels. Distribution channels for agricultural produce may include the farm-gate, local village markets, wholesale and retail markets as well as marketing boards. Wholesale prices are those derived where produce leaves the farm and may pass through one or two wholesale markets. The wholesaler is not the end user, but rather "middleman that enters the chain before the produce reaches the retailer (shop). The end user (consumer) ultimately buys form the retailer. In a primary wholesale market, the wholesale price of a product is the price at which the wholesale buyer purchases from the seller or his agents. This price may differ from the price the seller gets as the wholesaler may carry other costs or incidental charges. It is possible that the seller and the wholesaler may share these costs. The wholesale price of a product could also refer to the price at which the wholesaler offers to the retailers. This price is usually higher than that described above. In a secondary wholesale market, the wholesale price of a product refers to the price at which the wholesaler sells it to the retailers. This price usually exceeds the price as explained above because of the additional transportation charges, incidental expenses and profit. Wholesale prices of agricultural products are gathered in most countries. These prices are collected for three broad reasons: 1. Firstly, the wholesale markets are usually well organised and consequently wholesale prices are easy to record. 2. Wholesale prices are quoted throughout most of the year and can, therefore, be easily obtained as required. Farm gate prices on the other hand are obtainable only for that period after the harvesting of crop during which the producer disposes of his surplus. 3. Finally, the dealers in a wholesale market are usually well informed of the supply and demand situation for the product, so that the wholesale prices tend to reflect the sensitivity of markets to forces of supply and demand; this essentially is the element of price statistics of greatest interest to most economists and administrators. Export prices Export markets determine export prices for produce intended for delivery outside the customs boundary of the country. Export markets are also called terminal wholesale markets, where the valuation of the product is made as free-on-rail, or free-alongside-ship or free-on-board (indicated by f.o.b. prices).

23 23 Support prices Prices of some of the crops at the farm gate are fixed by Government to ensure welfare of farmers or to ensure supply of food-grains, meant for distribution through feeding plans and programmes. In such cases the prices are listed annually and are applicable to the country as a whole. These so-called agricultural support prices are sub-divided into categories. These are: Guaranteed minimum prices or intervention prices in which farmers are encouraged to grow new crops which have not developed assured markets. Government assures farmers that in case of any difficulty or an abrupt fall in the price level, government would either buy the produce or provide cash subsidies to the farmers. Generally such subsidies are provided through extension workers. Fixed purchase prices in which to provide direct benefit for foreign trade or in case of commercial crops (e.g. sugar cane) to safeguard interest of farmers the Government announce fixed prices. Please complete Activity 8 in your learner workbook My Notes Concept (SO 3) 1. Identify the principles and factors of demand and supply and how it relates to basic price formulation. 2. Climatic conditions; Economic conditions; Shifts in demand; Population growth; 3. Soil restraints; and Organic produce. 4. Internal factors vs. external factors. 5. Internal and external factors that impact on supply (production side). 6. Internal and external factors that impact on demand (needs of clients). 7. Impact of price changes on the production process. I understand this concept well Questions that I still would like to ask

24 24 Session 4 Marketing and Customer needs After completing this session, you should be able to: SO 4: The principles of marketing as demonstrated by the needs of customers/clients. In this session we explore the following concepts: The primary elements of the marketing mix:- Product. Promotion. Price. Place. Packaging. People. The role of the product quality as reflected in the demand. The role of the product packaging as reflected in the demand for the product as well as pricing thereof. The role and value of promotional aspects in the marketing process. The role of the pricing of the product/service in the marketing process. The role of place or distribution of the product/service in the marketing process. The importance of quality and dedicated people in the marketing process 4.1 The marketing mix and its importance

25 25 The phrase marketing mix is probably the most well known phrase in the marketing field. The primary elements of the marketing mix are price, place, product, and promotion. We also add packaging and people to the mix. Price There are many ways to price a product. The pricing strategy should communicate value for money to the consumer. Keep in mind that if prices are too low, a perception is created that the product is of lesser quality. If the price is too high the product may no longer be affordable. Place Place refers to the mechanism through which goods and/or services are moved from the manufacturer/service provider to the user or consumer. It is also referred to as channel, distribution, or intermediary. Product The type of produce that you supply is vital to your marketing mix. Higher quality produce are often produced in lesser quantities, but sold at higher prices at selected markets. Standard quality produce is aimed at mass markets at the best possible price. Poor quality produce is not easily marketed if at all. Please complete Activity 9 in your learner workbook My Notes Please complete Activity 10 in your learner workbook My Notes

26 The role of the product packaging Five Purposes of Packaging Product packaging serves a number of purposes. These are defined below: CONTAIN The package holds the product directly; this is PRIMARY packaging. Examples include the tube or pump for toothpaste, the can or jar for a food item, the bottle for a beverage, and the drum for a cleaning product. INFORM The package identifies the brand, the product and its contents and the manufacturing company. It also provides instructions on how it should be used and warns against hazards. Most of the abovementioned information is required by Law. PROTECT Packaging prevents spoilage, leakage, breakage, moisture changes, theft and tampering. Packages seal out contaminants of the environment such as germs, dirt, dust and moisture. It protects the package against tampering, theft and breakage. TRANSPORT Packaging may provide easy and safe movement of the product from the manufacturer via intermediates to the end user. This allows for a product to be manufactured in one area and transported where it may not be available. DISPLAY Packages may be attractive. They can be displayed on shelves assisting in the sale of the product. Size, cost, colours, brands, illustrations and shape are all considered for display. Approximately 10,000 products are available in today's typical supermarket. It is for this reason that companies invest in packaging bringing higher returns than traditional advertising. Please complete Activity 11 in your learner workbook My Notes

27 Product promotion as part of marketing Promotion includes all of the tools available to the marketer for 'marketing communication'. The elements of the promotions mix are: Personal Selling. Sales Promotion. Public Relations. Direct Mail. Trade Fairs and Exhibitions. Advertising. Sponsorship. Personal Selling Personal Selling is an effective way to manage personal customer relationships. The sales person acts on behalf of the agri-business organization. They are well trained in the approaches and techniques of personal selling. However sales people are very expensive and should only be used where there is a genuine return on investment. For example, salesmen are often used to sell cars or home improvements where the margin is high, but it might not be a good idea to employ a specific salesman to sell commodities such as i.e.

28 28 apples, oranges or chickens. Personal sales may well be the only method of selling farm goods in many rural communities! Sales Promotion Sales promotions refer to all promotions excluding advertising, personal selling and public relations. Sales promotions may include: The issuing of coupons; Discounted promotions; Competitions; Free accessories (such as free glass bowl with fruit); and Introductory offers (such as buy a new type of fruit juice and get free fruit of the same type). The costing of each sales promotion should be done carefully and compared with the alternatives. Public Relations (PR) Public Relations is 'the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its public' (Institute of Public Relations). Successful PR strategies tend to be long-term and are planned to take into account all eventualities. Direct Mail Direct mail is focussed on targeting specific consumers. The targeted individuals are sourced and selected from a database. The potential consumer is 'defined' using a series of attributes and similarities. Trade Fairs and Exhibitions Such approaches are useful for making new contacts and renewing old ones. Agri-business, farms or estates will seldom sell a great deal at such events. The purpose of the event is to increase awareness of the products and to encourage trade. They offer the opportunity for companies to meet with both the trade and the consumer. Advertising Advertising is a 'paid for' communication. It is used to develop attitudes, create awareness, and transmit information in order to encourage a response from the target market. There are many advertising 'media' such as newspapers (local, national, free, trade), magazines, journals, television (local, national, terrestrial, satellite) cinema and outdoor advertising (such as posters, bus sides).

29 29 Sponsorship Sponsorship is where an organization pays to be associated with a particular event, cause or image. Companies will sponsor sports events such as the 2010 Soccer World Cup or teams such as Bafana-Bafana. The characteristics of the event are then associated with the sponsoring organization. In the fresh produce sector one of the major annual events is the AllFresh conference. This event brings together all the role players in this sector. 4.4 Product pricing and marketing There are many ways to price a product. There are four main pricing strategies that can be used: Premium pricing. Penetration pricing. Economy pricing. Price skimming.

30 30 Premium Pricing Penetration Pricing Economy Pricing Price Skimming Use a high price for a unique product or service. This approach is used where a large competitive advantage exists. Such high prices are charged for luxuries such as Veal and Karoo Lamb or rare cultivar of fruit such as Persimmons or Thornless Prickly Pears. The price charged for products and services is set unnaturally low in order to gain market share. Once this is achieved, the price is increased. This approach is often successfully during the last season by retailers such as Fruit & Vegetable City to attract clients with products such as Peaches, Bananas, Avocados, etc. This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for apples, potatoes, milk, cheese, chickens etc. Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price without doubt falls due to increased supply. Manufacturers of table French Wine used a skimming approach in the 1970s & 1980 s. Once other manufacturers were tempted into the market (such as New World Producers from Australia, New Zealand, South America and South Africa) wines were produced at a lower unit cost, and other marketing strategies and pricing approaches had to implemented. 4.5 The role product distribution in marketing The word Place in the marketing mix is also known as channel, distribution or intermediary. It is the mechanism through which produce are moved from the producer to the consumer. There are six basic 'channel' decisions:- Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler) Single or multiple channels. Cumulative length of the multiple channels. Types of intermediary. Number of intermediaries at each level (e.g. how many retailers in the Cape Peninsula). Which companies as intermediaries to avoid 'intra-channel conflict' in the marketing of products. Types of Channel Intermediaries:- There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (e.g. Factory shops), and many others.

31 31 Concept (SO 4) 1. The principles of marketing as demonstrated by the needs of customers/clients. 2. The importance of the marketing mix Product Packaging Promotion Price Place People 3. The role of the quality of the product in marketing. 4. The role of the packaging of the product in marketing. 5. The role and value of promotional aspects in marketing. 6. The role of the pricing of the product in marketing. 7. The role of `place` or distribution of the product in marketing. 8. The importance of quality and dedicated people in marketing. I understand this concept well Questions that I still would like to ask Bibliography Books: 1. Encyclopaedia Britannica South African Version. 2. Wikepedia International Version. 3. P Kotler, G Zaltman - Journal of Marketing, 1971 JSTOR. References on World Wide Web: 1. wordnet.princeton.edu/perl/webwn windhaus%20marketing%20plan%

32 32 Terms & Conditions This material was developed with public funding and for that reason this material is available at no charge from the AgriSETA website ( Users are free to reproduce and adapt this material to the maximum benefit of the learner. No user is allowed to sell this material whatsoever. Acknowledgements Project Management: M H Chalken Consulting IMPETUS Consulting and Skills Development Developer: Cabeton Consulting Authenticator: Le Toit Management Consultants cc Technical Editing: Mr R H Meinhardt OBE Formatting: Ms P Prinsloo Ms B Enslin Design: Didactical Design SA (Pty) Ltd Layout: Ms P van Dalen

33 SOUTH AFRICAN QUALIFICATIONS AUTHORITY REGISTERED UNIT STANDARD: SAQA US ID Demonstrate an understanding of the importance of marketing UNIT STANDARD TITLE Demonstrate an understanding of the importance of marketing SGB NAME NSB PROVIDER NAME SGB Primary Agriculture FIELD Agriculture and Nature Conservation NSB 01-Agriculture and Nature Conservation SUBFIELD Primary Agriculture ABET BAND UNIT STANDARD TYPE NQF LEVEL CREDITS Undefined Regular Level 1 2 REGISTRATION STATUS REGISTRATION START DATE REGISTRATION END DATE SAQA DECISION NUMBER Registered SAQA 0156/04 PURPOSE OF THE UNIT STANDARD A learner achieving this unit standard will be able to demonstrate an understanding of the importance of marketing within the agricultural production process. Learners will understand the importance of the application of business principles in agricultural production with specific reference to marketing and delivery. They will be able to operate farming practices as businesses and will gain the knowledge and skills to move from a subsistence orientation to an economic orientation in agriculture. Farmers will gain the knowledge and skills to access mainstream agriculture through a business-orientated approach to agriculture. LEARNING ASSUMED TO BE IN PLACE AND RECOGNITION OF PRIOR LEARNING No learning assumed to be in place. UNIT STANDARD RANGE Whilst range statements have been defined generically to include as wide a set of alternatives as possible, all range statements should be interpreted within the specific context of application. Range statements are neither comprehensive nor necessarily appropriate to all contexts. Alternatives must however be comparable in scope and complexity. These are only as a general guide to scope and complexity of what is required. UNIT STANDARD OUTCOME HEADER N/A Specific Outcomes and Assessment Criteria: SPECIFIC OUTCOME 1 Understand what is meant by "marketing concept". OUTCOME RANGE The marketing concept includes, but is not limited to supply and demand, pricing, information and regulations and standards as well as the distribution channels.

34 ASSESSMENT CRITERIA ASSESSMENT CRITERION 1 An understanding of the "marketing concept" is demonstrated. ASSESSMENT CRITERION 2 The role of price is demonstrated. ASSESSMENT CRITERION 3 The role of demand and supply within marketing processes is demonstrated. ASSESSMENT CRITERION 4 The importance of quality of products/services within the marketing process is identified. ASSESSMENT CRITERION 5 An awareness of the legal environment that impacts within the marketing process is demonstrated. SPECIFIC OUTCOME 2 Understand the differences between and the value of demand and production driven farming practices. OUTCOME RANGE Demand and supply and the context of the specific agricultural commodity /service e.g. price, quality and consumer preferences. ASSESSMENT CRITERIA ASSESSMENT CRITERION 1 The ability to identify and define the relevance and relationship between demand and supply for a specific agricultural commodity is demonstrated. ASSESSMENT CRITERION 2 An awareness of the dangers involved within production-driven agricultural production is demonstrated. ASSESSMENT CRITERION 3 An awareness of the need for and advantages of demand-driven agricultural production is demonstrated. ASSESSMENT CRITERION 4 The importance of and the need for quality products and services are defended. SPECIFIC OUTCOME 3 Identify the principles and factors of demand and supply and therefore basic price formulation. OUTCOME RANGE The factors influencing both demand and supply (internal and external factors - climatic, economic, shifts in demand, population growth, soil restraints, organic produce, etc) should be dealt with and how it impacts on price. ASSESSMENT CRITERIA ASSESSMENT CRITERION 1

35 An ability to identify internal and external factors impacting on supply (production side) is demonstrated. ASSESSMENT CRITERION 2 An ability to identify internal and external factors impacting on demand (needs of clients) is demonstrated. ASSESSMENT CRITERION 3 An understanding of how the factors impacting on the demand and supply of agricultural products and services, may impact on prices is demonstrated. ASSESSMENT CRITERION 4 How price changes may impact on the production process are demonstrated and understood. SPECIFIC OUTCOME 4 The principles of marketing as demonstrated by the needs of customers/clients. OUTCOME RANGE The learner should be aware of the importance of the marketing mix (product, packaging, promotion, price, place and people). ASSESSMENT CRITERIA ASSESSMENT CRITERION 1 The role of the quality of the product/service within the demand for the product/service is recalled. ASSESSMENT CRITERION 2 The role of the packaging of the product within the demand for the product as well as pricing of it is recalled. ASSESSMENT CRITERION 3 The role and value of promotional aspects within the marketing process are recalled. ASSESSMENT CRITERION 4 The role of the pricing of the product/service within the marketing process is recalled. ASSESSMENT CRITERION 5 The role of `place` or distribution of the product/service within the marketing process is recalled. ASSESSMENT CRITERION 6 The importance of quality and dedicated people within the marketing process are recalled. UNIT STANDARD ACCREDITATION AND MODERATION OPTIONS The assessment of qualifying learners against this standard should meet the requirements of established assessment principles. It will be necessary to develop assessment activities and tools, which are appropriate to the contexts in which the qualifying learners are working. These activities and tools may include an appropriate combination of self-assessment and peer assessment, formative and summative assessment, portfolios and observations etc. The assessment should ensure that all the specific outcomes; critical cross-field outcomes and essential embedded knowledge are assessed.

36 The specific outcomes must be assessed through observation of performance. Supporting evidence should be used to prove competence of specific outcomes only when they are not clearly seen in the actual performance. Essential embedded knowledge must be assessed in its own right, through oral or written evidence and cannot be assessed only by being observed. The specific outcomes and essential embedded knowledge must be assessed in relation to each other. If a qualifying learner is able to explain the essential embedded knowledge but is unable to perform the specific outcomes, they should not be assessed as competent. Similarly, if a qualifying learner is able to perform the specific outcomes but is unable to explain or justify their performance in terms of the essential embedded knowledge, then they should not be assessed as competent. Evidence of the specified critical cross-field outcomes should be found both in performance and in the essential embedded knowledge. Performance of specific outcomes must actively affirm target groups of qualifying learners, not unfairly discriminate against them. Qualifying learners should be able to justify their performance in terms of these values. Anyone assessing a learner against this unit standard must be registered as an assessor with the relevant ETQA. Any institution offering learning that will enable achievement of this unit standard or assessing this unit standard must be accredited as a provider with the relevant ETQA. Moderation of assessment will be overseen by the relevant ETQA according to the moderation guidelines in the relevant qualification and the agreed ETQA procedures. UNIT STANDARD ESSENTIAL EMBEDDED KNOWLEDGE The person is able to demonstrate a basic knowledge of: The marketing concept and what it entails within agricultural production. The differences between production versus demand driven agricultural production. The components of the marketing mix and how it may impact on prices. The role of demand and supply within price formulation. UNIT STANDARD DEVELOPMENTAL OUTCOME N/A UNIT STANDARD LINKAGES N/A Critical Cross-field Outcomes (CCFO): UNIT STANDARD CCFO IDENTIFYING Problem Solving: relates to specific outcomes: Understand what is meant by "marketing concept". Understand the differences between and the value of demand and production driven farming practices. Identify the principles of demand and supply and therefore basic price formulation. UNIT STANDARD CCFO WORKING Teamwork: relates to all specific outcomes. UNIT STANDARD CCFO ORGANIZING Self-management: relates to all specific outcomes.