David McKinna et al. Pty Ltd
Marketing Strategy Consultants, Albert Park, Vic.
Marketing has always been a very changeable business mainly because of the dynamics of the market place. Each year marketing organisations go to great effort and expense to develop marketing plans only to find that within 3 months into the planning horizon the situation has changed markedly and the plans are rendered obsolete. For this reason, one of the basic skills in marketing is to manage change, to be able to predict future market requirements and changes, and quickly respond.
Whilst marketing has been a dynamic business, never in history has there been a period of greater change than has occurred in the past 5 years or so. There have been a number of fundamental changes in marketing which have and will continue to dramatically affect the marketing environment. On the surface, many of these changes won’t appear to be linked to agriculture but, in essence, will have a major influence.
The key changes are:
• a dramatically changing market;
• stagnation of traditional markets and growth in niche markets;
• renewed interest in export markets;
• evolution in the marketing chain;
• the electronic revolution; packaging driven innovation;
• the formation of mega organisations;
• the preoccupation with deregulation;
• farmers moving outside the farm gate.
These changes and their implications for agricultural marketing are discussed in the remainder of the paper.
The Dramatically Changing Consumer
There are a number of major changes in the composition of the population and attitudes of the consumer, which work together to produce dramatic changes in the products that people buy and the manner in which they use them. These changes are:
1. Changes in the demographic structure of the population The key changes are:
• an ageing of the population;
• growth of one and two people households;
• a growing proportion of ethnic people in the population.
2. Consumers’ purchases driven by health and nutrition
Consumers are much more concerned about the importance of what they eat. They are also becoming increasingly sensitive toward use of chemicals and artificial additives in food production.
3. Greater assertiveness by consumers which is reflected in higher expectations of products in terms of quality, value for money, consistency.
4. The growing importance of brands in marketing
Consumers want to be able to identify products which they can trust. Generic and plain label products, whilst still occupying a significant share of the market, have reached their peak and in some product categories are on the decline. High profile brands are becoming a key part of successful marketing.
5. The “Greeny” consumer
Consumers are much more conscious of the environment which is being reflected in their purchases away from CFSs and environmentally unfriendly packaging.
6. The desire and willingness to pay for products that offer convenience
The average Australian believes that he/she has a busy life and that it should be used to its fullest to enjoy activities that bring pleasure rather than undertaking mundane household chores.
7. Eating Out
One in three food dollars is now spent away from home, producing excellent opportunities within the food service sector and some stagnation in the household retail markets.
8. The microwave revolution
Upwards of 60% of households now have and use a microwave oven. This has had a dramatic effect on the diet and the manner in which food is prepared and eaten.
9. The travelling Australian
Half of the population has been overseas at least once, which has produced a dramatic effect on diet and perceptions of products, value for money, quality, and so forth.
Stagnation Of Traditional Markets And Growth In Specialist Niche Markets
Many of the traditional markets that have been the backbone of many industries for various reasons have become stagnate. The growth opportunities are now coming in the form of smaller, niche markets that require very specialist production and marketing skills.
Evolution In The Marketing Chain
There are a number of dramatic changes in the marketing chain as well. The key ones are:
• concentration within the retail sector, for example the number of food retailers has reduced from 10 to 4 in five years which has had a dramatic effect on the market particularly in terms of the balance of bargaining power and the cost of getting and maintaining distribution;
• the emergence of super discounters;
• the growth of specialist stores;
• the rapid growth of direct marketing;
• the move toward centralised warehousing and distribution;
• the growing popularity of franchising;
• the declining importance of wholesale markets.
The Shrinking Globe
Another major occurrence in marketing is the shrinking of the globe both in attitudinal as well as practical terms. This has been brought about by:
- dramatic developments in electronic communication;
- fast transportation;
- multinational ownership of Australian businesses.
This has meant that there has been a major move in favour of international marketing with Australia becoming more export oriented as well as experiencing strong competition from overseas competition in its local market.
There has also been a move to global marketing where the same strategy has been adopted around the world.
The Electronic Revolution
The electronic industry is changing at a frightening rate. Communication and computer systems have resulted in dramatic breakthroughs in all areas, not the least marketing.
An example of this is the “smart card”, a credit card which gives the retailer a comprehensive set of data about his customer which, coupled with electronic scanners in the store, provide rapid, accurate information on which to make marketing decisions.
Packaging Driven Innovation
It is interesting to observe that the vast majority of innovation in food in the past decade has been driven by packaging technology.
Such breakthroughs as aseptic packaging systems, controlled atmosphere, etc, have facilitated the marketing of a whole new generation of extended life and shelf stable products and have added to convenience. Packaging has provided a way for marketers to add value to their products.
The Formation Of Mega Organisations
Another phenomenon is the formation of mega organisations through mergers, vertical integration, etc. These are very powerful, very diversified organisations which are often more driven by financial considerations than a desire to provide a product or service. Often the actions of these organisations are disruptive to development and provide a degree of uncertainty and instability.
Preoccupation With Deregulation
Another change which affects agriculture more than other industries is the trend toward deregulation. Traditionally the marketing of agricultural products has been conducted by statutory authorities. For various reasons, the bureaucrats and politicians are keen to reduce government involvement in these industries. They do not want to take responsibility for commercial decisions. This will have a dramatic effect on the marketing of agricultural products forcing many people out of the respective industry and causing many more to enter.
Farmers Moving Outside Farm Gate
Farmers, both as individuals and collectively, are becoming much more involved with the marketing of their products. This has been driven mainly by disillusionment with the performance of traditional marketing arrangements or more particularly poor returns relative to the middle man’s share.
This behaviour goes beyond just marketing commodities. Farmers are becoming actively involved in further processing and value adding.
Implications Of Change In Marketing
1. The marketing environment will become much more competitive in the future with inefficient operators going out of business.
2. Markets will be much more volatile.
3. There will be increasing pressure to raise the quality and level of service in products and product marketing.
4. Farmers will need to be more prepared to take responsibility for their own destinies in terms of marketing decisions.
5. Much more innovation will be required to stay ahead of the market and the competition.
6. Operators will need to be more flexible and willing to enter new fields outside of the traditional operations and industries.
7. Agricultural industries will need to develop partnerships or relationships with others further up the marketing chain.
8. Much greater interest will need to be taken in the export market.
9. Agricultural industries will need to invest much more heavily in marketing and employ qualified specialists.
10. Agricultural groups should be prepared to appoint outsiders to their boards.