Improving skills for Smartfarming as an innovative tool for
rural development and economic growth
SmartFarmer
Module 1
Strategic Planning and Marketing of “smart”
organic agro-foods
Unit 1
The Concept and Principles of Marketing
Authors
Alexandra Mendonça
Training Material online
www.smartfarmerproject.eu
This project has been funded with support from the European Commission. This publication
reflects the views only of the author, and the Commission cannot be held responsible for any
use which may be made of the information contained therein. These are open knowledge
contents under following CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for
copyrighted materials that are quoted).
Table of Contents
Learning objectives/outcomes ___________________________________3
Estimated duration ___________________________________________3
Summary ___________________________________________________3
Learning (reading) resources ___________________________________3
Exercise/activities ____________________________________________9
Bibliography/Further reading ____________________________________9
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This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).
Learning objectives/outcomes
This first unit will help the reader to understand:
 The meaning of the marketing concept and the functions of marketing;
 The relevance of marketing to the agricultural and agro-food
businesses;
 Why it is important to implement the marketing concept.
Upon successful completion of this unit, you will be able to:
 Understand the basic concept of marketing;
 Understand the difference between a “Production oriented” business
and a “Marketing Oriented” business;
 Understand the influence of effective marketing on agro-food
businesses.
Estimated duration
The estimated learning duration for this unit is 30 minutes. However for the
completion of the proposed practical exercise, around 60 minutes will be
required. Therefore, it should take around 90 minutes to complete this unit.
Summary
Marketing is an organizational function that includes a set of processes
having as essential purpose to find out what your customers want and
supplying it to them, in ways that benefit the organisation and its
stakeholders.
This means that: i) the marketing process should be customer driven; ii) the
marketing process should ensure the business sustainability, through the
appropriate management of the value triad – quality, service and price.
Farmers are in general highly experienced in agricultural techniques and
procedures, but marketing requires learning new skills, new techniques and
the capability to access new sources of information. Getting marketing skills
will contribute to run farms and agro-businesses more profitably.
Learning (reading) resources
Reasons to get started
For sure you have been frequently involved in thinking about your business
and the production and selling of your products.
No matter what is the nature of your activity (e.g. a farm or an agro-food
business) and the stage of development of your business (starting-up or
3
This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).
already established) you have to face a few questions to cope with market
and external environmental challenges. That is to say, to deal with the
complex of economic, social and cultural conditions that affect and influence
the growth, development and survival of your business.
Getting acquainted and familiar with first principles of marketing does not
mean that you have to learn by heart a lot of notions and definitions that
apparently are far from your practical problems and requirements.
Marketing, in its basic principles and definitions, has much more to do with
your everyday business life than you can imagine. Marketing will help you to
better comprehend how you can adopt a more market oriented approach and
understand your firm’s external environment, in order to improve your
business.
Marketing Concept and Marketing Functions
The essence of marketing is identifying and meeting human and social
needs. According to Philip Kotler, marketing is “a societal process by which
individuals and groups obtain what they need and want through creating,
offering and freely exchanging products and services of value with others” [4].
Managing these exchange processes involves work and expertise. Thus
marketing management can be seen as “the art and science of choosing
target markets and getting, keeping and growing customers through creating,
delivering and communicating superior customer value” [4].
In short, marketing covers a set of concepts, theories, tools, practices,
procedures and… experience. Let´s get started with some core definitions
that will help you to go deeper into the marketing concept and functions.
Markets. The concept of exchange leads to the concept of market. Originally,
the “market” was the place where buyers and sellers gathered to exchange
their goods. In marketing, however, the term “market” is used to refer to
groupings of buyers, while the sellers are considered to be the “industry”.
Buyers and sellers are linked by four flows, as shown in the figure below.
Sellers send goods, services and communication (e.g. advertisements, direct
mails) to the market and in return, they receive from the market money and
information (e.g. buyers’ preferences, sales data).
Source: Philip Kotler, Kevin Lane Keller (2012), Marketing Management [4]
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This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).
Needs, Wants, and Demands. Needs are basic human requirements such
as for food, water, clothing and shelter. These needs exist intrinsically in
people and are part of the human condition. Wants are desires for specific
satisfiers of the basic needs (e.g. I need clothing, but I want an Armani suit).
Human wants are deeply influenced by social forces. Demands refer to wants
for specific products, supported by the capacity and willingness to buy them.
Many people want an Armani suit, but only few are able and willing to buy
one.
Products. A product can be broadly defined as anything that can be offered
to someone to satisfy a need or want, including physical goods and services.
In fact, physical products supply services in many cases (e.g. a microwave
oven provides cooking services), while services are delivered through
physical objects and other vehicles (e.g. tourism services).
Value, Cost and Satisfaction. How do consumers choose among the many
products that may satisfy a certain need? The key issue is value. The buyer
chooses the product he/she perceives to provide the most value. This value
results from the combination of the tangible and intangible benefits and the
cost of the product.
The customer value triad combines Quality, Service, and Price. Value
perceptions increase with quality and service, but tend to decrease with price.
Satisfaction reflects the customer assessment of the perceived performance
of a given product, in relationship to his/her expectations.
Therefore, we can consider that the marketing function is primarily “the
identification, creation, communication, delivery, and monitoring of customer
value” [4].
In other words: marketing involves finding out what your customers want
and supplying it to them. This leads to two important conclusions:
 The marketing process should be customer driven;
 The marketing process should ensure your business profitability,
through the appropriate management of the value triad – quality,
service and price.
In short: marketing is all about creating, communicating and delivering:
 The right product (What)
 For the right people (Who)
 At the right price (How)
 At the right place (Where)
 At the right time (When)
 At a profit (Why)
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This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).
Why is Marketing important?
Most farmers and small agro-businesses see themselves as “price takers”.
They tend to consider that they have no control over prices (due to the
bargaining power of wholesale and retail chains), frequently they don’t know
how to attract new customers, they have difficulty to follow up changes in
market demand, or they lack knowledge on the most profitable products to
grow.
While farmers and other agro-businesses can usually outline their problems
clearly, they often face difficulties in identifying potential solutions.
Marketing plays a key role in addressing those challenges and problems. It
provides a set of processes and tools that will help analysing your products
and services, assessing the effectiveness of your commercial communication
and distribution activities and improve the overall performance of your
business.
Marketing can inspire enhancements in your existing products, helping to
innovate and improve the position of your business in the marketplace.
Successful marketing will also help to build demand for your products and
services and will contribute to create a loyal customer base.
Making the right marketing decisions is not always simple, but an effective
marketing approach will support you to set prices, to decide where to sell your
products and how much to spend on advertising, direct sales or Internet
promotion.
Marketing involves also knowing as much as possible about your customers,
their needs and demands and includes as well research to follow up
competitors, the technology framework and the economic and social factors
that may globally influence your business.
Farmers are in general highly experienced in agricultural techniques and
procedures, but marketing requires learning new skills, new techniques and
the capability to access new sources of information. Getting marketing skills
will contribute to run farms and agro-business more profitably.
Orientation towards the Marketplace
During the past decades, the marketing approaches have changed
dramatically.
In particular, in the last few years, economic, social and cultural factors have
shaped new marketing opportunities and challenges. These factors refer to a
large range of interlinked evolutions that go from the digital revolution to the
globalisation processes, including also the development of disintermediation
solutions in the delivery of products/services, increased access to
information, better environmental consciousness of customers and more
empowerment of consumers, to mention just a few.
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This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).
Let’s have a look on the evolution of the marketing ideas, from “old” to “new”
concepts.
The Product Concept. Marketing focused on the product and the
companies concentrated their efforts on making a “better” product. The
definition of “better” was based on internal standards and values. The
mousetrap in this approach is that “a new or improved product will not
necessarily be successful unless it’s priced, distributed, advertised and sold
properly” [4].
The Marketing Concept. This concept emerged in the late 1950’s – early
1960’s and shifted the focus of marketing from the product to the customer.
The approach is not finding the right customers for your products, but “the
right products for your customers”. This concept developed the marketing mix
and the “four P’s” approach, as they become known: product, price, place
(distribution channels) and promotion. These issues will be further discussed
and detailed at Module 2.
The Holistic Marketing Concept. More recently, it was becoming evident
that a broader strategic marketing concept was required. Therefore, a new
shift started to emerge, focusing on the firm’s external environment. That is
to say that it is necessary to know the customer in a global context that
includes not only the competition, but also the government policies and
regulations, as well as the wider economic, social and political macro forces
that influence the markets evolution. Holistic marketing acknowledges that
“everything matters in marketing and that a broad, integrated perspective is
often necessary” [4].
Start thinking differently…
The supply chain is a long channel stretching from raw materials to the
finished products delivered to final consumers. Most farm outputs require
additional processing, packaging and other intermediary services, in order
they are in fact useful to the consumers.
Products are highly perishable and are not standardised by size or quality.
They are variable in quantity and quality over the year and often produced far
from centres of consumption…
… it looks like that the needs of farmers and consumers appear as almost
being opposite, as illustrated in the following figure.
One of the keys to success is to know:
WHO are your customers?
WHAT are their needs and priorities?
WHAT are they looking for?
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This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).
FARMERS’ NEEDS
CONSUMERS’ NEEDS
 Products to be sold at the
 Products
 Production to be sold
 To
 Sales to be made as close
 Purchases
 Products to be sold
 Products
 Products to be sold

highest possible price
regardless of quality
to the farm as possible
immediately after harvest
without any packaging
to be purchased
at the lowest possible price
purchase only the
highest quality possible
to be made as
close to home as possible
to be available
throughout the year

Products to be available in
packs if required
Source: Adapted from ProudFarmer Project (2010), Methodological Training Tool in Marketing, 1.
Marketing of Local and Typical Products, 1.1.First Principles of Marketing [5]
Each operator captures only a certain percentage of the total value generated
along the supply chain. To increase the farmers’ share of consumers food
expenditure will depend on:
 Providing services currently performed by other operators downstream
in the supply chain, for example by processing farm outputs or selling
directly to the public;
 Contributing to improve the supply chain efficiency, for example by
reducing buyers’ costs, or by meeting buyers’ specific requirements,
that otherwise would not be satisfied.
Running a farm or a small agro business is not simply producing and hoping
that customers will come to buy. Customers will pay for what they want and
not necessarily for what you might want to sell them.
Good ideas alone will not guarantee success. So, start thinking differently! Be
customer driven and market focused!
As a first step, we propose you an exercise.
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This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).
Exercise/activities
We propose you to go to your local store/supermarket and:
1. Make a list of the available fresh fruits and vegetables.
2. Behave as a “consumer” and proceed purchasing, as if this was your
weekly shopping of everyday items.
3. Write down a list of the needs/reasons, which pushed you to buy a specific
product and, in case of more than one choice for the same class of products,
make a list of priorities, which led you to select those specific ones.
After shopping is finished:
1. Analyse the goods that you produce in comparison to the list of
needs/reasons and eventual priorities, which led you to select the specific
products you have purchased in the supermarket. Classify your own products
according to your list of needs/reasons and priorities.
2. Analyse the products you have bought in comparison with the products that
you produce and make a list of the differences – appearance, price,
packaging, labelling, added value, communicative decorations, further
services provided, etc..
3. Analyse all your lists and identify prospective changes in your products to
fill gaps of quality, needs/reasons and priorities, which would lead you to buy
the supermarket products rather than yours.
At the end of the exercise you will be able to answer to this question:
 Are there margins of improvement for your products, in order they are
more appealing for your current consumers and are able to attract new
consumer categories?
Bibliography/Further reading
[1] Crawford, I.M. (1997), Agricultural and food marketing management, FAO
- Food and Agriculture Organization of the United Nations: Rome
(http://www.fao.org/docrep/004/W3240E/W3240E00.HTM)
[2] Dixie G. (2005), Horticultural Marketing, Marketing Extension Guide, FAO
- Food and Agriculture Organization of the United Nations: Rome
(http://www.fao.org/docrep/008/a0185e/a0185e00.htm#Contents)
[3] Keegan W.J. (2013), Global Marketing Management, 8th Edition Prentice
Hall: New Jersey
[4] Kotler P., Keller L.K. (2012), Marketing Management, 14th Edition,
Prentice Hall: New Jersey
[5] ProudFarmer Project (2010), Methodological Training Tool in Marketing,
1. Marketing of Local and Typical Products, 1.1.First Principles of Marketing
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This project has been funded with support from the European Commission. This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use which may
be made of the information contained therein. These are open knowledge contents under following
CC: http://creativecommons.org/licenses/by-nc/4.0/ (except for copyrighted materials that are quoted).