Agriculture Reference
In-Depth Information
interested in those buyers who value a relationship with their lender, as compared to those
who don't. Such segmentation approaches are relatively sophisticated, and are heavily used
by branded food companies to market products aimed at the “healthy lifestyle” segment
(Healthy Choice), the “gourmet” segment (Opus One wine), or the “young and rebellious”
segment (Red Bull), among many others. Such segmentation approaches require a variety of
demographic, behavioral, and psychological data to construct—all tied back to some common
set of needs the group is seeking in the product or service.
To illustrate the segmentation concept, consider a feed manufacturer. This fi rm will
recognize dairy, beef, pork, and poultry as clearly different market segments with different
needs. Further, dairy farmers' operations may be classifi ed as small, medium, or large,
according to herd size. The needs (and therefore the marketing strategy employed) of a
small, part-time farmer who owns his property and milks 50 cows will be far different
than a large commercial dairy with 10,000 cows using the latest computerized feeding and
milking systems. With a thorough understanding of the needs of the target segment in
hand, special promotional programs and pricing strategies can be developed. Marketing pro-
grams for such targeted market segments are thought to be far more productive than mass
marketing efforts aimed at the total market.
A key point here is that there are clearly defi nable differences between market segments.
If such differences do not exist, a mass market strategy works just fi ne. Typically, designing
marketing plans for different segments involves a substantial commitment of fi rm resources.
So, careful thought must go into the market segmentation employed. Well-defi ned market
segments will pass the following test:
1.
Measurable
: Can the market segment be identifi ed and evaluated? In some cases, market
segmentation can be developed easily using readily available demographic data. In
other cases, it may be very diffi cult to identify how many and which farmers want to buy
based on a relationship with the supplier as opposed to those who simply want to buy on
price.
2.
Substantive
: Is the market segment large enough to serve? Some segments may be well
defi ned and measurable, but be simply too small to justify the required resource com-
mitment.
3.
Actionable
: Can the fi rm effectively serve the segment? In some cases, the fi rm may
identify a large, well-defi ned segment, but simply not have the people, products, or
services needed to effectively serve the segment.
In addition to these questions, agribusiness fi rms look at several other factors as they make
their choice of target market. The level of competition is important. A segment may pass
the three-question test posed above, but still not be an appealing segment if every competitor
in the marketplace is aggressively pursuing the segment. Growth is another key issue. A
segment may be too small to be worth the fi rms' effort now, but if it has substantial growth
potential, it may make sense to stake a claim on the segment early and then grow sales as the
segment grows. Finally, the fi rm has to be focused on the profi tability of serving any given
segment—in the end, can the fi rm deliver value to the segment at a profi t?
Every agribusiness fi rm must decide on its optimal level of emphasis on a given segment,
since limited resources must be directed to the area where they will be most productive.
Decisions about the segments that represent the most effi cient use of resources rest on
data about the type of product, competitive behavior, size of the company, and other
factors.
