Agriculture Reference
In-Depth Information
dimension that should also be mentioned is the issue of competitive response. The above
examples have intentionally been over-simplifi ed to illustrate the key concepts involved. But
in reality, anticipating and managing the price response of the competition is a crucial part
of a successful pricing strategy.
Legal aspects
Pricing is a delicate issue, from both marketing and legal standpoints. There is a great deal
of federal legislation that clearly prohibits any form of collusion among fi rms in establishing
prices or discrimination against particular customers. The Sherman Act (1890), the Federal
Trade Commission Act (1914), and the Clayton Act (1914) provide the foundation for U.S.
antitrust law and prohibit acts (including pricing) that substantially reduce competition
among fi rms.
The Robinson-Patman Act (1936) strengthened the Clayton Act and strongly forbids
pricing acts that discriminate among buyers without a cost justifi cation. Any product of like
kind and quality that crosses state lines must be offered to all purchasers at the same price,
unless it can be clearly demonstrated that the price differences are based on differences in
the cost of serving various customers. Similarly, any discounts or allowances made to
one customer must be available to all customers. Local businesses that are not involved in
interstate commerce and that are the fi nal seller may sell at any price they choose to any
customer, so long as they are not in collusion with other sellers. These laws are enforced
by the Federal Government through the Department of Justice and the Federal Trade
Commission. In addition, competitors and/or customers can sue fi rms violating these
rules. The fi nancial penalties for violations of these pricing laws can run into the hundreds
of millions of dollars.
Promotional decisions
Promotional activities in the agribusiness are designed to do one thing—effectively com-
municate the value of the fi rm's products and services. Any marketing strategy incorporates
a variety of methods for informing customers of the value of the fi rm's products and services
and convincing them the fi rm provides the best product to suit their needs. This part of the
marketing strategy is basically a communications process intended to educate the customer
and encourage a positive buying decision.
The
promotion
mix chosen by the agribusiness fi rm is typically a combination of adver-
tising, personal selling efforts, general public relations activities, and sales support programs.
The mix must consider the life-cycle stage of the product, the stage of product adoption in
the marketplace, competitors' actions, and available budget. The promotion mix is designed
to support and complement the total marketing program (
Figure 7.7)
.
Identify
target
audience
Determine
communication
objective
Design
the
message
Select
communication
channel
Manage
implementation
Figure 7.7
The promotion strategy process
