Market Development, Information, and

Bargaining Power
Reasons for market
development
Strategy in market
development
Tools and outcomes
Participation in
commodities market
development
Bargaining power and
market stabilization
Market information
define
Market development involves creating or
expanding a market for new or existing products
and/or increasing the value of these products
few consumers today are aware of the prickly
pear, however, but farmers who grow this cactus
plant

Promotion: Strategic and Tactical
Objectives
Awareness
Trial
Attitude toward the
product
Beliefs
Preference
Temporary sales
increases
Emerging
Markets/
New Products
Mature markets
/established
products
Marketing Strategy
MARKETING
OBJECTIVES
What we want to
accomplish
TOOLS
Use resources such
as distribution,
advertising, sales
promotion,
demonstrations
TACTICS
AND
ADAPTATION
Implementing strategy
as things change.
More tough choices!
CONSUMER/
MARKET
RESPONSE
Consumers or
intermediaries
respond
STRATEGY
How to best use
available resources
to accomplish objectives
under circumstances.
Make tough choices!
OUTCOME
Sales are influenced
(e.g., volume,
frequency, switching,
price sensitivity)
ASSESS AND RE-EVALUATE
ASSESS AND RE-EVALUATE
Strategies, Objectives and the Hierarchy of
effects
The promotional activities needed for a given product will
depend on factors such as its current stage in the
product life cycle.
Once more people know, a significant challenge is going
to get more people to actually try the product
This may be difficult to accomplish because of the high
cost of the product and the vast number of choices of
other products that consumers can consume.
There is simply not enough time or money to try
everything available.

Strategies, Objectives and the Hierarchy of
effects
If a product category catches on, emphasis may
then need to switch to brand differentiation and
the firm may need to work on getting consumers
to hold favorable beliefs about their brand.
In later stages of the product life cycle, where
most consumers opinions have largely been
set, temporary sales increases, usually through
price promotions, may be the only realistic
objective.

Market Development: The Objectives
DECREASE CONSUMER PRICE SENSITIVITY
Costs a little more, but its worth it Zachy farms chicken ads
Campbells soup ads
GET MORE PEOPLE TO BUY PRODUCT
Hungry Man dinners Hot Pockets ads Variety seeking advertising Spam luncheon meets advertising
GET PRODUCT USED FOR NEW PURPOSES
Orange juiceit isnt just for dinner anymore Beefits whats for dinner
Spam luncheon meets advertising Baking soda ads
DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDS
Kraft cheese ads suggesting that Kraft has more calcium Total cereal ads suggesting vitamins
Coke is the real thing The Pepsi generation The night belongs to
Michelob Florida orange juice Maxwellits good to the last drop
Progresso and Campbells soup ads
GET CURRENT USERS TO USE MORE
Snickers satisfies you! Ask for A-1 Steak Sauce A sandwich just isnt a sandwich
without miracle whip Beefits whats for dinner The Incredible, Edible Egg
Fast food restaurant advertising
Market Development Issues
INCREASED
SALES OF
PRODUCT
DECREASE
CONSUMER
PRICE SENSITIVITY
GET MORE PEOPLE
TO BUY PRODUCT
GET CURRENT
USERS TO USE
MORE
GET PRODUCT
USED FOR
NEW PURPOSES
DEVELOP
PREFERENCE
RELATIVE TO OTHER
PRODUCTS OR BRANDS
DISTRIBUTION
ENHANCE-
MENT
ADVERTISING
SALES
PROMOTION
JOINT
VENTURES/
CO-
BRANDING
TRIAL
AWARE-
NESS
BUYING
CON-
VENIENCE
.

Big picture
onlydetails
not important!
Strategy Issues
Deciding on objectives
Realism
Suitability for
Company strengths
Competitor positions
Market structure and change
How much to spend on objectives
Cost of advertising and/or other promotion relative to gains
Most appropriate ways of achieving objectives based on
Cost
Effectiveness
Synergy
Consistency of objectives
Some Tools
Advertising
Awareness
Trial
Preference
Reminder
New uses
Distribution
Availability in
retail stores
Quality of
placement within
retail stores
Price/sales promotion
Coupons
Sales
Value
Premium
Joint ventures/co-
branding
Demonstrations
Product investment
Quality
Differentiation
Packaging
Usability convenience
Setting strategy.

Improving quality, for example, might be
achieved either by increased research and
development, the use of higher quality materials,
or by investing in new manufacturing
technology.
The most appropriate choice will depend on
factors such as cost and effectiveness, but may
also depend on risk.

Tactics and implementation.

If a decision as been made to position a product
as a premium brand through advertising, specific
ads must be developed and tested and
appropriate media and advertising schedules
should be resolved.
When implementation begins, results need to be
monitored.

Consumer adoption of new food products.

One way to spread new foods is through
massive advertising. This strategy has been
used in marketing the Hot Pockets
convenience products. Many foods also spread
as some groups of consumers imitate others
they see consuming them, and some are
encouraged to try new foods based on word-of-
mouth communication.

Consumer Adoptions of New Foods or New Food
Uses
ADOPTION BY
LIMITED GROUP
MEDIA
COVERAGE
INCREASING
ADOPTION/
ADAPTATION
PROMOTION
WORD OF MOUTH
OBSERVATION
TRIAL
TRIAL
Levels of market development.

Development efforts may center at several
different levels.
Florida orange growersmay want to promote
their food, hoping that preference will be
developed relative to other food categories
Alternatively, development efforts can focus on a
branded product (e.g., Diet Coke), a brand
(e.g., all Coca Cola branded products),


Commodities Market Development Programs
Typically regionale.g., Florida orange juice;
Idaho potatoes; Hawaiian sugar cane;
Washington Apples; Texas beef
Intention is to differentiate
Compulsory participation in advertising
programs
Development is not worthwhile for the individual
farmer
The individual farmer is assumed to benefit from
overall campaign
Level of Market Development
Levels
Commodity
Differentiation from competing commodities
Increase in demand for commodity
Corporate product category (e.g., Coca Cola
drinks, including Dasani)
Product category brande.g., Kraft American
cheese slices
Brand (product line)e.g., Kraft foods
Effects and Outcomes
SALES
Volumes
Prices
AWARENESS
PREFERENCE
USED IN
MORE
SITUATIONS
REDUCED
PRICE
SENSITIVITY
USED
MORE
FREQUENTLY
USE BY
MORE
PEOPLE
REPEAT
PURCHASES
TRIAL
Definitions
Innovation: An idea, practice, or
product perceived to be new by the
relevant individual or group.
Diffusion process: The manner in
which innovations spread through
the market.
To Adopt or Not to Adopt: How Will Consumers Answer the
Question?
Some causes of
resistance to adoption
Perceived risk--financial
and social
Self image
Effort to implement
and/or learn to use the
product
Incompatibility
Inertia/overwhelming
existing choices
Types of Innovations
Fashionstastes go
back and forth over
timee.g., food fat
content
Fadsproduct is in
for a short time and
then fades (e.g., ostrich
meat)
Trendsconsumption
of a food product either
increases or decreases
consistently over time
0
10
20
30
40
N
u
m
b
e
r

o
f

n
e
w

a
d
o
p
t
o
r
s
-2.50 -1.50 -0.50 0.50 1.50 2.50
Adoption of Innovations Over Time
Innovators
2. 5%
Laggards
(13.5%)
Early
majority
34%
Early
adoptors
(13.5%)
Late
majority
34%
Innovators and Imitators:
The Lifecycle of A Product
0
0.2
0.4
0.6
0.8
1
P
e
r
c
e
n
t

d
i
f
f
u
s
i
o
n
0 5 10 15 20 25
Time
The S-Shaped Diffusion Curve
100% adoption
or saturation
point
One Diffusion Pattern--Nicely Balanced...
Implications for Foods
Many substitutes and individual tastes
Trying new foods for variety is common
Social opportunities for trial
Food tastes tend to be learned early in life
Best opportunities for spread are with younger
consumers
Influences on the Speed of Diffusion
Risk to expected benefit ratio (relative
advantage)usually not an issue for
foods
Observabilityis the product
consumed in public
Product pricingscarce foods are
rationed through cost
Trialabilityusually easy for foods
Switching difficulties and learning
requirements/ ease of usenot a
problem for foods eaten out but may
be for foods to be produced at home
Pioneering Advantage
Consumer expectations are usually shaped
by the first encountered brand
Satisfying and awareness by consumers
Order of entry vs. pioneering advantage
Positioning of existing pioneer vs. strategy
of first entry
Bargaining Power
Impact
Price
Conditions
Returns
Time of payment
Interest or finance
charges
Quality or other
adjustments
Transportation or other
services

Sources
Size, number, and
concentration of firms
Supply control
Unequal information
Diversification (?)
Product differentiation
Control of resources
Financial resources
Ratio of fixed to variable
costs
Marketing Orders and Agreements
Mandates intended to stabilize markets
Types of issues
Grades, size
Packaging
Market allocation (quotas)
Minimum prices
Contributions to research
Advertising (market development)
Market Information
Some issues
Crop forecasts
Demand forecastsquantity
and prices
Government information
programs
Problems
Price specification
(comparability of location,
time, and other factors)
Net vs. gross prices
(allowances and discounts)
Cost vs. accuracy of
information
Changing market orientation
and scope of market
(proportion of buyers and
sellers involved in open
markets)
Voluntary cooperation