The price of transporting agricultural goods from a producer to a customer as well as the quantity of services provided is known as Cost of Agricultural Marketing. The cost of marketing is closely related to its efficiency. The marketing efficiency will be lower the more money spent in relation to the services received, and vice versa.

Factors Influencing Agricultural Marketing Costs

perishability of the product:

One of the main factors influencing marketing expenses is the product’s perishability. The level of perishability directly affects marketing costs. The increase in marketing costs is directly correlated with perishability.

The level of the loss during storage and transportation:

If there is a major loss in the quantity and quality of produce as a result of rotting, shrinking, or wastage during storage or transportation, the cost of marketing will go up.

Volume of the Product Handled:

A larger volume of business or product turnover is associated with a lower marketing cost per unit.

Consistency in Product Supply:

If the product is supplied consistently throughout the year, as opposed to irregularly, the cost of marketing per unit will be reduced to sporadically or only during a few months.

Amount of Packaging:

The expense of marketing goods that need packaging is higher.

Grading Adoption:

Products for which grading is readily adopted have lower marketing costs than those for which it is not.

Need for Demand Creation:

The overall cost of marketing will be high if a significant amount of advertising is required to generate demand among potential customers.

Product Bulkness:

Bulky products have higher marketing costs than non-bulky ones.

Requirement for Retailing:

A product’s overall marketing expenses increase with its retailing necessity;

Storage Need:

Products that are produced and sold immediately without the need for storage have lower marketing expenses than products that do, which drives up the cost of advertising.

Risk Extent:

A product’s risk (from either business failure, price adjustments, buyer monopsony, or the use of unfair techniques) increases with increased marketing expenditure.

Services Dealers Provide to Customers:

Marketing costs increase with the number of services a dealer offers to a consumer (e.g., home delivery, credit alternatives for purchases, product return policies, and the possibility for customers to enjoy their children’s amusement).

Why are the marketing expenses of agricultural commodities higher?

Selling agricultural commodities usually entails greater costs than creating items. These elements are the root cause of this phenomenon:

Dispersed Farms with Low Production Per Farm:

There are countless farmers producing a small quantity of agricultural products. There are numerous distinct producers. Therefore, the cost of assembly is high.

Bulkiness of Agricultural Products:

Compared to their value, most agricultural products are bulky. The cost of transportation increases as a result.

Difficult Grading:

A difficult undertaking is grading agricultural products. The requirement to physically check each lot during the acquisition and sale process increases the cost of marketing. Because product quality varies, it might be challenging to market or buy a product through a sample or contract because every batch needs to be examined.

Unreliable Supply:

Seasonality affects the production of agricultural products. Their market supply thus fluctuates throughout the year. During gluts, prices drop and marketing spend is distributed according to value demand for Processing and Storage: Because agricultural production is seasonal, there is a greater demand for agricultural products to be processed and stored. Processing is required since not all agricultural products are used in their unprocessed state. Processing and storage add to the expense of marketing. Agricultural items that are stored also suffer substantial losses because of their perishability.

How to Lower Agricultural Marketing Costs

Cutting marketing expenses can be done in several ways. There isn’t a single element that can significantly lower these expenses. The cost of marketing could, however, be significantly reduced by several elements working together. Several strategies to lower farm product marketing expenses include:

(a) Boost Marketing Effectiveness

collectively. Several tactics to reduce the costs associated with selling farm products include:

(i) Increase Marketing Efficiency

Several exchanges between producers and customers can increase the effectiveness of marketing. There are a number of important areas where increased efficacy could result in lower marketing costs, including:

(ii) Increasing the Volume of Business:

By handling more business at once, one can effectively reduce marketing costs and increase marketing efficiency.

(iii) Improved Handling Techniques:

Prepackaging perishables, utilizing rapid transportation, building cold storage facilities, and employing workers sparingly are a few strategies to increase output and reduce costs.

iv) Managerial Control:

Using tried-and-true management techniques boosts efficiency. By regularly evaluating costs and returns, marketing effectiveness may be improved at all levels.

(v) Modifications to Marketing Techniques and Technology:

By selling food services through supermarkets, selling orange juice instead of oranges, and integrating marketing functions, among other modifications to marketing techniques and technology, marketing effectiveness is increased and costs are reduced.

(b) Reduced Marketing Earnings

In the marketplace, agricultural commodities often produce the largest profits because of the inherent risk at different stages of marketing. There are multiple strategies to reduce the risk:

a) Putting hedging strategies into practice, improving market news services, standards, and grading; and

b) Increasing market rivalry for agriculture products

In general, when marketing margins and expenses decline, both the producer and the consumer benefit. Rarely, everyone gains equally—that is, the producers’ price stays the same—and both producers and consumers. Aside from these circumstances, higher agriculture marketing plan efficiency benefits both sides. The degree to which these advantages are distributed depends on the characteristics of the product’s supply and demand.