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Understanding Agriculture Input
Market
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Classification of Agricultural Inputs
Characteristics of Demand for Inputs
Market Mix for Agriculture Inputs vis-àvis consumer and industrial goods
Framework for Marketing Environment
Classification of Agricultural Inputs
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Based on their economic contribution or use
- Production increasing
- Production saving
- Production facilitating
Based on their economic life
- only for one production period
- over several production period
Classification of Agricultural Inputs
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Based on their economic nature
- land saving inputs
- labor saving inputs
Based on skill to use
- simple to use
- require new skills and methods
Classification of Agricultural Inputs
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Based on technical product features
- High differentiated inputs
- Low differentiated inputs
Characteristics of Demand for Inputs
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Derived demand
- Farmers do not use the inputs per se but what they
can do to their crops.
Complementary demand
- inputs are demanded not individually but as a
package
Dependent demand
- depends upon weather, nature and health of the
crop, subsidies, loans
Dynamic nature
- change in cropping pattern, change in availability of
irrigation water
Characteristics of Demand for Inputs
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Willing to experiment
- depends upon risk bearing ability
Seeing is believing attitude
Role of opinion leaders
Value for money seeking buyers
- calculate cost and benefits of using
the inputs
Market Mix for Agriculture Inputs vis-à-vis
consumer and industrial goods
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Marketing Mix – components
- Price
- Product
- Promotion
- Place (distribution)
Market Mix for Agriculture Inputs vis-à-vis
consumer and industrial goods
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Price
- Agricultural inputs and industrial products
share similar response patterns
- Users of these two products tend to be
more quality conscious than price conscious
- Response to the consumer goods is likely to
be influenced by the price factor
Market Mix for Agriculture Inputs vis-à-vis
consumer and industrial goods
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Product
- Incase of agricultural inputs and
industrial good, consumers are more
interested to know the technical details
or the performance parameters
- importance of product knowledge and
advisory services
Market Mix for Agriculture Inputs vis-à-vis
consumer and industrial goods
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Promotion
- agribusiness consumers share similarities with the
consumer goods users
- in both the cases, the number of prospects to be
reached is large, diverse and spread across different
regions.
- Both the product groups require market
segmentation
- Prospects of the industrial products are relatively
small in numbers, uniform in their requirements, and
generally concentrated in cluster of region.
Market Mix for Agriculture Inputs vis-à-vis
consumer and industrial goods
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Place (distribution)
- levels of channel and the network intensity required
for consumer goods and agricultural inputs are
relatively higher than that required for industrial
products.
- Role of channel as a dispenser in consumer goods
and agricultural inputs
- The channel does not have a pulling function
- Pulling is done by advertisement, demonstrations,
personal contacts and other extension means
Market Mix for Agriculture Inputs vis-à-vis
consumer and industrial goods
- In case of industrial products, channel
is small
- channel has to act as an advisor and
not merely a dispenser
Market Mix for Agriculture Inputs vis-à-vis
consumer and industrial goods
Component
Consumer goods Agricultural
inputs
Industrial
products
Product
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Price
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Promotion
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Place
(Distribution)
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Marketing Environment for
Agriculture Inputs
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Understanding farmers’ Perception about
Inputs
- Why the farmers want to use Inputs?
(usefulness)
How to create effective demand for
Agriculture Inputs?
Converting Effective Demand into
consumption of Inputs.
Marketing Environment for
Agriculture Inputs
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Effective Demand
- Desire to use the inputs
- Willingness to pay for inputs
- Capacity to pay for inputs
Marketing Environment for
Agriculture Inputs
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Usefulness of inputs to farmers
- quantity of production raised
- quantity of production saved
- improved quality
- reduce the uncertainty or risk of obtaining
good production
“Agronomic potential” of Agricultural Inputs
Marketing Environment for
Agriculture Inputs
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Increase the Agronomic Potential of
Agriculture Input
- Research & Development
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It is long term process
It requires large investment initially
Basically Technological Intervention
Marketing Environment for
Agriculture Inputs
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Agronomic potential of a input depends
on use of other inputs
- agricultural inputs are derived demand
products
- Inputs are purchased as package, not
individually
Marketing Environment for
Agriculture Inputs
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Does the Agronomic Potential of Input
is sufficient to create Desire among the
farmers to use Input?
- No or Yes
- Why?
Marketing Environment for
Agriculture Inputs
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Inputs are typically expensive units.
Two important considerations:
- Value of additional output gained by using
the input (x1)
- Value of output lost by not using the input
(x2)
Unless the value of x1 or x2 is substantial
and sufficiently more than the cost of input –
farmer will not use the input
“Agro-economic Potential” of Input
Marketing Environment for
Agriculture Inputs
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Agro-economic potential of Input is
affected by
Price of output
Cost of Input
Non-monetary inputs (techniques)
Marketing Environment for
Agriculture Inputs
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There is sufficient lag between the point
when input is used and the point when
output is realized
Price of output is expected price and it
may be less or more than the actual
price realization
- It may differentiate the actual
realization of Agro-economic
potential of Agriculture Input
Marketing Environment for
Agriculture Inputs
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Cost of Input
- Price of Input
- Transaction cost of obtaining the Input
-Due to varying level of transaction cost, cost
of Input may vary to different groups of
farmers
Marketing Environment for
Agriculture Inputs
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To create effective demand:
- Extension services
- Credit
- Entrepreneurship
(risk management)
Marketing Environment for
Agriculture Inputs
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When effective demand has been
created, actual consumption will depend
on:
- Adequate production
- Effective Distribution
Marketing Environment for
Agriculture Inputs
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Effective Distribution
- Catering to a large number of small farmers
- Scattered over a large area
- How to minimize the cost?
- Institutional Intervention in the form of Group
Approach
FRAMEWORK FOR MARKET ENVIRONMENT OF AG. INPUTS
Research & Development
Agronomic Potential
Output Price
Input Cost
Agro-Economic Potential
Extension Services
Infrastructure
Transport Services
Credit
Entrepreneurship
Effective Demand
Adequate Production
Effective Distribution
Actual Consumption
Marketing Environment for
Agriculture Inputs
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Agriculture input supply should not be
seen in isolation
Integrated approach with input,
production and marketing
Recent initiatives by input companies
are in similar lines