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    Ramesh Dhungana
    The document discusses marketing efficiency and costs. It defines marketing efficiency as how effectively a market structure performs its function. Marketing efficiency has three components - how effectively services are performed, the cost of providing services, and the effect of costs on production and consumption. The document also discusses factors that affect marketing costs such as perishability, bulkiness, need for storage and processing, and number of middlemen involved. It provides reasons why agricultural marketing costs are generally higher than other industries.

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    Untitled

    Uploaded by

    Ramesh Dhungana
    16 views25 pages
    The document discusses marketing efficiency and costs. It defines marketing efficiency as how effectively a market structure performs its function. Marketing efficiency has three components - how effectively services are performed, the cost of providing services, and the effect of costs on production and consumption. The document also discusses factors that affect marketing costs such as perishability, bulkiness, need for storage and processing, and number of middlemen involved. It provides reasons why agricultural marketing costs are generally higher than other industries.

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    The document discusses marketing efficiency and costs. It defines marketing efficiency as how effectively a market structure performs its function. Marketing efficiency has three components - how effectively services are performed, the cost of providing services, and the effect of costs on production and consumption. The document also discusses factors that affect marketing costs such as perishability, bulkiness, need for storage and processing, and number of middlemen involved. It provides reasons why agricultural marketing costs are generally higher than other industries.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    16 views25 pages

    Untitled

    Uploaded by

    Ramesh Dhungana
    The document discusses marketing efficiency and costs. It defines marketing efficiency as how effectively a market structure performs its function. Marketing efficiency has three components - how effectively services are performed, the cost of providing services, and the effect of costs on production and consumption. The document also discusses factors that affect marketing costs such as perishability, bulkiness, need for storage and processing, and number of middlemen involved. It provides reasons why agricultural marketing costs are generally higher than other industries.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 25

    Marketing Efficiency

     The term marketing efficiency can be broadly defined


    as the effectiveness or competence with which a
    market structure performs its designated function.
     Clark - ME has been defined as having the following 3
    components –
     1. The effectiveness with which a marketing service is
    performed.
     2. The cost at which the service is provided and
     3. The effect of this cost and the method of performing
    the service on production and consumption.
    Efficient Marketing
     Movement of goods from producers to consumers at
    the lowest possible cost, consistent with the provision
    of the services desired by the consumer, may be
    termed as EM.
     Change that reduces costs of accomplishing a function
    without reducing consumer satisfaction indicates an
    improvement in efficiency.
     Change with reduced costs that reduces consumer
    satisfaction need not indicate increase in marketing
    efficiency.
    Marketing Costs, Margin & Price
    spread
     Marketing functionaries move the commodities from
    the producers to consumers. Every function involves
    cost.
     In the marketing of agricultural commodities, the
    difference between the price paid by the consumer and
    the price received by the producer is known as price
    spread. This is also termed as gross marketing margin.
     Gross margin includes –
     1. The cost involved in moving the product from the
    point of production to the point of consumption and
     2. Profits of the various marketing functionaries
    involved in moving the produce from the point of
    production to consumer.
    Factors affecting the cost of
    marketing
     1. Perishability of the product
     2. Extent of loss in storage and transportation
     3. Volume of product handled
     4. Regularity in the supply of the product
     5. Extent of packaging
     6. Extent of adoption of grading
     7. Necessity or demand creation
     8. Bulkiness of the product
     9. Need for retailing
     10. Need for storage
     11. Extent of risk
     12. Facilities extended by the dealers to the consumers

     1. Perishability of the product – Cost is directly related
    to the degree of perishability. The higher the degree of
    perishability the greater the cost of marketing and vice
    – versa.
     2. Extent of loss in storage and transportation – If the
    loss in the quality and quantity of product arising
    during the period of storage or in course of
    transportation the cost will go up.
     3. Volume of product handled – Larger the volume of
    product handled the less will be the unit cost of
    marketing.

     4. Regularity in the supply of the product – If the


    product is supplied through out the year the cost will
    be less.
     5. Extent of packaging – Cost is higher to the
    commodities need packaging.

     6. Extent of adoption of grading – Cost of marketing of


    ungraded product is higher than grading products.

     7. Necessity or demand creation – If advertisement is


    needed to create demand the cost will be higher.
     8. Bulkiness of the product – Cost of marketing is
    higher for bulky products than that of products which
    are not bulky.

     9. Need for retailing – Greater the need for retailing


    higher will be the cost of marketing.

     10. Need for storage – Commodities sold immediately


    without any storage attract lower marketing cost.
     11. Extent of risk – Greater the risk the higher is the
    cost of marketing.

     12. Facilities extended by the dealers to the consumers-


    Greater the facilities extended by the dealers to the
    consumers ( home delivery facility, supply of goods on
    credit, return facility for the product), the higher the
    cost of marketing.
    Reasons for higher marketing costs
    of farm products
     1. Widely Dispersed Farms and Small Output per
    Farm
     2. Bulkiness of Agricultural products
     3. Difficult in grading
     4. Irregular Supply
     5. Need for storage and processing
     6. Large number of middlemen
     7. Risk involved
    Reasons for higher marketing costs
    of farm products
     1. Widely Dispersed Farms and Small Output per
    Farm: The cost of assembling is high as there are
    innumerable producers of agricultural products and
    each producing small quantity.
     2. Bulkiness of Agricultural products – Most of the
    agri products are bulky in relation to their value which
    results higher cost of handling, storage and
    transportation.
     3. Difficult in grading – The sale or purchase by
    sample is not easy because an inspection of each lot of
    the product is required by reason of variation in their
    quality.
     4. Irregular Supply – Seasonal production – glut –
    prices go down and the cost of marketing functions
    goes up.
     5. Need for storage and processing – Greater need
    of storage because of seasonality of production. Losses
    in storage are high because of highly perishable.
     6. Large number of middlemen – Larger the
    number of middlemen the higher the marketing costs.
     No restriction on their entry in the trade.
     Licensing, high risk and high capital make entry
    difficult in non-farm goods.
     7. Risk involved –Risk of price fluctuation is high in
    agri products. Higher risk leads to higher risk
    premium which adds to marketing cost.
    How to reduce marketing costs
     There are various ways of reducing marketing costs.
     1. Increase the efficiency of marketing – The
    following are the areas in which efficiency may result
    in reduction in marketing costs –
     A. Increasing the volume of business – By
    increasing the quantity to be handled at a time, group
    marketing by farmers can help in this regard.
     B. Improved handling methods – Use of fast
    transportation means, development of cold storages,
    efficient use of labour, pre-packaging of perishable
    goods.
     C. Managerial control – Constant monitoring of
    costs and returns at each stage of marketing may be
    adopted.

     D. Change in marketing practices and technology


    – Such as sale of orange juice instead of orange,
    retailing food services through super markets.
     2. Reduce profits in marketing –
     Profits in the marketing of agri commodities are often
    the largest because of the risk at various stages of
    marketing.
     The risk may be reduced by –
     A. Improvement in market news service, grading.
     B. Increasing the competition in the marketing of farm
    products.
    Marketing cost in India and other
    countries
     Lower than in developed countries.
     Share of farmer in the price paid by consumer is
    higher.

     Unprocessed in India – Ready to eat form in developed


    countries.
     Labour is relatively cheap.

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