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BY MAUD ROUCAN AND WHITNEY PEAKE October 2006 As a mid-size agribusiness, the allocation of your marketing dollars compared to the competition likely weighs heavily on your mind. Marketing is often one of the major differentiating factors between your product and the products of your competitors. A survey conducted by AgriMarketing magazine (see page 38) provides some insight as to what mid-size agribusinesses are spending on marketing tools. The information provided will give you a better idea as to where your company stands compared to competitors in terms of marketing budget allocation. The survey was sent to 146 of the largest agribusinesses serving U.S. agricultural producers in June 2006. It requested information related to the firms' marketing tool investments. A total of 75 surveys were usable and analyzed. The majority of firms returning surveys were in the mid-size agribusiness range, with annual sales between $10 million and $999 million. They are the focus of this article. CAPITAL PRODUCETS VS EXPENDIBLE Many different industries were represented within the survey and could have been grouped in several ways for comparison. We chose to split the group into capital and expendable product industries, and since no significant difference exists between the two categories in terms of sales, we can readily compare them. Capital product industries (15 firms) provide capital assets such as tractors, buildings, and livestock equipment, while expendable product industries (29 firms) provide current-use goods and services such as seed, crop protection chemicals, animal health products, and services. Results reveal that the capital product firms spend on average $794,000 on mass media marketing, while the average firm in the expendable product group spends nearly 3.5 times that amount, roughly $2.75 million. The expendable firms once again outspend the capital firms in other promotional tools, with average annual expenditures of approximately $3.4 million and $1.4 million, respectively. Marketing expenditure totals indicate that the average expendable product firm spends nearly three times as much as the average firm in the capital products industry. The chart above illustrates that firms in both industries spend more on print than any other mass media. We can also see that the expendable product firms allocate more of their marketing budget to radio and television, but less to Web site advertising than do the capital product industries. It is important to note that mass media Web site advertising differs from company Web sites, which appears with the other promotional tools. Web site advertising refers to general online advertising, while company Web sites refer to the Websites developed and maintained by the firm. Both capital and expendable product firms allocate similar budget amounts to direct marketing, collateral materials, company Web sites, and gifts. The following chart also shows that capital product firms allocate a much larger portion of their budget to shows/fairs, while expendable product companies tend to allocate a greater amount of their budget to public relations and market research. KEY TAKEAWAY Mid-size agribusiness firms in expendable product industries, on average, spend more on marketing efforts than do firms selling capital products. Regardless of industry category, print advertising makes up the largest marketing expenditure outlay. In addition, both industries allocate more of their marketing budget to the other promotional tools than for mass media tools. This article serves as a description of the expenditures on marketing tools currently being made by mid-size agribusinesses. It may be useful to benchmark your firm against these numbers as a first step towards tailoring a marketing strategy that targets your audience the best, promotes your products and services most effectively, and gives you the most bang for your buck. AM Maud Roucan (mroucan@purdue.edu) is a research associate for the Center for Food and Agricultural Business in the Department of Agricultural Economics at Purdue University and Whitney Peake (wnoliver@purdue.edu) is a Ph.D. student in the Department of Agricultural Economics at Purdue University. Tweet |
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