It is exciting and diverse. It is changing quickly. It relies on the weather, uses an incredible

Figure 8. Mass market strategy



Figure 9. Market segmentation strategy

The number of ways that a market can be segmented is limited only by the agribusiness marketer’s imagination. (To prove this statement, just think about the variety of restaurants and the market segments they aim to serve that are present in any mid-size city.) A few particular ways to segment a market are discussed here. A geographic segmentation may be appropriate for some markets. Food tastes and preferences clearly vary geographically and certain products have much more appeal in some regions than others.

Demographic segmentation is used in many markets. Age, income, size of household, education, number of children, type of employment, and so on can all be important market segmentation variables. Such demographic segments are heavily used in the food industry. The marketing plan developed to promote hot dog consumption among children under the age of 16 might look far different than the marketing activities developed to reach the 22–29-year-old consumer.
For the farm market, segmenting customers by operating characteristics is typically useful. This may involve such characteristics as type of operation (crop versus livestock, for example), size of operation, production technology used (no-till versus conventional till; heavy precision technology users versus non-precision technology users, etc.), and form of ownership (owner/operator versus cash rent versus crop share). Demographic variables like those mentioned above can be used in concert with the characteristics of the farm operation to further define the market segments.
In other instances, psychographic or behavioral market segments may be developed. Here, the focus is on more than physical characteristics. The marketer may be interested in wine buyers who value image and prestige in their purchase. Or, the farm lender may be interested in those buyers who value a relationship with their lender, as compared to those who don’t. Such segmentation approaches are relatively sophisticated, and are heavily used by branded food companies to market products aimed at the “healthy lifestyle” segment (Healthy Choice), the “gourmet” segment (Opus One wine), or the “young and rebellious” segment (Red Bull), among many others. Such segmentation approaches require a variety of demographic, behavioral, and psychological data to construct all tied back to some common set of needs the group is seeking in the product or service.
To illustrate the segmentation concept, consider a feed manufacturer. This firm will recognize dairy, beef, pork, and poultry as clearly different market segments with different needs. Further, dairy farmers’ operations may be classified as small, medium, or large, according to herd size. The needs (and therefore the marketing strategy employed) of a small, part-time farmer who owns his property and milks 50 cows will be far different than a large commercial dairy with 10,000 cows using the latest computerized feeding and milking systems. With a thorough understanding of the needs of the target segment in hand, special promotional programs and pricing strategies can be developed. Marketing pro- grams for such targeted market segments are thought to be far more productive than mass marketing efforts aimed at the total market.
A key point here is that there are clearly definable differences between market segments. If such differences do not exist, a mass market strategy works just fine. Typically, designing marketing plans for different segments involves a substantial commitment of firm resources. So, careful thought must go into the market segmentation employed. Well-defined market segments will pass the following test:
1. Measurable: Can the market segment be identified and evaluated? In some cases, market segmentation can be developed easily using readily available demographic data. In other cases, it may be very difficult to identify how many and which farmers want to buy based on a relationship with the supplier as opposed to those who simply want to buy on price.
2. Substantive: Is the market segment large enough to serve? Some segments may be well defined and measurable, but be simply too small to justify the required resource commitment.
3. Actionable: Can the firm effectively serve the segment? In some cases, the firm may identify a large, well-defined segment, but simply not have the people, products, or services needed to effectively serve the segment.
In addition to these questions, agribusiness firms look at several other factors as they make their choice of target market. The level of competition is important. A segment may pass the three-question test posed above, but still not be an appealing segment if every competitor in the marketplace is aggressively pursuing the segment. Growth is another key issue. A segment may be too small to be worth the firms’ effort now, but if it has substantial growth potential, it may make sense to stake a claim on the segment early and then grow sales as the segment grows. Finally, the firm has to be focused on the profitability of serving any given segment in the end, can the firm deliver value to the segment at a profit?
Every agribusiness firm must decide on its optimal level of emphasis on a given segment, since limited resources must be directed to the area where they will be most productive. Decisions about the segments that represent the most efficient use of resources rest on data about the type of product, competitive behavior, size of the company, and other factors.