Agroindustrial project analysi

THE MARKETING FACTOR 37decisionmaking is always done under uncertainty. Market researchis intended to reduce this uncertainty at a reasonable cost.For example, the manager of a vegetable-oil plant was consideringswitching from a plastic can to a polyethylene bag for a shorteningproduct because of the cost savings, estimated at $0.01 acontainer or $10,000 a year for a million-unit output. The marketingdirector proposed spending $5,000 for a consumer survey anda panel to test the new packaging concept. The manager was notenthusiastic about spending one-half of a year's savings on marketresearch, but he was uncertain about how the new packaging wouldaffect sales. He suspected that there was only a 50 percent chancethat sales would fall by more than 10 percent, but the marketingdirector pointed out that, with the profit margin of $0.10 a unit, a10 percent drop from 100,000 units would negate the cost savings.He thought that market data would provide the manager withinformation by which the manager could estimate the effect of thechange in packaging. The research was conducted and indicated thatone-third of the consumers would not buy the product in the newpackage because, when they used all the shortening, they recycledthe plastic containers to other uses. As a result, the manager estimated,with 90 percent certainty, that sales would drop by 25percent and generate a loss of $22,500 (1,000,000 units X 25 percentsales loss X 90 percent certainty X $0.10 margin), whichwould negate the cost savings of the new packaging and result ina net loss.Salient points for project analysisA project analyst should consider the following questions whenreviewing the consumer and marketing dimensions of an agroindustrialproject.Who are the potential consumers?• Socioeconomic, cultural, demographic characteristics?* Market segments?* Positioning options for the product?Why would they buy the product?* Physiological, sociological, psychological needs?* Expressed reasons for purchasing? sustenance? sensory appeal?status? convenience? necessity?