"Get started marketing well" e-Book - Progressive Dairyman Magazine

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"Get started marketing well" e-Book - Progressive Dairyman Magazine

GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risksivproducers—who manage so many aspects of their businesses sowell—to allow themselves to be tossed about by the markets. You cantake control of your marketing.Beyond empowerment, there’s an even more compelling reason to getstarted marketing. Marketing is becoming a management imperative tosecure financing.The markets over the past year have handed many producersa tough lesson. We want to help you learn from it by outlining howto get started marketing. The approach we recommend and outlinedin this e-book is the same one that we have used to position our clientsto manage both market opportunities and risks for the past 25 years,including 2009. We hope you find it helpful to your marketing and thatyou can apply the concepts to your operation.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risksvContentsPart One: What the Market Has Taught Us.• The boom-bust cycle.• So what’s the lesson from 2009?• You endured famine. What’s next?• The difference marketing can make.• Volatility: It can mean opportunity.Part Two: What Does Strategic MarketingLook Like?Part Three: Avoid these Pitfalls and the Pitin Your Stomach.Part Four: Become an Expert or Hire One.Then Get Started.• Going it alone? Know your strengthsand limitations.• Hiring an expert.• Our approach.• Market Scenario Planning sm• What does it mean to be strategically positioned?• Sounds great. Now, how do you do it?• Five key principles for marketing done well.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 1Part One: What the Market Has Taught Us.It’s not about what happens. It’s about how you react to what happens.Philosopher George Santayana is credited with having said, “Thosewho cannot remember the past are condemned to repeat it.” So let’squickly revisit the economics of 2009 and the years leading up to it,despite what we know are painful memories. What we saw were marketsimpacted by a multitude of factors, at times causing price moves thatbelied the fundamentals. Oceania suffered a major two-year drought,the global economy went into a severe recession, demand for mostcommodities dropped sharply, and institutional dollars flowed in andout of commodity markets. These were among the major factors thatmoved prices.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 2Let’s look at the effect of institutional dollars, just as an example. At onepoint, we saw those dollars flow back into the market, driving up price,even though we had an abundant milk supply. Institutions can move themarket despite what the fundamentals may indicate. They can exaggeratefundamentals, creating a perception of problems when there are none, orhide simmering problems.Back on the farm, we saw increasing milk supplies due to investmentsand expansions in the years just prior to 2008. When the sharp drop-off indemand came, cow numbers dropped dramatically.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 3Capital investments by dairy producers led to increased milk supplies just prior to the ensuing drop-offin demand. This triggered a sharp drop in cow numbers.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 4Unfortunately for dairy producers, there was a lag between thedrop-off of milk prices and the drop in feed prices. Dairy producers wholocked in feed prices at high levels only to experience the milk pricedrops were the worst hit. Maybe that was your experience.Fortunately for dairy producers (and unfortunately for grainproducers), feed input costs have come down almost as sharply as theywent up. See chart on next page.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 5Historical Milk-Feed Price Ratio (Monthly, Jan. 1985-Present)The drop in feed costs helped. However, as of November 2009, the benchmark milk-to-feed priceratio of 3 to 1 was at an all-time low, roughly 1.5 to 1.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 6The boom-bust cycle.The long, slow build-up in commodity prices over time was payingproducers to invest in their businesses. Supply kept building. Add insome “irrational exuberance” fueled by authors like Jim Rogers, whotouted commodity investments, and we were in the midst of boomingcommodity prices. Suddenly we had abundant supplies, and the higherprices were doing their job of rationing demand. As a result, the sell-offin the markets came fast.Here’s what’s tough to swallow: Without question, the milk marketoffered opportunity before plunging. Producers used that opportunity toinvest in their businesses and add cows. And unfortunately, relatively fewproducers took advantage of that opportunity to lock in the higher milkprices. Why? Some thought the price boom would continue.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 7Some locked in prices with forward contracts too soon, only to watchthe price continue to climb, with no re-ownership strategy in place torecapture opportunity. (If this was your experience, you may have souredon marketing altogether. Many did.)In either case, significant opportunity was left on the table.So what’s the lesson from 2009?Our industry is subject to cycles – boom and bust cycles. The wayto manage through those cycles is to capture every opportunity in thegood years so you are prepared to endure the bad years. That’s actuallyan ancient management principle. You may recall the biblical characterJoseph, who directed Egyptians to store up grain during the seven goodyears so that when seven years of famine came, the nation was prepared.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 8The same principle of feast and famine applies to the dairy industry,as shown here.The percent change in milk price indicates how volatile it’s been lately. We’re going to continueseeing feast and famine in the form of high and low milk prices.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 9You endured famine. What’s next?We have already seen the milk price rebound. See chart on nextpage. As we’ve seen in the past, the industry will ramp back up as pricesrecover. That will set the stage to kill prices again.In the long-term, embracing marketing as an integral part of yourbusiness will help you prepare for volatility. You’ve probably conqueredevery other management challenge. Marketing is your last managementfrontier and the key to running an agile * business when the severe priceswings come.*The concept of the “agile dairy producer” comes from Dairy Profit Weekly editor Dave Natzke. You can readmore on this subject in fall/winter 2009 issues of DairyBusiness Communications publications.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 10U.S. Milk Cows on Farm For All 50 StatesHigh heifer inventories and a recovery in milk prices have led to a return to growth in totalcow numbers.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 11Marketing is quickly becoming amanagement imperative to secure financing.The global credit crunch has changed financingrequirements and put significant pressure onlenders. Producers who have strong balancesheets as a result of using sound marketingstrategies will increasingly be classified asA+ lending candidates by lenders.As a result, producers will learn to takecare of their lenders as well as their cows. Youwill need to develop an approach to marketingthat achieves your own goals and earns theconfidence of your lender. Yet another reason tostart designing your approach now.“Dairies will struggleunder tight lendingrequirements longerthan they will sufferfrom low milk prices.”-Scott Stewart, quoted in“Is Your Dairy Business Agile,”Eastern DairyBusiness,October 2009


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 12The difference marketing can make.Within the last few years, the market has offered opportunitiesto sell record-high milk and purchase low-priced feed. Despite massunprofitability throughout the industry, we know and worked withproducers who took advantage of forward-pricing feed when it was lowand pricing milk when it was at attractive levels. They actually remainedin the black every month in 2009 and improved their financial position.We know that sounds shocking, yet they did it.Lenders who work with many of our consulting clients tell us that thoseclients are in a better cash flow position than most of their other customers.As a result, and as you can imagine, these lenders are pleased and relievedthat they do not have to be concerned about their business viability.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 14What is meant by “structured” and “strategic”? Well, in the dairyherd, you structure a preventive health program and you’re vigilant aboutit every day. The same principle applies to marketing. Every day youneed to be prepared and vigilant.Capitalizing on and maximizing opportunities differs fromlocking in a small profit margin as soon as the market allows.Doing so is equivalent to removing all risk, which in turn removes allopportunity. Farming by nature is a risky business. If you try to takeall the risk out, you take all the profit opportunity out as well. The bestthing you can do is manage the risk and position yourself to capitalize onopportunities the market presents.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 15Of one thing we are fairly confident: Volatility will continue.Producers who are not positioned to take action will miss market movesand leave opportunity on the table.Every producer wants to be better than average when it comes toproduction. Producers must also strive to be better than average with theirmarketing.The average price the market offers is not good enough for thelong haul. The best producers will take every penny they can get fromthe market so that when prices drop below profitable levels, they have astrong financial position to help cushion the shock.You can position yourself to still be here in the years ahead byapplying the business practice of scenario planning, a strategic approachto marketing explained in the next section.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 16Part Two: What Does Strategic MarketingLook Like?Marketing has been done by grain farmers for years. It has alsofrustrated grain farmers for years, a sentiment for which there is plentyof proof. We’ve seen it in our own surveys: Of producers responding,91 percent said they find marketing stressful. Dairy producers, relativelynew to commodity marketing, have an opportunity to avoid thefrustrations of their grain counterparts.In our experience, many grain producers have struggled withmarketing because they have based their marketing decisions onpredictions of what the market will do. They gather a variety of facts andopinions. They wait to make their marketing decisions until all the facts


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 17are in. Unfortunately, in farm marketing, by the time you have all theinformation you need to confidently make a decision, the market moveis over.There is a saying: a known fundamental is a useless fundamental.It means the facts you have are the same ones everyone else has and,thus, they are factored into market prices. There’s no opportunity inthis knowledge.We believe marketing is about the strategy decisions you makeand implement with structure and discipline, not about what youknow. That’s why we take a completely different approach to commoditymarketing. If farmers have been frustrated with marketing for years, andprice predictions are so inaccurate, isn’t it time for a change in approach?


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 19This describes Market Scenario Planning, sm * a practice based onmilitary scenario planning concepts that were first developed by theRomans. Such planning helped the Roman armies prepare for theuncertainties of war.In the late 1960s, French oil executive Pierre Wack applied scenarioplanning to business. It worked so well for Royal Dutch/Shell, thecompany effectively dealt with the oil shock of late 1973. The businessworld has embraced scenario planning ever since.Market Scenario Planning smis the application of scenario planningprinciples to marketing. We lay out strategies, in advance, in anunemotional way. We attempt to imagine all the possible scenarios andcustomize our thinking to each individual. It is our approach to help youdeal with uncertainties.*Market Scenario Planning sm is a signature approach to commodity marketing developed by Stewart-Peterson Inc.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 20Here’s a simplified view of how you would approach marketingthrough scenario planning:“If the market goes up a little, I’ll do A.”“If the market goes up a lot, I’ll do B.”“If the market goes down a little, I’ll do C.”“If the market goes down a lot, I’ll do D.”“If the market goes up a little then turns down a lot, I’ll do E.”And so on and so forth. A strategic approach includes dynamic,detailed plans of action for all scenarios. All this strategizing is done inadvance, in an unemotional way, so you are prepared to act as variousmarket scenarios unfold.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 21Ask yourself: Would you rather guess where prices might go or beprepared for whatever the market might do?What does it mean to be strategically positioned?Good marketing is all about consistency and maximizing theopportunities the market gives you. You can count yourself amongsuccessful marketers once you’ve built a solid average price for the milkproduced in your dairy operation. It’s not about picking the tops andbottoms. It’s about protecting your bottom line from risk of low pricesand positioning yourself to capitalize on higher prices.Prices offered by the market over the years tend to average nearthe average producer’s breakeven. That’s why it’s so important toconsistently take out of the market as much return as you possibly can


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 22within a reasonable risk parameter.Your marketing objective should be to maximize the separationbetween the average price you receive for your milk and the final marketprice in a bear market, and to minimize the separation between theaverage price you receive and the final market price in a bull market.For an easier understanding of this concept, we’ve included a visualrepresentation on the next page to answer the question: “What doesgreat marketing look like?” You can see and hear firsthand a completeexplanation of this concept in our Get Started Marketing Well webinars.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 23


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 24Sounds great. Now, how do you do it?We’ve just given you a concept. Now you have to execute it. Thisis the most difficult part of managing milk price opportunity and risk.Why? Because you have to devote time to developing each scenarioand strategy, and to choosing the right tools and trigger points for eachscenario. Then, you have to devote time to watching the markets so thatyou can adjust and execute those strategies. And you have to do so withconsistency and discipline.Moreover, a good strategy is dynamic. Sometimes adjustments haveto be made. Mike Hogan, the director of our Market360 ® consultingservice, likens dynamic marketing to what you do as a producer everyday: “A marketing strategy is a living, breathing thing that has to becared for much like a herd is cared for. Every day we are adjustingstrategies based on any number of factors.”


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 25Execution of strategy is where so many marketers fall down. Theymake a decision to buy or sell, and when the time comes to do it, theydon’t pull the trigger. We see this a lot, and we understand it’s a difficultemotion to overcome.Dairy producer Dennis Haubenschild described his reluctance to executein a 2009 Dairy Today article, calling his former approach to marketing the“woulda, coulda, shoulda . . . sometimes I got things covered, sometimes Ididn’t.” Click here to click to article.The bottom line is, the best strategy in the world is worthless if there’sno discipline to execute.You are probably wondering how this added responsibility fitsinto the management of your operation. We’ll address that question. Butfirst, let’s summarize our key principles for strategic marketing done well.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 26Five key principles for marketing done well.When implementing milk price opportunity and risk management,you can position yourself to succeed by adhering to these principles.#1 Base your marketing decisions on strategy, not on outlook.All of the fundamentals in the world may point to higher prices, yetprices end up falling. Conversely, the fundamentals may point to lowerprices, yet prices end up rallying. The only thing that is certain in themarkets is that prices will rise and fall, and you need to be positionedand ready for both.#2 Be positioned for the unexpected. There are no “cannots”in commodity markets. Anything is possible price-wise, and an openmind is a necessity to implementing successful price opportunity andrisk management.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 27#3 Using futures and options is a necessity. Futures and options canposition you for the unexpected. They also offset activities done or notdone in the cash market.For example: If you sell your milk to the plant on a forward contract, how areyou going to manage the potential opportunities of that sale if the milk pricerallies? What if your plant won’t let you forward contract? Without knowledgeof futures and options and how each works, you will find it difficult to succeedat price opportunity and risk management.#4 Focus on building a weighted average price for your milk. Inrising markets, your average price will lag the market, but your priceshould trend with a rising market. Conversely, you want an average pricethat separates from the market price in a falling market, as shown in the


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 28graphic on page 23. Do not try to pick tops and sell your milk there. Thechance of picking a top is slim to none. The key is running different pricescenarios so that you can see the costs and/or benefits of every decisionthat you make.For example: If you sell 20% of your production at $15.00 and the milk pricegoes to $21.00, what is your average price? If your average price variestoo widely from the market price, then maybe call options or an alternativestrategy is needed.#5 Have the discipline to execute. The best price opportunity andrisk management ideas are useless if not executed. Discipline requirespulling the trigger when targets are hit and being committed to watching


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 29the market daily to know if any targets are hit. Discipline also meansa commitment to consistently reviewing and adjusting your strategies.A regular strategy review is critical to staying in sync with extremelyvolatile markets.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 30Part Three: Avoid these Pitfalls and the Pitin Your Stomach.There are six common marketing pitfalls that typically causefrustration for producers. In part, we can blame emotions, as it’s difficultto make good decisions under financial pressure and in the face of greatuncertainty. There’s also a tendency to think “things will be different this time.”The reality is, it will never be easy to make important financialdecisions under pressure. That’s why great strategies are pre-planned.As for thinking things will be different, well, that’s a dangerousline of thinking that never seems to change. After 25 years of helpingproducers with their marketing, we have seen producers get caught in thesame traps. It’s human nature.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 31Pitfall #1: Marketing on a margin. Much attention has been givento knowing your breakeven so that you can lock in a profit margin. Yet,locking in a profit whenever prices rise above your breakeven can costyou money. This can limit you from capitalizing on opportunities ifprices continue to rise. In the long run, it’s equivalent to slowly goingout of business.We’re not saying you shouldn’t lock in profits. We’re saying, withgood reason, you should strive to lock in higher margins as much as youpossibly can.Usually one of the following precipitates marketing on a margin:• unprofitable price levels• previous marketing mistakes (missed opportunities)


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 32Both result in a weak financial position. The stress of weak financialsleads producers to begin locking in minimal profits as soon as the marketoffers it. Their motive is to avoid ever again having to watch the bottomline go from black to red.For those who are the most financially strapped, this may be anecessary approach. However, in the long run, it leads to consistentlyminimal margins at best and should be avoided if possible.It is important to realize that the best time to hedge/price feed willnot always be the best time to price milk. You should expect to do theseat significantly different time periods, maybe even a year or two apart.After a period of unprofitability (red ink), many producers want to lock inboth feed and milk prices at the same time, to ensure a profit margin. Mostof the time, you are better off separating these decisions and actions.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 33#2 Marketing based on your breakeven. By this we mean focusingon the point at which selling would ensure money won’t be lost. The firstconcern is that the market may never reach your breakeven. Minimizinga loss can be just as important as maximizing opportunities. Experiencesof 2009 certainly illustrate this point. Market decisions centered around abreakeven price can eliminate any opportunity to capture a higher price.The motivation behind marketing should be to get as much returnon production as possible within reasonable risk parameters and riskmanagement cost considerations. When that motivation wanders, focuson profit gets replaced by desperation to avoid loss at any cost, andopportunity disappears.Marketing on the breakeven is like selling too soon. Granted, sometimesit works: A sale within this approach might occur before a price dip. However,


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 34over the long term, eliminating all opportunity increases the challenge to growan operation or even remain viable during extended downturns.#3 Making isolated decisions. Where there is risk or uncertainty,making one decision in concert with another can be helpful.For example, it’s easy to focus on getting a good price for your milk.But what is “good”? If you haven’t managed the input side, paying toomuch for feed diminishes the profit you make on your milk.Strategic marketing looks at the big picture:• integrating milk sales and feed purchases with the goal ofachieving a favorable overall return.• incorporating a hedge account to complement cash sales.(The two are meant to work in concert with one another.)


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 35Making decisions based on the big picture is taking an integrated,holistic approach. Anything less is making isolated decisions.#4 Thinking the future will be like the past. This pitfall actually hastwo sides, the other being: believing the future will be different. The factis, while history can repeat itself, it doesn’t necessarily repeat in the sameway, and you can’t time it. By all means, be careful not to ignore the past.Just don’t bet on it making a second appearance that mirrors the original.The same goes for assuming the future will be different than the present.At some point it probably will. Yet, nobody knows how or when.#5 Being bullish at the top and bearish at the bottom. The marketalways looks the most bullish at the top and the most bearish at the bottom.When you’re convinced prices have nowhere to go but up, whatdo they typically do? Fall apart and collapse, right? Then, when prices


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 36have been declining for months and months, you become completelydiscouraged and feel there is no hope that prices will ever go up again.All the news is as negative as it could possibly be, and you sell, thinkingthings can only get worse. This is just about the time prices bottom outand start climbing higher.What it all boils down to is this: When you can identify a list ofconvincing reasons why prices should go up, you can just about bet thatthe price move is over. That’s because the market has already factored inthose identifying reasons. They have been bid into prices, buyers have allbought because of them and prices have already risen substantially. Onceall the bullish news is well known and is factored into prices, demand andprices start to fall.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 37A simple concept to remember here is we are talking about “futures”markets. Even tomorrow’s cash price is a futures market. Tomorrow’sexpectation is based on today’s news, which is already factored into themarket, so it takes new news to continue to drive the market.Nobody knows when bear and bull markets begin and end until afterthey have begun or ended. You can’t successfully outguess the market.You can prepare yourself for whatever the market may do.#6 Ignoring cycles of supply and demand. Rounding out this listof common pitfalls is ignoring the basic economic model of supply anddemand. You know the concept: price equalizes demand and supply. Thatis, price equalizes demand for whey, cheese, nonfat dry milk and so forth,and the quantity you supply, resulting in production in line with demandover time.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 38Of course, production is never perfectly in line with demand. Themarket follows a typical cycle of over-production followed by significantunder-production. And in the end, in the commodity business, prices tendto average right around an average cost of production.Even if the supply were in sync with demand, producers still cannotafford to ignore this economic model. That’s because when you’relooking at the supply of products out there, you want to look at whetherthey’re growing or shrinking. It’s important to know year-to-year whetherthose supplies will be higher or lower. If the trend is toward highersupplies, the price trend is likely to be down.The level of supplies is not key. What matters most is the trend insupplies (relative to demand). Are excess supplies increasing or decreasing?


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 39• If excess supplies are increasing, then prices will trend down.• If they are decreasing, then prices trend up.You cannot be in the business of producing a commodity withoutunderstanding and appreciating these basic models of supply anddemand. It is this model that drives and rewards most of the innovativebusiness management in our industry.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 40Part Four: Become an Expert or Hire One.Then Get Started.More than ever before, you either need to be an expert or hire anexpert. Marketing takes time, effort, discipline and knowledge.• An acute understanding of your cash marketing alternativesis necessary.• Thoroughly understand all the hedging tools available in yourtoolbox. Know which ones to apply when and where.• Know the costs, risks and reward potential of each strategyalternative.If you are unable to put in the time or effort to learn these things,


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 41we recommend you hire an expert as aconsultant to help you.Going it alone?Know your strengths and limitations.Have you ever heard—maybe evenuttered—this popular movie line? “A man’sgot to know his limitations.” We like to putthis sentiment into a more positive light whenthinking about farm marketing: You’ve got toknow your strengths . . . as well as what mightbe limiting you.To help producers identify personalstrengths and factors that might be limitingThe Theory of Constraints hasroots in agricultural crop production,going back to a 1928 principlecalled “Liebig’s Law,” which statesthat growth is controlled not by thetotal of resources available, but bythe scarcest resource – the limitingfactor. This concept was originallyapplied to plant growth. Agriculturalscientists found that increasing theamount of plentiful nutrients in the soildid not increase plant growth. Onlyby increasing the amount of the mostlimiting nutrient was the growth of theplant improved.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 42marketing performance, we developed a process that borrows from the“Theory of Constraints,” a business-management principle found inpresent-day management textbooks.*We applied the Theory of Constraints to marketing with ourMarketing Assessment Profile (MAP). MAP helps producers take stockof their current approach to marketing and address what, if anything,holds them back from doing a great job with it. Experience tells us thatusually there are only one or two factors that limit performance.While these factors are not necessarily easy to overcome, it’s vitallyimportant to truly recognize them. Only by seriously assessing whereyou’re at can you begin to effectively move forward.*The Theory of Constraints was popularized in The Goal, by Eliyahu Goldratt. The theory states that at any givenpoint in time, an organization has at least one constraint which limits its performance relative to its goal.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 43Producers whose marketing skills we have assessed—even thosewho felt confident in their marketing abilities—have appreciated theassessment. They say it helps them be more honest about themselves,and that having someone else put their analysis down on paper makesa big difference.The ultimate purpose of MAP is to help you gain the confidenceto make consistent, disciplined marketing decisions. MAP is a freeservice, and it may be a first stop for you along the way to getting startedmarketing well. Click here to read Progressive Dairyman’s profile of adairy producer’s experience with MAP.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 44Hiring an expert.If you choose to do your own marketing, we strongly encourage youto adhere to the principles outlined in this book. If you have concludedthat your time is better spent managing your farm and that marketing is atime-consuming job requiring the assistance of experts, your next step isto hire an expert. If you hire a marketing professional, that person shouldbe one who:• Is not driven by his or her market opinions.• Is capable and experienced enough to envision all the possiblescenarios of what the market may do.• Strategically prepares you to act no matter what the market does.• Helps you maintain discipline in decision-making.• Is an accountable and trustworthy professional.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 45Our approach.As you well know by this page, we believe that you can’t outguessthe market and that it is far better to be prepared for whatever the marketmay do rather than to focus on where prices might go.We follow a consistent, systematic approach to marketing throughMarket360, ® our strategic consulting service. We are very proud of our96.8%* renewal rate for this service. This is a reflection that we arecommunicating and connecting with our clients, and we’re delivering thelevel of performance they expect.*Renewal rate based on July 1, 2009 to July 1, 2010 data.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 46Ultimately, Market360 gives our clients confidence like never beforein their marketing to achieve the financial security they seek for theirfamilies and operations. Producers say they value it because it:• Takes the guesswork and anxiety out of farm marketing.• Gives them confidence that opportunities are maximized andrisks minimized.• Offers customized, flexible strategies.• Lets them retain control over their marketing.• Leaves more time for other aspects of business and life.• Click here for client testimonials.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 47Get started marketing well by calling 800-334-9779 to speak with oneof our dairy marketing experts. We’ll provide you with client references,help you better understand how our approach can fit your farm, anddiscuss the decisions you will need to make in order to get started now.Ask us about MAP, the Marketing Assessment Profile. Manyproducers we work with find the assessment a good and easy first step.MAP opens your eyes to your strengths in marketing and identifiesopportunities to take your marketing to the next level.We hope this book has prepared you to position yourself forprofitability in uncertain and difficult times. Whether through our servicesor through this book, it’s time to get started marketing well!


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 48Stewart-Peterson Inc. is a commodity consulting and marketing services firm offering opportunityand risk management services for clients. We believe marketing can be done well, and would enjoythe opportunity to help you gain confidence in your marketing and take it to the next level.


GO TO TABLE OF CONTENTSGet Started Marketing | How to position yourself right now to manage the coming opportunities and risks 49Stewart-Peterson Inc.800-334-9779www.stewart-peterson.com© 2010 Stewart-Peterson Inc. All rights reserved. All rights reserved.No part of this book may be used or reproduced in any manner whatsoever without written permission.For information, contact Stewart-Peterson Inc., 137 S. Main Street, West Bend, WI 53095.

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