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May 2010 Archive for Marketing Strategy

RSS By: Scott Stewart, AgWeb.com

Marketing Strategy

Psychology of selling during a bull market

May 28, 2010
There’s a principle in psychology called the Recency Effect. It suggests that when facts and figures have been presented to us, we best remember those we heard most recently. The same is true of experiences. If you visit a restaurant 10 times, you tend to remember your most recent dining experience the best. It carries the most weight in your opinions of the food and service.
 
In marketing, many producers tend to focus on the most recent price action. This can have damaging effects to the psyche in a bull market when, as prices rise, producers focus on how the price today is better than it had been. In their quest to capture the top of the market, they pass on profit opportunities. Their focus on the most recent price action creates a habit of not selling.
 
Each leg up in price during a bull market leads to a change in emotion. Producers go from being cautious in the early stages, to confident and then to enthusiastic. As the bull rages, enthusiasm turns to greed and conviction. Why sell when you’re convinced prices will go higher, right?
 
In a bull market, too few producers are willing to sell when it makes sense. Everyone wants a higher price. For the record, I do believe you deserve and should capture as much price opportunity as possible. It’s crucial to capture opportunity so that you can build a cushion for when prices are low. After all, if there’s one thing you can predict about rising prices, it’s that they will eventually fall.
 
Why is it so difficult to sell when prices are rising? In a word, emotion. Producers get caught up in the moment. "Irrational exuberance" takes hold. That’s why it’s so crucial to develop marketing strategies ahead of time and pre-plan your decision-making. That way, you’ll have a well thought-out rationale for why you’re selling. Emotion won’t enter into the equation. Pulling the trigger and executing a sale with cold, calculating decisiveness will become the new normal.
 
Capturing as much price opportunity as possible does not mean selling at the top of the market every time. Only hindsight consistently gives you the market high. The best marketing approach builds the highest possible price average over time. To achieve this, you have to capture opportunity as it presents itself. This includes selling on the way up.
 
CAUTION: Selling in a bull market can open up a common emotional trap. Producers fall into this trap when they sell and then immediately afterward see prices rise. They become frustrated and deem the sale as opportunity lost. Many an epithet has been hurled at marketing over this oft-repeated scenario. When this occurs, producers are letting their most recent sale—just like the most recent meal at a restaurant—influence how they feel about their marketing.
 
Second-guessing overtakes rationale thinking. Was it wrong to sell?  What is too early? These are not the questions to be asking. Instead, ask: Did I base my decision on prior planning and strategy or on emotion? Decisions based on emotion are bound to fail, even if luck prevails some of the time.
 
Decisions based on strategy should be viewed in the big picture. You can’t allow one poor, or perceived poor, decision to color your opinion of marketing. Remember that marketing success is achieved over the long haul with hard work and a thorough planning for all possible price scenarios. A negative reaction to having sold on the way up in a bull market often will be seen as positive when viewed through the lens of time.
 
In order to confidently sell in a bull market, and position yourself to both capture maximum opportunity and achieve the highest possible average selling price, you have to put strategy and discipline into your marketing. When you approach your marketing this way, one of your first accomplishments will be eliminating second-guessing.
 
 
Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at scotts@stewart-peterson.com.
 
 
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2010 Stewart-Peterson Inc. All rights reserved.

The Joy of Farm Marketing

May 04, 2010
"Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets started on the proof." So said the late economist John Kenneth Galbraith.
 
Fortunately, I’m not on a mission to convince you that farm marketing is wonderful. It is, but as Galbraith said, changing a person’s mind is very difficult. I have a different goal—more on that in a moment.
 
How do you feel about Deere and Case or Pioneer and DeKalb or Chevy and Ford? If you’re passionate about green tractors, a person would have a hard time convincing you that red is better simply by telling you so. Even if your favorite tractor leaves you stranded in the field, there’s a very good chance you’ll tell yourself there’s no need to buy a different brand next time.
 
I searched the phrase "Chevy versus Ford" online and got more than 39 million results. There are hordes of passionately opinionated truck people. You see their preferences displayed in decals on the back windows of pickups. You hear it from friends. Maybe you’ve debated online with people. Does anyone think it’s easy to change a truck owner’s mind? Tell a Ford man that Chevy is better—or vice versa—and give actual facts for why he should own one. You’ll hear six ways from Sunday why you’re wrong.
 
Let’s apply this to your marketing. Do you manage opportunities and risks, get a better-than-average price per bushel over the long term, and feel very satisfied with your approach? Or, do you think marketing is fraught with frustration and can’t be done well? Regardless of which group you fall into, hearing people tell you their way is better isn’t going to change your mind.
 
Usually, when it comes to changing your mind about something, you’ve got to commit to some sort of action first—taking that other truck for a test drive or deciding to never make marketing decisions during trading hours. That’s because doing is believing.
 
Are you willing to do something to consider a different point of view? I’ve listed three initial steps among the many you could take. Doing just one could very well give you a different perspective about marketing and, most importantly, lead to improvement:
·         Learn how to use options well! What could happen? You might see the benefit in learning advanced options strategies.
·         Relinquish marketing duties to your spouse. What could happen? You might see something in your spouse’s approach that was missing in yours.
·         Try to ignore the outlook and focus on planning for whatever happens. What could happen? You might become an expert. Or you might decide it’s more productive—and relaxing—to hire an expert.
 
As I said earlier, changing your mind is not my goal. I want to use decades of experience, failures and successes to show you that you can do marketing well. The proof is there. You’ve got to want to take the first step.
 
 
Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at scotts@stewart-peterson.com.
 
 
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2010 Stewart-Peterson Inc. All rights reserved.
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