Guest comment - Herb Baum - The Packer

Guest comment - Herb Baum

09/14/2009 04:01:26 PM
Tom Karst

We know that chain advertising and promotion increases demand. We also know that price is the key element in determining the level of demand.

A positive, measurable effect of introducing generic promotion into a national marketing system, already too complex to understand for a single commodity and involving private sector pricing and promotion (ads) for thousand of firms and multiple commodities, is incomprehensible because of the unlimited number of variables and cross commodity effects. It sounds good and the strawberry industry, including yours truly, led the effort for generic advertising and industry promotional allowances later to be discontinued because of the inability to establish causal relationships.

However, with large crops and acreage, the industry is reconsidering generic advertising during peak periods. I understand the decision is to “study” causal relationships rather than launch a program.

It is interesting to note that contract pricing is now the predominant form of marketing between private firms and the large chains, although special price and supply situations are considered by the parties. Industry activity, as you suggested, is mostly irrelevant in this entire new marketing environment since each shipper-marketing agent has its own relationship with customers in the form of category management

Finally, as I mentioned in my book, “measurable performance outcomes” are vital for evaluation of any program and must refer to the direct effects of polices on demand, prices, and growers real farm income. Proxies for demand may indirectly affect demand by influencing behavior and attitudes, but are difficult to measure.

The CSC and other marketing Boards are trying to influence these proxies, and the proxies would be the variables that a national generic program would attempt to effect. Proxies for sales, or substitutes, i.e., product usage, consumer attitudes, shopping behavior and consumer perceptions of the product, are frequently used instead of measuring actual sales (demand). However, the defense of a national generic program should be based on “measurable performance outcomes” rather than indirect proxies which are immeasurable, as would be the cross-commodity effects of multi-commodity promotion activities.

If Kaiser bases his conclusion, that the Board promotion positively effected price, I would suggest that the private sector pricing and promotion activity, along with contract pricing, have had a more important influence on price averages and price stability than Board promotion activities. The relative quality in comparative years is also important in comparative pricing. Any further study of generic promotion and Blueberries should evaluate the private sector and understand the complete working of the Blueberry industry before concluding from an econometric model that Board policy is responsible for price increases and marketing larger volume.

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