In our country, accurate figures are not available regarding the cost of marketing farm and manufactured products. That is why, it is difficult for us to have an idea of the same. But in the advanced countries researches and studies have been conducted to ascertain the cost of marketing of various types of products. In those countries, especially in America, estimated average figures of the cost of marketing all farm products have sometimes been used to show that such costs are high and it is often assumed that since the costs are high, the marketing operations must be efficiently performed.
But the mere fact that marketing costs are high proves nothing as to the effectiveness with which it is carried on. Marketing is essential to the production of goods in the economic sense and high costs of marketing any class of products are usually due to the necessity of performing expensive processes.
Perishability, waste, shrinkage, varying quantities that are shipped and handled, effectiveness of market information, extent of competition, seasonality, the extent to which grading and inspection make sale by description or sample possible — all these are important factors in determining the efficiency and the cost of marketing and they vary greatly in their effects as between different Products, and different seasons of the year.
In the sale of farm products the number of steps in the channel of distribution varies widely. Concentration of farm products in the country and their sale by jobbers in the city usually cost a little more, while retailing is the most expensive part of the whole process. Transportation is another important expense item which, however, varies considerably with products and which in the marketing of farm products sold at retail cannot be easily segregated because a considerable part of the service is supplied by wholesale and retail middlemen.
The cost of marketing raw materials from farm to factory is much lower than the cost of marketing those farm products which are used by consumers in approximately the form in which they leave the farm. But such statement may not always be true. Because most agricultural raw materials are less perishable than are farm products consumed in their original state, and so transportation and storage are less expensive.
They are commonly handled in carloads from local shipping points to the factory, and they do not go through the expensive retail operations.
Cost of Marketing Manufactured Goods
The marketing of manufactured products is likewise an expensive process. Many products manufactured for personal consumption are difficult to sell, and as a result the combined selling costs of manufacturer, wholesaler, and retailer often total more than the costs of production. That is, over one-half the price paid by the consumer may go to pay for marketing the product.
A considerable proportion of this is the cost for creating demand : creation of demand for new products that consumers are not in the habit of buying ; the competitive cost of attracting customer which would otherwise go to competitors producing other products or similar products. The exact amount cannot be accurately determined even for a particular product or firm.
The cost of selling staple commodities is often as high as the cost of selling some luxuries. This is particularly true of convenience goods and many varieties of each.
Wholesaler and retail middlemen are likely to stock the products of several competing manufacturers, and some have competing products bearing their own private brands. The result is that a manufacturer often obtains little cooperation from middlemen. Small independent retailers usually carry proper extensive efforts to sell any product, and wholesalers and many large retailers commonly have their own private brands to whose sale they are likely to direct their efforts. They are, moreover, unlikely to push one manufacturer’s products more than those of his competitors.