COOPERATE MARKETING IN NIGERIA

“Cooperative marketing” can mean many things to many people depending upon

your background. Cooperative businesses are a type of corporation but have a few

qualities that make them an attractive option for many small groups that want to

maintain member ownership of the business. “cooperative” is both a noun referring to

a legal business structure and as an adjective to describe the agreement of people to

cooperate with each other related to marketing efforts.

Agreement between a manufacturer and a member of distribution chain (distributor,

wholesaler, or retailer) under which the manufacturer shares a certain percentage of

the member's advertising and promotion costs, or contributes a fixed sum.

Agreement between two or more marketers with complementary products (such as

cosmetics and toiletries) or different seasonal sales cycles (such as raincoats and

winter coats) to promote or sell each other's products with their own. Also called

cooperative marketing or co-marketing.

Co-marketing (Collaborate marketing) is a marketing practice where two companies

cooperate with separate distribution channels, sometimes including profit sharing. It

is frequently confused with co-promotion.

Simply put, marketing cooperative as the name suggests, their primary function is to

market the products of their members.

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Cross-marketing describes the practice where two individual entities companies

exchange marketing channels for mutual benefit. No new product, service or brand is

created here

Examples:

link or banner exchanges

"Intel Inside" on PCs

Co-marketing describes the practice where two individual entities companies create

and jointly develop a new product, service or brand (and normally jointly promote it).

Co-marketing has of recent become very prominent in the entertainment industry.

This typically means partnerships between brands and entertainment properties such

as television shows, films, and music acts.

Examples:

Apple and Nike jointly developing a new service for joggers

Omega and the James Bond franchise partnered to promote the films and the

company's watches

Companies such as The SMC Group specialize in entertainment co-marketing,

and have negotiated a number of deals including Alexandra Burke and Sure

Deodorant, Shaggy and Logitech Ultimate Ears

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Cooperative Marketing Act

The Cooperative Marketing Act of 1926 was a piece of agricultural legislation

passed in the United States which expanded upon the Capper-Volstead Act of 1922.

It allowed farmers to exchange “past, present, and prospective crop, market,

statistical, economic, and other similar information” at their local cooperative

meeting, without breaking antitrust laws. Previously, under the Capper-Volstead Act,

they had only been permitted to exchange pricing information.[1]

Under the Cooperative Marketing Act, farmers and their local, regional, and national

cooperatives could legally exchange a host of information within their marketing

systems. It was a critically important strategic authorization that enabled federated

cooperative systems and marketing agencies-in-common to effectively function as

coordinated entities.

In addition, the Act created the Division of Cooperative Marketing within the United

States Department of Agriculture to assist cooperatives in gathering and sharing data

on output, prices, and demand. The Act also created the Cooperative Research and

Service Division which conducted research and service activities relating to problems

of management, organization policies, merchandising, sales, costs, competition, and

membership arising in connection with the cooperative marketing of agricultural

products and the cooperative purchase of farm supplies and services.

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The Cooperative Marketing act was useful, but it was still not satisfactory to the

Farm Bureau or other farm lobbyist groups. For farmers, an increase in available

information to help cooperatives work together was no substitute for the price floor

on select crops that they demanded. Demand for a price floor was steady, and

culminated in the passage of the McNary-Haugen bills in 1927, and again in 1928,

both which suffered the veto of President Calvin Coolidge.

Cooperative businesses are a type of corporation but have a few qualities that make

them an attractive option for many small groups that want to maintain member

ownership of the business. Cooperatives have three distinct characteristics that

separate them from other businesses. Cooperatives are member-owned, member-

controlled, and generate member-benefit. Member-owned is a function that

guarantees that the members of the cooperative are the ones that provide the initial

capital for the start-up of the business and are the current owners of the cooperative.

Member-controlled continues down the same thought process because the members

are the ones that elect the board who is responsible for making long-term decisions

for the cooperative. The members are electing other members to serve on the board

and make these decisions for the total membership of the cooperative. Member-

benefit is the end result that ensures the profits made by the cooperative are being

returned to the members, sometimes referred to as patronage refunds. These profits

are not being returned based on the investment the members made in the cooperative,

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but rather the amount of business that members conducted with the cooperative

throughout the year. For example, if you are a member of the cooperative, but do not

use any services or purchase any products from the cooperative during the year, you

have no member-benefit or patronage refunds coming your way at the end of the

year.

If you and your neighbor agree to sell your products in one roadside stand, you are

practicing cooperative marketing. When you use cooperative as an adjective it

describes the behavior or agreement of two or more parties in relation to marketing.

These cooperative marketing arrangements are usually informal and have no legal

binding between or among the parties involved. These cooperative marketing

agreements can last years and never have problems; however, sometimes group

dynamics make these agreements unpleasant and useless for the parties involved.

There are many reasons why parties join a cooperative business or participate in a

cooperative marketing arrangement.

New product commercialization

Kotler et al. (1999: 604) define new product development as the development of

original products, product improvements, product modifications and brands through

the firm's own R&D efforts. They believe that commercialization is the final step in

new product development. Zarea (2011) argues that mostly, commercialization fails

because of the unsuitable marketing strategy or inefficient implementation. This is

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exactly what we need to concentrate on, that is how marketing strategy can be

designed to produce results of success of product development. The marketing

strategy development as Kotler et al. (1999: 614) described consists of some

elements, one of the most important of them is to determine the target market. It

seems that accessing the target market to offer new product is one of the main

difficulties for ventures, so finding a way to penetrate the target market, especially

for products affordable for youth and football clubs, can be facilitated if football

clubs enter into marketing efforts, not just by embedding the product on the kit, but

by participation in the marketing strategy, as a partner. Thus, it seems better to study

a case, as success of cooperative marketing as an entrepreneurial strategy to reach the

target market.

Creating an Enabling Environment for Cooperate Marketing to Thrive In

Nigeria

In an effort that culminated in the 1970s, the Nigerian government gradually

expanded its controls over the private sector, levying differential taxes and subsidies,

increasing industrial prices relative to farm prices, favoring investment in key sectors,

providing tariff and tax incentives to vital sectors, protecting favored industrial

establishments from foreign competition, awarding import licenses to selected firms

and industries, and providing foreign exchange to priority enterprises at below-

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market exchange rates. While the ostensible reasons for this policy of favoritism were

to transfer resources to modern industry, expand high-priority businesses and sectors,

encourage profitable enterprises, and discourage unprofitable ones, in practice the

government often favored urban areas by promoting production that used socially

expensive inputs of capital, foreign exchange, and high technology. Market

intervention helped political and bureaucratic leaders protect their positions, expand

their power, and implement their policies. Project- or enterprise-based policies

(unlike reliance on the market) allowed benefits to be apportioned selectively, for

maximum political advantage. Government made it in the private interest of

numerous individuals to cooperate in programs that were harmful to the interests of

producers as a whole. However, market-clearing prices (for farm commodities or

foreign exchange), whose benefits were distributed indiscriminately, inspired little or

no political support among farmers and businesspeople.

Beginning in 1979, the policy prescription of the World Bank (and IMF) was for

African countries to refrain from interfering in foreign exchange and interest rates,

wages, and farm prices; to privatize state-owned enterprises (especially agro-

processing, farm input distribution, insurance, and retail and wholesale trade); to

relax restrictions on foreign capital; and to encourage indigenous business ventures.

By the early 1980s, Nigeria faced substantial international payments deficits in the

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midst of declining export prices and rising import prices, rising external debt

payments, and negative economic growth.

In a paper presented at the celebration of the World Consumer Rights day in 1992,

Mrs. Priscilla O. Kuye, president of the Nigerian Bar Association, averred that the

problem of consumer protection has pre-occupied the attention of successive

Nigerian governments over a long time.

Notable among the Nigerian consumer protection laws cited by Kuye are:

The sale of Goods Act of 1893 The Hire Purchase Act of 1965

The Standards Organization Act of 1971 (and its 1976, 1984 and 1990 Amendments)

The Food and drugs Decree of 1974

The Counterfeit and Fake Drugs (miscellaneous provisions Decree of 1989)

These and other statutory provisions were aimed at ensuring that the products

manufactured in Nigeria conform with certain standards so that the interests of the

consumer are safeguarded. According to Kuye, the laws prohibit and regulate

deceptive or unconscionable advertising and sales practices, product quality, credit

financing and reporting, debt collection, leases, and other aspects of consumer

transactions.

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Expatiating further on consumer protection laws available in Nigeria, Kuye made a

special case of the Standards Organization of Nigeria Act of 1871, which established

the Standards organization of Nigeria as an integral part of the Federal Ministry of

Industry. With the 1990 amendment to the Act, the organization became a body

corporate with a Director-General as the Chief Executive. The main functions of the

organization, as summarized by Kuye, are “to standardize the methods and products

industries in Nigeria, and to ensure that the government policy on standardization is

complied with by the industries. The 1990 amendment to the Act also empowers the

organization to set “Mandatory Industrial Standards”, through the Ministry of

Industries, where necessary and to take a number of disciplinary and legal actions

against any manufacturer and/or vendor who fails to conform to such mandatory

standards.

The Policy Objectives

The primary policy objectives of the Federal Government on co-operatives are:

1. To provide a conductive environment which will facilitate cooperative marketing

practice and its effective use for social and economic development of the rural

communities in Nigeria.

2. To promote the development of an effective, efficient and economic cooperative

marketing and use it as a machinery for rural transformation and development.

Policy Strategy

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In order to achieve these objectives, these strategies are pursued by the government.

1. Intensification of cooperative marketing education, training and public

enlightenment at all levels. This is to increase participation and involvement of

farmers and other rural people in co-operative movement activities. Besides it will

hopefully enhance decision making process of the rural people in order to improve

their general welfare.

2. To use cooperative marketings to achieve the macro-economic objectives of

increased domestic production of food and cash crops, industrial raw materials,

equitable distribution of inputs and. Production, farm products and other

commodities, diversify export earnings and generation of employment

3. To widen the democratic base in the local communities through cooperative

marketing participation in the formulation and implementation of rural development

programmes.

4. The methodical and gradual withdrawal of government’s involvement in the

management and running of the co-operatives.

In this regard the government’s role in cooperative marketing development will be to

create and maintain a conducive socio-economic and political framework and

environment for cooperative marketing to thrive.

Other efforts by the government include;

Universal Price Subsidies and Tax Reductions

Universal price subsidies and petroleum product tax reduction are the two most

commonly used methods of partially offsetting higher cooperate prices on the

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international market.1 They are used in various combinations, and the distinctions

between them are not always clear. Nigerian governments do not adjust taxes and

provide subsidies; others lower taxes and provide no subsidies. The result may be

identical: end users pay lower prices, and Nigerian government collects lower net

revenue from the downstream petroleum sector. However, the effects on the revenues

of different levels of Nigerian government may differ. For example, if (1) the central

Nigerian government levies no tax, (2) state governments levy an excise tax of 30

percent, and (3) the Nigerian federal government provides a price subsidy equal to

20 percent of the end-user price, state government revenues remain the same while

the Nigerian federal government suffers a net loss.

Targeted Price Subsidies and Tax Reductions

Agriculture, public and goods transport, and fisheries are among the sectors that have

benefited from targeted price interventions in some countries because of the

perceived economy wide benefits of keeping the prices of their goods and services

low. Some examples are given in this section.

Price Stabilization Fund

A price stabilization fund may have an intuitive appeal but does not work well in

practice, and all such funds were strained in 2007–08 (see Bacon and Kojima 2008,

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chapter 7). The idea behind a price stabilization fund is to set domestic prices higher

than international prices in times of low world cooperate prices and save the balance

in the fund; when world cooperate prices exceed a threshold level, money is

withdrawn from the fund to subsidize domestic prices. Ideally, such a fund is self-

financing, which would be the case if, for example, prices were mean-reverting.

Influencing Prices In addition to direct interventions, there are other ways by which

nigerian governments can affect prices. These methods include exercising influence

on state-owned cooperate companies; becoming involved in coperate produce

procurement; negotiating with coperate produce marketers; using legal force to lower

prices; widely disseminating price information; and, in cooperate-exporting countries,

using export bans and taxes.

Influencing State-Owned Cooperate Companies

If there is a national cooperate company or an cooperate company with some state

involvement that is also a price-setter (because it controls a large share of the

market), the nigerian government may send signals to the company to keep prices

low.

Nigerian government Involvement in Cooperate produce Procurement

The Nigerian governments have become directly involved in cooperate produce

procurement in the hope of lowering costs, through scale economy, reducing profit

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margins, or both. On at least one occasion, the mere threat of Nigerian government

involvement achieved price reduction

Holding Talks with Cooperate produce Marketers

The Nigerian governments have held meetings with cooperate produce marketers to

argue for price reduction. The prime minister of Cambodia in September 2008

instructed the finance ministry to meet with cooperate produce marketers to lower

prices, and called upon cooperate companies to lower prices on several occasions

(Phnom Penh Post 2008b). The Nigerian government had formed a special ministry

committee three months earlier to monitor prices with a view to assessing if there

might be price gouging

Disseminating Price Information

Transparency in pricing helps create a level playing field and can indicate whether

prevailing prices are broadly reasonable. At a minimum, nigerian governments

should promulgate and enforce a regulation requiring all filling stations to post prices

on display boards using letter sizes that are clearly visible from the road. Other means

of enhancing transparency include conducting price surveys and posting the results,

publishing graphs of domestic and international cooperate produce prices for

comparison, making historical and current prices public and readily available through

the Internet and other media, and disclosing on a regular basis the price buildup for

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each key petroleum product (including application of rules for price determination

where prices are set by the Nigerian government).

Government Motivational Export Policies and Strategies

The nation export promotion programmes are contained in the Nigerian Export

Incentives and Miscellaneous Provision Decree 18 of 1986, as amended by Decree 65

of 1992, and the 1996/1997 national budget policies on export. Some of the

assistance policy programmes include:

Currency Retention Scheme

This is also referred to as “Domiciliary Account Export Proceeds”; the scheme allows

exporters to retain one hundred percent of their foreign exchange earnings in their

domiciliary accounts in any authorized bank of their choice. The objective of the

currency retention scheme is to enable exporters have foreign exchange at their

disposal, and this can be utilized for non-oil export related activities.

Export Development Fund (EDF)

This is a special fund provided by the Nigeria government to give financial assistance

to exporting companies so as to cover part of their initial expenses in respect of the

following export promotion activities:

a. To participate in training courses, symposia and workshops in all aspects of

export promotion,

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b. To enable exporters advertise in foreign markets,

c. To carryout market research studies,

d. To encourage firms to engage in product design and consultancy programmes,

e. To participate in trade missions buyers-oriented activities, overseas trade fairs

exhibitions and store promotions

f. To assist in the area of cost of collecting trade information,

g. To encourage the development of export oriented industries.

It is important to note that the fund would only cover part of the cost involved in any

exportrelated activity, while exporters bear major part of such costs.

Export Expansion Grant Fund (EEGF)

The fund is to provide an inducement for exporters to enable them (exporters)

increase the volume of export, diversify export products and market coverage. The

Export Expansion Grant Fund is made available only to exporters who have

repatriated their proceeds from previous export transactions as certified by Central

Bank of Nigeria (CBN).

Duty Draw-Back Scheme (DDS)

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This scheme is aimed at providing for the refund of import duties and surcharges on

raw materials, including packaging and packaging materials used for the

manufacturing of products destined for export.

Duty Suspension Scheme (DSS)

This is a mechanism through which imported inputs for export production can be

imported with a waiver of import duties and surcharges, such as raw materials and

intermediate inputs packaging materials, labels, etc used directly to manufacture

export products that can be imported free of customs, excise and other duties under

the scheme.

Manufacturing-in-Bond Scheme

The manufacturing-in-bond scheme provides for importation of raw materials into a

bounded warehouse of the company for export production. That is, the scheme is

designed to enable manufacturers to export products that have a minimum value

added of 20 percent to import duty free on their raw materials for exportable

products. Only products produced in Nigeria qualify to benefit from this incentive.

Pioneer Status Scheme (PSS)

This is an incentive that grants tax holidays on corporate income to manufacturing

exporters that export at least fifty percent of their turnover. The objective of this

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scheme as provided in the income tax Act of 1971 is to encourage the establishment

of export-oriented industries in Nigeria.

Export Price Adjustment Fund (EPAF)

This fund serves as a supplement or additional fund to compensate exporters on the

following:

(a) High cost of production arising mainly from infrastructural deficiencies.

(b) Purchasing commodities at prices higher than the prevailing world market prices-

this is usually fixed by government.

(c) Other factors beyond the control of the exporters are unfavourable currency

exchange rate, political instability, etc.

The fund is principally designed to provide leverage after other incentives might have

been exhausted.

Tax Relief on Interest Income

The relief is aimed at tax exemption on interest accruing from loans granted by banks

in aid of export activities. This is in accordance to Company’s Income Tax Act of

1979, which states the percentages of tax exemption on interest for foreign investors.

Capital Asset Depreciation Allowance (CADA)

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The Company’s Income Tax Act of 1979, as amended by the Finance/Miscellaneous

Provisions Decree of 1985, and amended further by the Export Incentives Decree No.

18 of 1986, provides for an annual depreciation allowances of five percent on plants

and machinery to all manufacturing exporters who export at least fifty percent of

their annual turnover with at least thirty-five percent value added.

Incentives for Manufacturing Enterprises

Manufacturers profit and dividends are exempted from taxation under this scheme.

The tax exemption includes:

(a) Removal of taxes on interest income loans and advances granted by banks for

Export manufacturing.

(b) Tax exempt for dividend derived from manufacturing companies in the

petrochemical and liquefied natural gas sub-sectors.

(c) Low rate of tax (20%) for small manufacturing companies for the first five

years of commencement of business.

(d) Small companies’ dividends are free from tax.

(e) Restrictions for capital allowances are removed for manufacturing companies

(f) Profit for any Nigerian company in respect of goods exported from Nigeria are

exempted from tax, and

(g) Profits of companies whose supplies serve as inputs to manufacturing of

productsfor exports are excluded from tax.

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Incentives on Export of Solid Minerals

New companies venturing into the mining of solid minerals from 1996 are to enjoy

tax free holiday for the first three years of their operation.

Special Trade Agreements/Liberalization

Certain bilateral and multi-lateral trade agreements are entered with a view to

waiving or reducing some duties or tariffs on goods from countries that signed the

agreement. This is aimed at encouraging foreign trade and investment. The Lome

conventions, generalized system of preferences (GSP), and ECOWAS treaty are

some of the examples of the special trade agreements to which Nigeria has been

associated with.

Export Promotion Zone (EPZ)

Nigerian export promotion zone was established by Decree No 34 of 1991; the decree

provides for the establishment of a geographical enclave within the country, to which

normal customer’s tariffs or duties do not apply. In other words, EPZ is an incentive

provision for exporters within a nation’s customs territory, which provides an

attractive environment for doing business especially in an otherwise not too attractive

environment. The objective of EPZ is to motivate local and foreign investors,

stimulate industrial production for export, diversify economic activities, generate

foreign exchange, create backward linkages and provide bases for technology

transfer. The first export promotion zone in Nigeria is located in Calabar, and the

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foundation was laid on November 7th, 1991, by the then President of the Federal

Republic of Nigeria-General Ibrahim B.Babangida. Other policies and incentives

aimed at not only creating export awareness, but also to promote other export

activities include incentives for the manufacture of locally made spare-parts and

equipment, re-discounting and refinancing facility for export, industrial export

simulation facility, export credit guarantee facility, export credit insurance facility

and insurance of market risks.

Perception of Nigeria Export Policies and Programmes

To have an insight to the perception and performance of the Nigerian export

promotion programs, we will consider the number of participants and the total sum

paid to beneficiaries with respect to duty drawback scheme and export expansion

grant fund from 1988 to 1996. According to NEPC (1997), a total of ninety-three

companies benefited under the duty drawback scheme, out of one hundred and forty-

three companies that applied within the period; while about one hundred and ninety-

one million naira was paid to the companies for the same period of nine years (1988

to 1996). It is worthy to remark that the number of companies that applied is small,

and the number of benefiting firms is also not encouraging. Hence the desired

objectives could not be achieved. Okeke (1990), also stated, that the drawback

schemes’ elaborate administrative procedures gave rise to what the author called

“undesirable situations”. Another example of Nigerian export performance can be

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seen from the total export expansion grant disbursed to companies from 1989 to

1996. The grant ranged between 1.7 million Naira to 79 million Naira. Considering

the capital-intensive nature of expanding manufacturing companies, it will not be out

of place to state that the above sum disbursed is insignificant to make meaningful

impact in the export expansion scheme of most companies within the given period.

In analyzing the scope and the objectives of Nigerian export assistance programmes

as discussed above, we can describe them as laudable. But some of the export

assistance programmes are not yet being implemented or are poorly implemented.

Hence, Iyanda (1998) similarly remarked that Nigeria government’s approval of

export credit guarantee scheme was more on paper. In the same manner, the

commercial banks failed persistently to comply with CBN’s guidelines on credit to

the export sector, while some people have also argued that successive governments

were simply paying “Lip service” to the promotion of non-oil export.

The usual complaints of NEPC since its establishment in 1976, has been that of

inadequate funding. The under funding if NEPC may have also been responsible for

the ineffectiveness and inefficiencies. NEPC (1989), noted that, “…owing to the

ineffectiveness of existing package of export incentives as well as constrains, the

orders received in some of its missions overseas could not be executed”. This is

coupled with some administrative “bottle-necks” placed on the part of exporters

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which resulted in the inability of Nigerian exporters to respond urgently and

successfully to the over fifty million Naira tentative orders received during the trade

missions embarked in the past. It was to solve some of the above-mentioned

problems that the Association of Nigerian Exporters (ANE) was formed in 1984

(Ogunnus, 1986). ANE is a private sector, non-profit organization that liaises with

relevant government agencies over export matters. It may also be necessary at this

point to ask whether we-those involve in export policy formulation, promotion and

implementation in Nigeria-are supporting the best programme (Czinkota 1981). Some

other problems were also identified as being responsible for not achieving the

nation’s desired economic development through export marketing. One of the

problems has to do with exporting raw agricultural commodities by Nigerian

exporters, and these commodities are sold as processed goods to Nigerian consumers

at a higher price. This is why Nwakama (1986), stated that the absence of forward

integration in the Nigerian agricultural sector is largely responsible for the failure

of the Nigerian agricultural sector to expand, and make meaningful progress.

Similarly, lack of backward integration is also accused of been responsible for the

industrial sector’s low growth and expansion.

From the preceding discussions, it can be appreciated that marketing in general, and

export marketing in particular can be described as the necessary foundation and

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facilitator for any meaningful economic development to be made in any given

country of the world, and government effective export incentives and conducive

environment will not only motivate firms’ export marketing, but will also facilitate

the achievement of the desired export objectives of the Nigeria nation.

Benefits of Cooperative Marketing

Economies of scale

There are economies of scale that can be obtained from the collective effort of joining

forces and marketing as a group. It would be cheaper for beef producers to come

together and assemble a semi-load of feeder calves for shipping to Kansas than it

would be for each individual to get their calves to Kansas. When you are buying

supplies, a consolidated order that contains pallets or bulk orders is cheaper than

individually buying a small amount of supplies.

Bargaining power

A group effort can combine available supply of product or consolidate services

offered that allow bargaining power for the group. If you have 2 bushels of

tomatoes, you have little power to negotiate a price with a retailer, but if as a group

you have 140 bushels of tomatoes, you can bargain for a better price because of the

quantity that can be supplied by the group. This bargain force can be used to gain

additional economies of scale with bulk purchasing arrangements.

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Flow of product

Retail markets require some consistency in flow of product to their

establishments. As an individual with 12 doe goats, you can in no way guarantee

more than 2 kid goats per month for the year. Retailers are looking for a business

that can provide them a set amount of product on a daily, weekly, or monthly

basis. If you get together with 20 other producers and as a group you have 240 doe

goats, you could guarantee up to 40 kid goats per month to the retailer. You will

now have their attention and be able to negotiate a price that the group needs for

the kid goats.

Preserving markets

Many markets are looking to reduce the costs of obtaining products or services.

These markets are looking at buying their products or services but dealing with

less people and having the same amount of product to sell through their

establishments. If you are trying to market your 10 finished hogs to a processor

and the cooperative down the road has members with 120 hogs ready for

slaughter, the buyer will stop at the cooperative to make his purchase. He can

obtain 120 hogs in one contact versus the contact with 12 producers your size to

end up with the same end result. A cooperative marketing arrangement will

preserve many of the markets you use for the future as businesses move to cutting

costs associated with procuring products and services.

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Access to professional assistance/expertise (hire support)

Many producers can benefit from professional services in marketing and sales of

their products. If you are an apple producer, you are probably in the business

because you are good at producing apples, but you have to sell them to make any

profit. If marketing and sales are not your “cup of tea,” you are a member of the

majority of today’s agricultural producers. If you join a cooperative marketing

group that hired a marketing manager and all you had to do was raise a top quality

apple for the person to market, your life would be much easier. You individually

could not afford to hire that marketing manager, but as a group of 15 orchard

owners you can consolidate your product and finances to increase the price you

will receive for your product.

Challenges of Cooperative Marketing

Agreeing on one common mission

The first step in moving towards a cooperative marketing arrangement is to make

sure all individuals are on the same page. This is achieved by making sure that all

members are onboard to operate for the same purpose. Most of the time, this is not

present among the members, even though most groups or steering committee

members think that they all want the same end result. Again, a facilitator can help

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the group move through this process, because a common vision is essential for

moving any further on the marketing venture.

Trust and sharing of information

Many agricultural producers have operated individually for years and are skeptical

about the idea of a cooperative marketing venture. There is a time and process for

building a sense of trust among the members and generating an open sharing of

information in relation to the cooperative marketing venture. This trust must occur

among members to keep members loyal and make the effort function successfully

in the future. You are going into business with all members of the effort and if you

have trust issues, why would you ever agree to run a business with these people?

This is a major roadblock for many groups but some facilitated discussions can be

held with professionals who are experienced in dealing with the human

components of cooperative marketing organizations.

Group dynamics (democratic group decision making and costs)

The group dynamic aspect of an organization depends somewhat on the size of the

organization. A large cooperative marketing effort would have a board of directors

that govern the long-range planning and decision making for the cooperative, but

in a case where the group only consists of 20 or 25 members all members might

participate in making decisions. Most understand that a democratic process for

making decisions ensures that the members are involved and their opinions are

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addressed, but the fact is that this process can take more time to reach the end goal

of a decision. Some organizations operate on a basis that consensus has to be

reached by all for the decisions to go forward. This is different than a democratic

majority vote system and can take much more time for plans to move forward.

Lack of commitment from members

Members can become disloyal members in the blink of an eye. This behavior

exhibits why it is important that members “buy into” the vision for the group,

have a developed trust for all members, and understand the need for sharing

information and managing the group dynamics in the cooperative marketing

organization. This issue is sometimes addressed by signing a marketing agreement

or contract with the organization that outlines the repercussions that will occur

should you, as a member, breach your contract/agreement with the organization. If

you are not agreeable to signing the agreement, then I contend that one of the

three above challenges has not been resolved for you as a member. Take a step

back, readdress the situation, and let members know what your hesitations are

before signing an agreement to market through the organization. This is necessary

for the success of the organization. Human nature tells us that a member will sell

outside the organization if he or she can make a dollar more. A large majority of

producers would choose to market only with the organization when it can benefit

the member.

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Conclusion and Summary of Cooperative Marketing

We have explored the definitions of “cooperative marketing” and compared the

benefits and challenges of cooperative marketing efforts. So is a cooperative

marketing effort a fit for you? Only you can determine the right choice for your

operation, but hopefully I have given you some topics to address and think about

before participating. There are several benefits to joining a cooperative marketing

venture: obtaining economies of scale, entering new market(s), accessing

professional services, maintaining more of the retail dollar, increasing bargaining

power, and preserving existing markets. These can benefit your operation by

increased profits and efficiency, but you need to consider the challenges before

you make the final decision. The challenges are not to discourage you from

joining a cooperative marketing organization, but rather to make you aware that

with benefits come challenges for the organization. These are all related to the

human dynamics, commitment, and trust of the members who operate and own the

organization. When it comes to generating income, many of us choose the option

that will bring us the highest reward in the near future. With cooperative

marketing organizations, you have to look at the reward you receive throughout

the year from the organization. Is the average as a member of the effort better than

the average you would have achieved as an individual? This requires you to look

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at the “whole picture” and determine the best option for the future success of your

operation.

References

King, Robert, and Gigi DiGiacomo. 2000. Collaborative Marketing: A Roadmap

and Resource Guide for Farmers. Minnesota Institute for Sustainable

Agriculture (MISA).

Mather, J. Warren, and Homer J. Preston. 1980. Reprinted 1990. Cooperative

Information Report 1, Section 3: Cooperative Benefits and Limitations. United

States Department of Agriculture (USDA), Rural Business Cooperative

Development Service.

Rapp, Galen. 1995. Cooperative Information Report 10: What are Cooperatives?

United States Department of Agriculture (USDA), Rural Business Cooperative

Development Services.

SARE/ SAN. 2003. Reap New Profits: Marketing Strategies for Farmers and

Ranchers. USDA Sustainable Agriculture Network (SAN).

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Varney, Christine (December 2010). "The Capper-Volstead Act, Agricultural

Cooperatives, and Antitrust Immunity" (PDF). American Bar Association.

Retrieved 2011-01-27.

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