Agricultural marketing

MARKETING EFFICIENCY
Marketing efficiency is essentially the degree of market performance. It is a 
broad and dynamic concept.
Def: - If is the ratio of market output (satisfaction) to marketing input (cost of resources). 
An increase in ratio represents improved efficiency and vice versa.
Components of marketing efficiency :
1. Effectiveness with which a marketing service is performed.

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2. The cost at which the service is provided. 
3. The effect of this cost and the method of performing the service as production and 
consumption. i.e. effect of (1) & (2), last two are more important.
Assessment of marketing efficiency :
1. Technical or Physical or Operational efficiency: It pertains to the cost of 
performing a function; Efficiency is increased when the cost of performing a 
function per unit of out put is reduced.
Eg: - Storage processing, handling etc.
2. Pricing / Allocative efficiency : System is able to allocate farm products either 
over time, across the space or among the traders, processors and consumers at a point 
of time in such as way that no other allocation would make producers and consumers 
better off. This is achieved via pricing the product at different stages, places, times 
among different users. Pricing efficiency refers to the structural characteristics of the 
marketing system, when the sellers are able to get the true value of their produce and 
the consumers receive true worth of their money. 
The above two types are mutually reinforcing in the long run. 
Emperical Assessment of Marketing Efficiency :
A reduction in the cost for the same level of satisfaction or an increase in the 
satisfaction at a given cost results in the improvement in efficiency. (Khols and Uhl.)
O 
E = ---- 100
I 
E = level of efficiency 
O = value added to the marketing system. 
I = real cost of marketing 
Shepherd ‘s formula of marketing efficiency :
 
V
ME = --- - 1 100 
I

ME
= Index of marketing efficiency 
V 
= Value of the goods sold or price paid by the consumer (Retail price) 

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I 
= Total marketing cost or input of marketing.
This method eliminates the problem of measurement of value added.

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