MKT 711 Week 4 Economic and Societal Factors in Marketing Strategy Example

Milk Prices, Fewer Farms and Climate Pressure: Economic and Societal Factors Shaping the Marketing Strategy of a Dairy Technology Firm

[Student Name]

University of Phoenix

MKT/711: Marketing and Managing the Customer Relationship

Week 4 Assignment

[Instructor Name]

[Date]

HerdSense Technologies and its sales figures are composites written for a model paper; industry trends are described in general terms.

The first three weeks examined HerdSense Technologies, the composite dairy sensor maker from Madison, Wisconsin, from the inside: its relationships, the value of its customers and its use of technology. Its strategy, however, will succeed or fail partly because of forces it does not control. Over the past seven years, HerdSense's new-farm sales have tracked dairy farm income closely, falling in years when milk prices dropped and rising when they recovered. The number of US dairy farms has continued to shrink while average herd size grows. And milk buyers, food companies and consumers are asking more about dairy's environmental footprint and the treatment of cows. This paper evaluates these economic and societal factors and their implications for HerdSense's marketing strategy.

Milk Prices and Farm Income

Dairy farm income is volatile because milk prices swing with supply, export demand and feed costs. When margins fall, farmers delay purchases and seek to cut monthly costs. HerdSense's sales records show that in the two weakest years for milk prices since its founding, new installations fell by about 30 percent and cancellations among small farms rose by about a third. Subscription revenue held up better than hardware sales, since existing customers valued alerts that save sick cows.

Marketing in Downturns

Srinivasan et al. (2005) surveyed managers about their firms' marketing behavior during recessions and found that proactive marketing in a downturn, such as maintaining or increasing investment and pursuing opportunities, was associated with better business performance. The benefits were greater for firms with a strategic emphasis on marketing, an entrepreneurial culture and slack resources. The finding suggests that HerdSense should not simply cut marketing when milk prices fall, but should use downturns to offer financing and win customers from weaker competitors.

Consolidation of Farms

The dairy industry has consolidated for decades, with small farms exiting and large operations expanding. For HerdSense, consolidation means fewer customers with more cows each. Week 2 showed that large herds carry lower value per cow because of discounts, service costs and churn. Consolidation therefore pushes the firm toward its least profitable segment unless it changes how it serves large accounts.

Diffusion of Innovations

Bass (1969) proposed a model of new product growth in which the probability of adoption depends on a coefficient of innovation, reflecting outside influences such as advertising, and a coefficient of imitation, reflecting the influence of previous adopters. The model produces an S-shaped adoption curve and has predicted sales of many durable products well. Sensor monitoring in US dairy appears to be in its middle stage: early adopters have bought, and further growth depends on imitation, as farmers see neighbors succeed.

Adoption of Agricultural Innovations

Feder and Umali (1993) reviewed research on the adoption of agricultural innovations and found that adoption depends on farm size, access to information, perceived risk, credit availability, labor constraints and the innovation's characteristics, with larger farms often adopting earlier. Information spreads through extension services, dealers and neighbors. In HerdSense's data, farms that bought after a neighbor installed collars were twice as likely to cite that neighbor as their main reason, consistent with imitation effects.

In the middle of the adoption curve, the most persuasive salesperson is the farmer down the road.

Labor Scarcity

Dairy farms face persistent difficulty hiring workers. Technology that watches cows around the clock helps farms with fewer people. This structural factor strengthens demand for monitoring regardless of milk prices and gives HerdSense a durable argument for its value.

Sustainability and Animal Welfare

Sheth et al. (2011) argued that sustainability requires a customer-centric approach, which they called mindful consumption, in which marketers encourage consumption that considers environmental and social effects. In dairy, milk processors and food brands increasingly ask farms for evidence on emissions and animal welfare to meet their own commitments. Health monitoring supports both: healthier cows produce milk more efficiently, which lowers emissions per gallon, and early detection of illness improves welfare. HerdSense has not marketed these benefits.

Ethical Considerations

The same data that support welfare claims could be used to pressure farmers or to make claims that overstate their practices. HerdSense must ensure that any sustainability reports built from its data are accurate and that farmers control whether their data are shared with processors.

Regulation and Trade

Dairy is shaped by government programs and trade. Federal milk pricing rules and margin protection programs affect how much farm income swings, and export markets for cheese and milk powder link Wisconsin farm prices to global demand. A trade dispute that closes an export market can lower milk prices within months. HerdSense cannot influence these policies, but it can watch them as early indicators of farm income and adjust its downturn playbook before sales fall. Data privacy rules for farm data are less developed than for consumer data, which places more responsibility on firms to set fair terms themselves.

How the Factors Interact

The forces reinforce each other. Consolidation concentrates cows on large farms, which face the hardest labor shortages and the strongest processor demands for sustainability evidence. Low milk prices accelerate the exit of small farms, speeding consolidation. Peer imitation spreads fastest in regions with many mid-size farms, which are shrinking in number. A strategy that addresses one force in isolation will miss these links. For example, a program aimed only at small farms may grow in the short run while its market shrinks.

Competitive Environment

European competitors with larger research budgets are expanding in the United States, and milk processors are beginning to bundle monitoring into supplier programs. These moves may commoditize basic alerts, which pushes HerdSense to compete on expertise, service and data insight rather than collars alone.

Strategic Implications

Five implications follow. First, adopt a downturn playbook: when milk prices fall below a set level, offer hardware financing and pause price increases, and keep marketing spending steady to take share. Second, build an imitation program that turns satisfied farmers into hosts of neighbor visits and field days through dealers. Third, redesign large-herd service to make consolidation profitable, as Week 3 proposed. Fourth, market labor savings as a core benefit. Fifth, offer optional, farmer-controlled sustainability and welfare reports that processors can use.

Limitations

The analysis relies on general industry trends rather than precise national figures, and the firm's own sales data are the main quantitative evidence. The sales patterns described cover only seven years and one firm, and they cannot separate the effect of milk prices from other changes. A longer panel across firms would allow stronger conclusions about how economic cycles affect technology adoption in agriculture.

Conclusion

HerdSense's success depends on forces beyond its walls: volatile farm income, consolidation, the pace of diffusion, labor scarcity and societal pressure for sustainability and welfare. Research on marketing in recessions, diffusion and agricultural adoption, and sustainable consumption explains how these forces shape demand and suggests that the firm can turn several of them into advantages through proactive downturn marketing, peer-driven adoption, profitable large-herd service and farmer-controlled sustainability reporting.

References

Bass, F. M. (1969). A new product growth for model consumer durables. Management Science, 15(5), 215-227. https://doi.org/10.1287/mnsc.15.5.215

Feder, G., & Umali, D. L. (1993). The adoption of agricultural innovations: A review. Technological Forecasting and Social Change, 43(3-4), 215-239. https://doi.org/10.1016/0040-1625(93)90053-A

Sheth, J. N., Sethia, N. K., & Srinivas, S. (2011). Mindful consumption: A customer-centric approach to sustainability. Journal of the Academy of Marketing Science, 39(1), 21-39. https://doi.org/10.1007/s11747-010-0216-3

Srinivasan, R., Rangaswamy, A., & Lilien, G. L. (2005). Turning adversity into advantage: Does proactive marketing during a recession pay off? International Journal of Research in Marketing, 22(2), 109-125. https://doi.org/10.1016/j.ijresmar.2004.05.002