Co-operative Marketing

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 Introduction
Different forms of business orgs:
1. Sole proprietorship
2. Partnership
3. Joint stock company [Corporations/Ltd. Companies]etc.
Besides many differences among them in respect of their formation,
operation, capital contribution as well as liabilities, one common
similarity is that they all engage in business activities to earn profit.
There are certain orgs which undertake business activities with the prime
objective of providing service to the members. Although some amount
of profit is essential to survive in the market, their main intention is not
to generate profit and grow.
They pool available resources from the members, utilise the same in the
best possible manner and the benefits are shared by the members.
 Meaning of Co-operative Society
 A poor villager has two cows and gets 10 litres of milk. After
consumption, there is a surplus of 5 liters per day.
 What can he do with the surplus? He may want to sell the milk but
may not find a customer in the village.
 Somebody may tell him to sell the milk in the nearby town or city.
Again he finds it difficult, as he does not have money to go to the
town to sell milk.What should he do? He is faced with a problem.
 What could be the solution for him?
 There are many others like him in the village & also nearby village.
 In the morning they can collect the surplus milk at a common place,
send somebody to the nearby town to sell. In the evening, they can
sit together and distribute the money according to their contribution
of milk after deducting all the expenses from the sale proceeds.
 Contd….
 Group of milk producers is now formed by the villagers.
 By selling the milk in the nearby town they were all able to earn money.
 No problem of finding a market for the surplus milk.
 Instead of selling only milk why not produce other milk products like ghee,
butter, cheese, milk powder etc. and sell them in the market at a better
price?
 They produced quality milk products and found a very good market for
their products not only in the nearby town but in the entire country.
 Just think it over. A poor villager, who was not able to sell five litres of milk
in his village, is now selling milk and milk products throughout the nation.
 He is now enjoying a good life. How did it happen? Who made it possible?
This is the reward of a joint effort or co-operation.
 Contd……..
 The term co-operation is derived from the Latin word co-operari,
where the word co means ‘with’ and operari means ‘to work’. Thus, co-
operation means working together.
 So those who want to work together with some common economic
objective can form a society which is termed as “co-operative society”.
It is a voluntary association of persons who work together to promote
their economic interest. It works on the principle of self-help as well as
mutual help.
 The main objective is to provide support to the members. Nobody
joins a cooperative society to earn profit. People come forward as a
group, pool their individual resources, utilise them in the best possible
manner, and derive some common benefit out of it.
 contd..
 In a similar way, the consumers of a particular locality can join hands
to provide goods of their daily need and thus, form a co-operative
society.
 Now they can buy goods directly from the producers and sell those
to members at a cheaper price. Why is the price cheaper? Because
they buy goods directly from the producer and thereby the
middlemen’s profit is eliminated.
 In the same way people can form other types of co-operative
societies as well.
 Types of Co-operative Society

1. Consumers’ Co-operative Society: These societies are formed to

protect the interest of general consumers by making consumer goods
available at a reasonable price.
2. Producers’ Co-operative Society: These societies are formed to
protect the interest of small producers by making available items of their
need for production like raw materials, tools and equipments, machinery,
etc.
3. Co-operative Marketing Society: These societies are formed by small
producers and manufacturers who find it difficult to sell their products
individually. The society collects the products from the individual members
and takes the responsibility of selling those products in the market. Gujarat
Co-operative Milk Marketing Federation that sells AMUL milk products is
an example of marketing co-operative society.
 Contd…..
4. Co-operative Credit Society: These societies are formed to
provide financial support to the members. The society accepts deposits from
members and grants them loans at reasonable rates of interest in times of need.
Village Service Co-operative Society and Urban Cooperative Banks are examples of
co-operative credit society.
5. Co-operative Farming Society: These societies are formed by
small farmers to work jointly and thereby enjoy the benefits of large-scale farming.
6. Housing Co-operative Society: These societies are formed
to provide residential houses to members. They purchase land,
develop it and construct houses or flats and allot the same to
members. Some societies also provide loans at low rate of interest to
members to construct their own houses. The Employees’ Housing
Societies and Metropolitan Housing Co-operative Society are
examples of housing co-operative society.
 Characteristics of Co-operative Society

i. Open membership: to all who have a common interest. A minimum

of ten members [maximum not specified] are required to form a
cooperative society. However, after the formation of the society, the
member may specify the maximum number of members.
ii. Voluntary Association: Members join the co-operative society
voluntarily. A member can join the society as and when he likes,
continue for as long as he likes, and leave the society at will.
iii. State control: To protect the interest of members, co-operative
societies are placed under state control through registration. While
getting registered, a society has to submit details about the members
and the business it is to undertake. It has to maintain books of accounts,
which are to be audited by government auditors.
iv. Sources of Finance: In a co-operative society capital is contributed
by all the members. However, it can easily raise loans and secure grants
from government after its registration.
 Contd…..
v. Democratic Management: managed by a group known as “Board
of Directors”. The members of the board of directors are the elected
representatives of the society. Each member has a single vote,
irrespective of the number of shares held.
iv. Service motive: Co-operatives are not formed to maximise profit
but to provide service to its members. For example, in a Consumer
Co-operative Store, goods are sold to its members at a reasonable
price by retaining a small margin of profit.
v. Separate Legal Entity: A Co-operative Society is registered under
the Co-operative Societies Act. After registration a society becomes a
separate legal entity, with limited liability of its members. Death,
insolvency or lunacy of a member does not affect the existence of a
society. It can enter into agreements with others and can purchase or
sell properties in its own name.
Contd…..
vi. Distribution of Surplus: Profit generated is distributed to its
members not on the basis of the shares held by the members (like
the company form of business), but on the basis of members’
participation in the business of the society. For example, in a
consumer co-operative store only a small part of the profit is
distributed to members as dividend on their shares; a major part
of the profit is paid as purchase bonus to members on the basis of
goods purchased by each member from the society.
vii. Self-help through mutual cooperation: Co-operative
Societies thrive on the principle of mutual help. They are the
organisations of financially weaker sections of society. Works on
the principle of “Each for all and all for each”.
 Formation of a Co-operative Society

 A Co-operative Society can be formed as per the provisions of the Co-operative Societies
Act, 1912. At least ten persons having the capacity to enter into a contract with common
economic objectives, like farming, weaving, consuming, etc. can form a Co-operative
Society. A joint application along with the bye-laws of the society containing the details
about the society and its members, has to be submitted to the Registrar of Co-operative
Societies of the concerned state. After scrutiny of the appliation and the bye–laws, the
registrar issues a Certificate of Registration.
 Requirements for Registration:
1. Application with the signature of all members
2. Bye-laws of the society containing:
(a) Name, address and aims and objectives of the society;
(b) Names, addresses and occupations of members;
(c) Mode of admitting new members;
(d) Share capital and its division.
 Advantages of Co-operative Society
i. Easy Formation: Formation of a co-operative society is very easy compared to a joint stock
company. Any ten adults can voluntarily form an association and get it registered with the Registrar
of Co-operative Societies.
ii. Open Membership: Persons having common interest can form a co-operative society. Any
competent person can become a member at any time he/she likes and can leave the society at will.
iii. Democratic Control: A co-operative society is controlled in a democratic manner. The members
cast their vote to elect their representatives to form a committee that looks after the day-to-day
administration.This committee is accountable to all the members of the society.
iv. Limited Liability: The liability of members of a co-operative society is limited to the extent of
capital contributed by them. Unlike sole proprietors and partners the personal properties of
members of the co-operative societies are free from any kind of risk because of business liabilities.
v. Elimination of Middlemen’s Profit: Through co-operatives the members or consumers control
their own supplies and thus, middlemen’s profit is eliminated.
vi. State Assistance: Both Central and State governments provide all kinds of help to the societies.
Such help may be provided in the form of capital contribution, loans at low rates of interest,
exemption in tax, subsidies in repayment of loans, etc.
vii. Stable Life: A co-operative society has a fairly stable life and it continues to exist for a long period
of time. Its existence is not affected by the death, insolvency, lunacy or resignation of any of its
members.
 Limitations of Co–operative Society:
i. Limited Capital: The amount of capital that a cooperative society can raise
from its member is very limited because the membership is generally confined to a
particular section of the society. Again due to low rate of return the members do not
invest more capital. Government’s assistance is often inadequate for most of the co-
operative societies.
ii. Problems in Management: Generally it is seen that co-operative
societies do not function efficiently due to lack of managerial talent. The members or
their elected representatives are not experienced enough to manage the society. Again,
because of limited capital they are not able to get the benefits of professional
management.
iii. Lack of Motivation: Every co-operative society is formed to
render service to its members rather than to earn profit. This does
not provide enough motivation to the members to put in their
best effort and manage the society efficiently.
iv. Lack of Co-operation: The co-operative societies are formed with the idea of
mutual co-operation. But it is often seen that there is a lot of friction between the
members because of personality differences, ego clash, etc. The selfish attitude of
members may sometimes bring an end to the society.
v. Dependence on Government: The inadequacy of capital and various other
limitations make cooperative societies dependant on the government for support
and patronage in terms of grants, loans subsidies, etc. Due to this, the government
sometimes directly interferes in the management of the society and also audit their
annual accounts.
 ………

 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.
 Contd…..
 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.

 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.
 Benefits of co-operative marketing

Economies of scale - When you are buying supplies, a

consolidated order that contains pallets or bulk orders
is cheaper than individually buying a small amnt of
supplies.
Bargaining power -A group effort can combine available
supply of product or consolidate services offered that
allow bargaining power for the group.
 Contd…..

 Flow of product - Retail markets require some

consistency in flow of product to their establishments.
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.
 Contd…..

 Access to professional assistance/expertise (hire support) - If you

join a cooperative marketing group that hired a marketing manager
and all you had to do was raise a top quality product/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.
 Maintaining more of the retail dollar -increasing the financial
income for your operation can be achieved through reducing costs of
supplies by bulk purchasing or increasing the income by tapping new
markets, keeping existing markets or negotiating a higher price in
new and existing markets.
 Challenges of co-operative marketing

why isn’t everyone a member of a cooperative marketing effort? There

are some challenges to cooperative marketing efforts. As an
individual, you are making the decisions, but in a group cooperative
marketing effort, there are several members who need to agree with
the decision of the effort.
 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.
 Trust and sharing of information - This trust must occur among
members to keep members loyal and make the effort function
successfully in the future.
 Group dynamics (democratic group decision making and costs)
 Lack of commitment from members - Members can become disloyal
members in the blink of an eye.
 AMUL – Co-operative marketing

AMUL – Anand Milk Union Ltd. It was formed in 1946, a dairy co-
operative movement in India. It is a brand name managed by an apex
co-operative organisation named as Gujarat Co-operative Milk
Marketing Federation Ltd. [GCMMF], jointly owned by about 2.6
million milk producers in Gujarat.
Products – bread spreads, milk drinks, powder milk, fresh milk,
cheese, chocolate.
Amul product’s diversification
1. Dairy products - bread spreads, milk drinks, powder milk, fresh
milk, cheese, chocolate.
2. Non dairy products – vegetable oils, snacks, instant food etc.
Benefits of diversification – high growth rate, expansion of network
etc.
 BUSINESS MODEL OF AMUL

Everyday Amul collects 7 millions of milk from 2.6 million

farmers and convert this milk into branded, packaged
products and deliver to over 5 lakh retail outlets across India.
SEGMENTATION –
Wide range of product categories caters to consumers across all
market segment. Example, Amul kool is a target at children,
while teenager prefer Kool Café……low price range to high
price range.
TARGETTING – open stores at IIM, IIT, bank’s complex,
shopping malls etc., diabetes customers etc
 …………
PROMOTION – through different electronic media, BILL
BOARD [most popular for amul]

Intelligent Marketing – Amul spends very less budget in

advertising/promotional activities. Butter girl has been used
since the last 41 years or so. Amul star voice of India etc.

Competitors – Britannia, Nestle, HLL, Cadbury, Mother Dairy

etc.
Conclusion
1. Has good strategy for selling
2. For all segment of products are available