Using Best-Worst Scaling to Determine Market Channel Choice by Small Farmers in Indonesia

A household survey and a novel Best-Worst scaling method are used to examine the relative importance of various buyer characteristics to small potato farmers in Indonesia. A Latent Class Cluster Analysis is used explore whether producers’ utilities for marketing channels are heterogeneous. For the aggregate sample, the attributes related to the buyer providing immediate cash payment, a price premium and always following through on their commitment to buy their potatoes were the three most important attributes. The results of the Latent Class Cluster Analysis found four unique classes or segments of producers, each with distinct utilities for buyer characteristics and interesting differences socio-demographic characteristics. The largest segment (44%) was relatively similar to the aggregate, placing a high importance on cash payment, price and willingness to negotiate. Two segments, 24% and 16% of producers placed a relatively high importance on the buyer providing access to certified potato seed or finance for purchasing inputs, and another segment placed the highest importance on having a long-term relationship with their buyer. This has interesting implications for traders, particularly traders who are interested in securing a long-term relationship with potato producers – simply being able to provide cash at the time potatoes are delivered and/or a small premium may immediately increase the strength of the relationship.