MARKETING 101 Introduction to Marketing Farm Products

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MARKETING 101Introduction to Marketing Farm
Products
WHICH IS BEST FOR YOU?

• Ginger Myers
• University of Maryland Extension
• Director, Maryland Rural Enterprise Development
  Center
• gsmyers_at_umd.edu, 301-432-2767

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Tell me about yourself

• What kind of farm?
• Are you currently marketing? How?
• What are your key marketing issues, questions,
  and concerns

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A TALE of TWO MAPS
2007 US Population Concentrations
2007 Direct Marketing Concentrations
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TYPES OF MARKETING STRATEGIES

• Retail
• Direct Wholesale
• Wholesale

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RETAIL
Farmer Final Customer

• CSA
• Subscription farms/
• Home delivery
• e-business
• Farm markets/
• Roadside stand
• U-Pick
• Farmers markets
• Off-the-farm (e.g., freezer trade)

Level of Complexity
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Off-the-Farm
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Off-The-Farm
PLUSES MINUSES

• Most simple form of marketing
• Cash and carry
• Minimal advertising
• Word of mouth
• Customers come to you

• Possible Regulations
• Interruptions

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Farmers Markets
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FARMERS MARKETS
PLUSES MINUSES

• Low cost
• Low risk
• Easy to start and exit
• Test market products
• Learn skills
• Share information

• Profitable? returns
• Market politics
• Volunteer time

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U-PICK (PYO)
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U-PICK
PLUSES MINUSES

• Low cost
• Low risk
• Stay on farm
• Fewer crops

• Declining popularity
• Deceptive simplicity
• Liability

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Farm Market / Roadside Stand
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Farm Market / Roadside Stand
PLUSES MINUSES

• Moderate risk
• Your own little store!
• Great range
• Local institution

• Investment
• Zoning
• Space

Self Help Stand?
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E-Business
PLUSES MINUSES

• Modest investment
• Market is increasing
• Seasonal
• Great for educating
• Convenient (Secure credit cards or 800)
• Consider drop shipping for a giant

• No get rich quick
• Time consuming
• Must keep updated
• Seasonal
• Cost-effective shipping is key to profitability

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Community Supported Agriculture
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CSA
PLUSES MINUSES

• Sense of community
• Income in the Spring
• Educate the public

• Complex organization
• financial return

Robyn Van En Center
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DIRECT WHOLESALE
Farmer Buyer Final Customer

• Institutions
• Grocery stores
• Restaurants
• Food co-ops

Level of Complexity
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Hendersonville (NC) Community Food Coop
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Food Coops
PLUSES MINUSES

• Like farmers
• Educated market
• Tend to be flexible

• Prefer organic
• Price inelastic
• Manager turnover
• Politics

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Restaurant Agriculture
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Restaurant Agriculture
PLUSES MINUSES

• Good Chefs love farmers
• Price premiums for quality
• Some flexibility

• Few good chefs
• Late payers
• Go out of business
• Chef leaves
• Can be fussy

Slowfood.com Chefs Collaborative
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GROCERY STORES
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Grocery Stores

• Start with Mom and Pops (Grauls, country stores)
• Offer samples and freebies
• Sell only high quality
• Small retailers want small packs
• Provide references
• Do your own merchandizing

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INSTITUTIONAL SALES
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INSTITUTIONAL SALES

• Stick with small accounts to start
• Offer value-added options if possible
• Emphasize freshness and health
• Develop relationship with dietician or menu
  planner
• Consider training kitchen staff
• Explain seasonal variation and benefits

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TRADITIONAL WHOLESALE
Farmer Re-seller Final Customer

• Cooperative
• Wholesaler/Distributor
• Auction

Level of Complexity
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THE MIDDLEMEN
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WHOLESALER
Wholesaler Purveyor Shipper Broker Jobber
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Grower Cooperatives
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Produce Auctions
Leola Produce Auction in Lancaster County,
Pennsylvania
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HOW THE MARKET STRATEGY CHOOSES YOU

• Skills
• Location
• Product
• Resources

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1. SKILL SET
LEVEL OF IMPORTANCE
Retail Direct Wholesale

• Merchandizing high medium
• People skills high medium
• Multi-tasking high medium
• Self Discipline high high
• Negotiating medium high
• Flexibility high high

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2. LOCATION
LEVEL OF IMPORTANCE
Retail Direct Wholesale

• Customers proximity high moderate
• Visual Appeal high moderate
• Highway access mod moderate
• Safety high moderate

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3. PRODUCT
Retail Direct Wholesale

• Volume mod larger
• Variety mod larger
• Quality high mod-high

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4. START-UP RESOURCES
LEVEL OF IMPORTANCE
Retail vs. Direct Wholesale

• Sweat equity high mod-high
• Marketing cost low-mod low
• Land base smaller larger
• Total investment low mod

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Marketing Basics

• Relationship Marketing
• Merchandizing
• Pricing
• Promotion

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RELATIONSHIP MARKETING

• What it is NOT
• Target marketing
• Guerilla marketing
• Marketing tactics
• Capturing markets
• Penetrating markets

• What it IS
• Educating/Learning
• Building trust (social capital civic capital)
• Offering values (values adding marketing)

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Who are YOUR Customers?Roadside Stand Customer
Profile (Wisconsin Study)

• Half are gardeners
• Average 7 to 12 in purchases per visit
• 55 learn about the business by WOM!
• 80 live within 40 miles of market
• Shop an average of 2 times per month at the stand
  (versus 2.2 times per week at the grocery store)
• They expect higher quality and lower prices than
  supermarkets
• They will increase purchases if you offer more
  ways to prepare the product.
• 20 of customers are lost every year (death, move
  away, shop elsewhere)

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WHAT CUSTOMERS WANT

• Convenience
• Value
• A Taste of Place
• Entertainment
• Memories
• Expression of their values
• Safe food

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Merchandising Tips

• Displays must be colorful, bountiful (bulk)
• Emphasize special products
• Change displays often
• Remove displays that arent selling
• Someone should always be available to answer
  questions
• Offer only top quality
• Offer impulse purchase items near checkout
  counter
• Packaging is 90 of the sale (according to the
  International Jam, Jelly and Preserve
  Association)
• Cross merchandize (apple peeler and apples sweet
  corn holder and sweet corn)

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Top Secrets of Relationship Marketing

• Talk to customers
• Start small
• ID secondary buyer or make donations
• Be a trend spotter!
• Sell only high quality
• Use season extending technology, but
• Learn intensive production techniques
• Always deliver what, how much, and when you said
  you would deliver
• Consider VA convenience
• Create a unique atmosphere in your stand
• Consider agritourism

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The First 10 Seconds are Critical!

• Recognize the customer immediately
• Smile sincerely
• Keep work areas neat
• Be neat and well groomed
• Dont be over solicitous

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Pricing Strategies

• Keep it simple
• Customers see relatively little difference
  between 5.50 and 6.59 but they may balk at
  6.60
• Supermarkets tend to end prices with 9.
• In retail, stick with prices that are in 25 cent
  increments (e.g., 75c) to speed sales

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Pricing Strategies

• Price-lining Price-lining features products at a
  limited number of prices, reflecting varying
  product quality or product lines. This strategy
  can help smart marketers to sell top quality
  produce at a premium price and an "economy line",
  e.g. overripe or smaller fruits. Price-lining can
  also make shopping easier for consumers and
  sellers because there are fewer prices to
  consider and handle.
• Single-pricing The single-price strategy charges
  customers the same price for all items. Items are
  packaged in different volumes based on the single
  price they would be sold for. With such a policy
  the variety of offerings is often limited. The
  strength is being able to avoid employee error
  and facilitate the speed of transactions. Also,
  customers know what to expect. There are no
  surprises for customers.
• Loss-leader pricing A less-than-normal markup or
  margin on an item is taken to increase customer
  traffic. The loss-leaders should be well-known,
  frequently purchased items. The idea is that
  customers will come to buy the "leaders" and will
  also purchase regularly priced items. If
  customers only buy the "loss leaders," the
  marketer is in trouble.
• Odd-ending pricing Odd-ending prices are set
  just below the dollar figures, such as 1.99 a
  pound instead of 2.00. Some believe that
  consumers perceive odd-ending prices to be
  substantially lower than prices with even-ending.
  However, it might not be suitable in some
  markets. For example, in a farmers¹ market
  situation, products should be priced in round
  figures to speed up sales and eliminate problem
  with change.
• Quantity discount pricing A quantity discount is
  given to encourage customers to buy in larger
  amounts, such as 2.00 each and three for 5.00.
  Gross margins should be computed on the quantity
  prices.
• Volume pricing Volume pricing uses the
  consumers' perception to its advantage, and no
  real discount is given to customers. Rather than
  selling a single item for 2.50, two are priced
  for 4.99 or 5.00.
• Cumulative pricing Price discount is given base
  on the total volume purchased over a period of
  time. The discount usually increases as the
  quantity purchased increases. The type of pricing
  has a promotional impact because it rewards a
  customer for being a loyal buyer.
• Trade discount/Promotional allowances Price is
  reduced in exchange for marketing services
  performed by buyers or to compensate buyers for
  performing promotional services.
• Cash discount A discount is given to buyers who
  pay the bills within a specified period of time
  to encourage prompt payment.
• Seasonal discount This type of discount is used
  to induce buyers to purchase at the end of the
  season or during off-season

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Rule of Thumb Marketing Sequence
Direct Mail
Word of Mouth
Newsletter
Time
Mass Media A (newspapers, billboard)
Mass Media B (television, radio)
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Collateral Marketing Material

• Logo/trademark
• Stationery
• Brochure
• Biz card
• Answering machine
• Website
• Signage

Unifying theme and artwork
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Top Secret Tricks of Marketing

• PYO use classifieds
• Only go after the high end restaurants
• Romance your customer
• Develop Point of Purchase materials (recipe pads,
  tent cards, shelf talkers, etc.)
• Specialties should be premium priced
• Get professional help with logo or brand name
• Know the difference between promotion and
  advertising
• Do not shotgun your advertising (try coupons)
• Turn lemons into lemonade
• Dont be stingy

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DIRECT MARKETING PROMOTION STRATEGIES

• The most popular
• The most effective
• The most expensive

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TYPES OF PROMOTION USED

• WWW
• Chamber of Commerce
• Radio
• Yellow Pages
• Newsletter
• Tourism association
• Magazine
• Motorcoach tours

• Sign
• Newspaper
• Farm Fresh Food guide
• County guide
• Brochure
• TV
• Ag association
• Direct mail

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Risk Management Strategies

• Conduct pre-feasibility assessment
• Consider biosecurity problems
• Talk with insurance agent
• Visit operations similar to what you have
  proposed
• Examine overall financial position

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INFORMATION RESOURCES

• LocalHarvest.com
• Direct Marketing websites
• ATTRA.com
• University of Maryland Extension
• Maryland Department of Agriculture
• Commodity Groups