Transcript Marketing 101 - College of Agriculture & Natural Resources

MARKETING 101
Introduction to Marketing Farm
Products
WHICH IS
BEST FOR
YOU?
Ginger Myers
University of Maryland Extension
Director, Maryland Rural Enterprise
Development Center
[email protected], 301-432-2767
Tell me about yourself:
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What kind of farm?
Are you currently marketing? How?
What are your key marketing issues,
questions, and concerns
A TALE of TWO MAPS…
2007 US Population
Concentrations
2007 Direct Marketing
Concentrations
TYPES OF MARKETING
STRATEGIES
Retail
Direct Wholesale
Wholesale
RETAIL
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Farmer
Final Customer
CSA
Subscription farms/
Home delivery
 e-business
 Farm markets/
Roadside stand
Level of
 U-Pick
Complexity
 Farmers’ markets
 Off-the-farm (e.g., freezer trade)
Off-the-Farm
Off-The-Farm
PLUSES
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Most simple form of
marketing
Cash and carry
Minimal advertising
Word of mouth
Customers come to
you
MINUSES
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Possible Regulations
Interruptions
Farmers’ Markets
FARMERS’ MARKETS
PLUSES
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Low cost
Low risk
Easy to start and exit
Test market products
Learn skills
Share information
MINUSES
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Profitable? returns
Market politics
Volunteer time
U-PICK (PYO)
U-PICK
PLUSES
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Low cost
Low risk
Stay on farm
Fewer crops
MINUSES
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Declining popularity
Deceptive simplicity
Liability
Farm Market / Roadside Stand
Farm Market / Roadside Stand
PLUSES
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Moderate risk
Your own little store!
Great range
Local institution
MINUSES
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Investment
Zoning
Space
Self Help Stand?
E-Business
PLUSES
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Modest investment
Market is increasing
Seasonal
Great for educating
Convenient (Secure
credit cards or 800#)
Consider “drop
shipping” for a giant
MINUSES
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No get rich quick
Time consuming
Must keep updated
Seasonal
Cost-effective
shipping is key to
profitability
Community Supported Agriculture
M e m b e rs o f W e st H a v e n F a rm , a C S A in Ith a c a , N e w Y o rk ,
w o rk in th e f ie ld s, w e sth a v e n f a rm .ith a c a .n y .u s .
CSA
PLUSES
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Sense of community
Income in the Spring
Educate the public
Robyn Van En Center
MINUSES
Complex
organization
 $$ financial return
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DIRECT WHOLESALE
Farmer
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Buyer
Institutions
Grocery stores
Restaurants
Food co-ops
Final Customer
Level of
Complexity
Hendersonville (NC) Community
Food Coop
Food Coops
PLUSES
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Like farmers
Educated market
Tend to be
flexible
MINUSES
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Prefer organic
Price inelastic
Manager
turnover
Politics
Restaurant Agriculture
Restaurant Agriculture
PLUSES
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Good Chefs love
farmers
Price premiums
for quality
Some flexibility
Slowfood.com
Chefs Collaborative
MINUSES
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Few good chefs
Late payers
Go out of
business
Chef leaves
Can be fussy
GROCERY STORES
Grocery Stores
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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
INSTITUTIONAL SALES
INSTITUTIONAL SALES
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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
TRADITIONAL WHOLESALE
Farmer
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Re-seller
Cooperative
Wholesaler/Distributor
Auction
Final Customer
Level of
Complexity
THE “MIDDLEMEN”
WHOLESALER
Wholesaler
Purveyor
Shipper
Broker
Jobber
Grower Cooperatives
Produce Auctions
Leola Produce Auction
in Lancaster County, Pennsylvania
HOW THE MARKET
STRATEGY CHOOSES YOU
Skills
Location
Product
Resources
1. SKILL SET
LEVEL OF IMPORTANCE
Retail
Direct Wholesale
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Merchandizing
People skills
Multi-tasking
Self Discipline
Negotiating
Flexibility
high
high
high
high
medium
high
medium
medium
medium
high
high
high
2. LOCATION
LEVEL OF IMPORTANCE
Retail
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Customers proximity
Visual Appeal
Highway access
Safety
high
high
mod
high
Direct Wholesale
moderate
moderate
moderate
moderate
3. PRODUCT
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Volume
Variety
Quality
Retail
Direct Wholesale
mod
mod
high
larger
larger
mod-high
4. START-UP RESOURCES
LEVEL OF IMPORTANCE
Retail vs.
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Sweat equity
Marketing cost
Land base
Total investment
high
low-mod
smaller
low
Direct Wholesale
mod-high
low
larger
mod
Marketing Basics
Relationship Marketing
Merchandizing
Pricing
Promotion
“RELATIONSHIP MARKETING”
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What it is NOT:
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Target marketing
Guerilla marketing
Marketing tactics
Capturing markets
Penetrating markets
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What it IS:
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Educating/Learning
Building trust (social
capital; civic capital)
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Offering values
(“values adding”
marketing)
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Who are YOUR Customers?
Roadside Stand Customer Profile (Wisconsin Study)
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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)
WHAT CUSTOMERS WANT
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Convenience
Value
A Taste of Place
Entertainment
Memories
Expression of their values
Safe food
Merchandising Tips
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Displays must be colorful, bountiful (bulk)
Emphasize special products
Change displays often
Remove displays that aren’t 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)
Top Secrets of
Relationship Marketing
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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
The First 10 Seconds are Critical!
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Recognize the customer immediately
Smile sincerely
Keep work areas neat
Be neat and well groomed
Don’t be over solicitous
Pricing Strategies
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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
Pricing Strategies
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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 evenending. 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
Rule of Thumb Marketing
Sequence
Direct Mail
Newsletter
Word of Mouth
Time
Mass Media A (newspapers, billboard)
Mass Media B (television, radio)
Collateral Marketing Material
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Logo/trademark
Stationery
Brochure
Biz card
Answering machine
Website
Signage
Unifying theme
and artwork
Top Secret Tricks of Marketing
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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
Don’t be stingy
DIRECT MARKETING
PROMOTION STRATEGIES
The most popular
The most effective
The most expensive
TYPES OF PROMOTION USED
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WWW
Sign
 Chamber of Commerce
Newspaper
 Radio
Farm Fresh Food guide
 Yellow Pages
County guide
 Newsletter
Brochure
 Tourism association
TV
 Magazine
Ag association
 Motorcoach tours
Direct mail
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Risk Management Strategies
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Conduct pre-feasibility assessment
Consider biosecurity problems
Talk with insurance agent
Visit operations similar to what you have
proposed
Examine overall financial position
INFORMATION RESOURCES
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LocalHarvest.com
Direct Marketing websites
ATTRA.com
University of Maryland Extension
Maryland Department of Agriculture
Commodity Groups