Transcript The Marketing Plan

Concept Development and
Market Planning
February 20, 2014
Dan Welch
NY FarmNet/FarmLink
Cover Slide Interpretation
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Translation: How big is this risk?
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Response: It depends…
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What’s your idea?
What motivates you to undertake a new venture?
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Personally?
In the market?
What’s your risk threshold?
What does your support network look like?
Have you done your homework?
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Do you have a business plan?
Do you have a marketing plan?
There’s more to Old MacDonald’s story
than the song lets on…
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Ag ventures are similar to other businesses in
that they require planning, resources across
development stages, and constant nurturing
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Ag ventures are unique in that:
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Livestock don’t take vacations
Earth continues to spin on it’s axis - Seasonality
Price variability
Regulatory oversight
Not all ideas are created equal…
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There are a lot of business ideas out there
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>50% of small businesses fail in first year
95% fail in first 5 years
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Source: U.S. Small Business Administration
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Ideally, an idea responds to a market need
and you not only enjoy providing that
good/service but YOU HAVE A
COMPETITIVE SKILL ADVANTAGE
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Is this idea feasible?
Feasibility
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Feasible defined: capable of being done or
carried out; suitable, reasonable, likely.
Synonym – possible
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Implied here is that what’s “possible” is a
determined by situational characteristics
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Which characteristics merit the closest look?
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Financial profile
Physical production capabilities
Marketing know-how
What do you want this business to be?
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Identify your goals/objectives and mission
statement. In other words, work backwards.
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Regardless of your philosophy. the customers
and market(s) you serve, the business needs
to be economically sustainable unless you
have no budget constraint
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Economic sustainability is strongly correlated
with the ability to sell your product
Marketing: Starting Points
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Marketing may be the last thing you want to
confront after production
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Marketing: a second full-time job
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Note, this excuse is not sufficient
Producers grow/process products well. Few are
naturally, and equally, as adept at marketing.
Farmers need buyers.
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You don’t have to consider market demand but you
may be saddled with a lot of cheese
or maple syrup…
Marketing: Starting Points
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Recommendation: work with NYSDAM agents
to minimize product safety risk, regulatory
missteps, etc.
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Remember, NYSDAM may be navigating the
learning curve with you.
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Case in point: The proliferation of small-scale dairy
processors in the state has invited a whole new set
of regulatory questions at processing
1. This isn’t how you want to start out your
dairy processing career.
2. Simply changing the sign is not enough.
Marketing Agenda
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The 4 Ps: product, price, promotion,
place/distribution
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Marketing plan
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Common strategy for addressing marketing needs
Why have one?
What’s in it?
 How do I come up with the numbers?
War stories from the ag front
The 4 Ps: Product
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What does the market want or need?
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What do you have a competitive advantage in
providing?
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What are the key market drivers?
Solicit feedback from friends and family before
settling on a product
Provide high quality product to market
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If you’re going to do it, do it right
The 4 Ps: Price
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Know your production costs so that you can
determine a breakeven sale price
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Know your competition
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How are similar products priced?
How price sensitive are potential customers?
Pricing is experimental
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Set a price then watch and see
Do not be afraid to explore the demand curve
The 4 Ps: Promotion
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Think like your customer.
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Are they looking for the “cheese story?”
Will they appreciate (meaning “pay more for”)
pretty packaging?
What product attributes do they care most about?
What are the most effective venues for promoting
your product?
A high quality product will help market itself.
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Consider food competitions where awards based on
objective/unbiased evaluation
The 4 Ps: Distribution/Place
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Fact: The product must physically move from
the farm to the consumer
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Question: Are you better off self-distributing
or outsourcing this responsibility?
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Decision is highly personal. What premium do you
place on your leisure time?
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To evaluate, need good information on: market
value of transportation, effort required to
coordinate with buyers, packaging, labeling, and
promotional tasks
The 4 Ps: Distribution/Place
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The time and labor commitment
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Distribution can be quite time consuming where
there are a very small number of workers. Selfdistribution may appear cost-effective but consider
the time constraints especially on already overextended laborers.
Re-evaluate distribution choices as the venture
mattures
The capital/equipment commitment
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Do you need refrigeration equipment?
Can you retro-fit your pick-up?
The 4 Ps: Distributrion/Place
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Market outlet choices are quite diverse
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Close proximity to several major metropolitan
markets. FYI – supplying larger markets is more
expensive
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Regional/local markets: restaurants, grocery
stores, farmers markets, specialty shops
Direct marketing: on-farm sales, farm stands, online sales
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The supply chain is less formal and structured
than you might expect (see handout)
The Marketing Plan
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Why have one?
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Necessary for a business plan
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Business plan is first and foremost for your own
benefit, then creditors, granting agencies, etc.
The importance of the marketing plan does
nothing to simplify the task. It’s timeconsuming and frustrating given the inherent
challenges of forecasting details about a new or
potential market. Consider it a long-run
investment.
The Marketing Plan
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What belongs in a marketing plan?
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Information as to how you will handle postproduction responsibilities.
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For individual pieces, see handout
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Recommendation: put as many (credible)
numbers in as you possibly can to help link
production and marketing information in your
business plan.
The Numbers in a Marketing Plan
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What numbers?
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How do I get the numbers?
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Target market estimates: How many likely customers per
market outlet?
Pricing: Breakeven cost(s), strategic pricing
Marketing costs: Alternative scenarios across mix of
distribution, promotion, pckging/labeling
Census data, store managers, observation
Talk to vendors
Why worry about the numbers?
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It allows you to link the marketing and business plans
Do not underestimate the value of marketing
information
Stories from the ag front line…
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Example 1: Specialty cheese venture
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Characterized by large budget
Still took 5+ years to turn a profit
Lost cheese maker, now where to find sheep’s
milk?
Example 2: Food bank/produce grower
diversifies into distribution
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Business goal: leverage resources better for
benefit of local community
Wait – our target audience needs more handholding…
To Market We Go…
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Be prepared. Do your homework. Be
objective during the marketing planning
stage.
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Recognize that marketing plans have to be
flexible. People and markets are dynamic.
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Final point: stop and re-evaluate your
business objectives when the ag venture
is no longer fun.
NY FarmNet and FarmLink Resources
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FarmNet offers business planning and
financial consultation to NY farmers
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FarmLink offers assistance with estate and
farm succession planning to NY farmers
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All services are strictly confidential and free
of charge