Transcript Lesson 2 slides RBD comments

Lesson 2: Marketing
Outline of presentation
• Goals of Marketing Lesson
• Basic Marketing Concepts
– Market segmentation RBD—use better
word/concept—”defining your markets?”
– Segment examples
– Win-win scenarios
• How to use the tip sheets
• How to use the marketing worksheet and how
it relates to your business plan
Goals for Lesson 2
• To learn about a variety of marketing channels
• To understand the value of combining a few
marketing channels
• To consider each market channel individually
and what it would take to enter that market
• To identify the 2-4 market channels that seem
like the best fit for your farm business
• To identify challenges and next steps in
entering those markets
By the end of this lesson, you’ll have a
basic marketing plan for your farm
business! RBD: for slides 2&3, what
graphics could be added…also, where
would some of the Cornell videos fit
in?
Two ways to think about marketing
• Niche Market
– Specializes in satisfying
specific needs of
consumers
– Niche products are
attractive for specific
demographics, at
specific price points, and
at differing levels of
quality. RBD-remember
our audience—
demographics & price
points sound like
jargon…
• Commodity Markets
– A standard product that
is undifferentiated (not
different) from other
products within the
market.
– Commodity prices are
volatile (RBD: we need
to discuss what
“commodity” means..)
and typically set through
commodity exchanges
like the Chicago Board of
Trade.
Let’s talk about
niche marketing
RBD: I love graphics,
but can we get
something that
might be more
representative—we
don’t cover a lot of
meat niche
markets..
What is market segmentation?
• Two sections of a market are segmented if
price changes in one segment do not cause a
corresponding price change in another
segment (RBD: I’m going to be obnoxious and ask, “Why does the user need
to know about market segmentation—isn’t it enough to point out that different
markets have different prices and requirements?—market segmentation sounds a
bit like business school jargon….)
• For example:
– You have two customers. One is price sensitive and
buys in volume. Another wants frequent deliveries,
specialty cuts, and buys in lower volumes. The product
is the same, but the price is different depending on
value-added attributes.
Why do we segment the market?
– If there is more than one type of consumer,
then your job is to figure out how, and if, you
can sell to the different kinds of consumers…)
the market is not uniform
– A non-uniform market implies that among
consumers of your products, there are
different perceptions of value
– If there are different perceptions of value, then
it is possible to charge a different price for the
same product based on value-added traits
– Creates a more resilient business model.
What kinds of segments are there?
• Market Channel Segmentation: Segments based on
different outlets to sell products.
– Grocery, Farmers’ Markets, CSA, Restaurant
• Service Platform Segmentation: Segments based on the
services provided to a customer.
– Delivery, further processing
• Cultural Demographics Segmentation (RBD—need plain
language..I like the ideas, but not the language..)
– Halal, kosher, cabrito, organ meat, asian vegetables
• Values Segmentation: Segments based on customer
perceptions of value
– Organic, natural, local, grass-fed, farmer owned
No market segment type is an island, many overlap.
How do we segment the market?
• Identify different market venue, service, and
individual value segments in your area.
• Requires some sales legwork.
• Are you out talking to:
• Restaurant owners?
• Grocery Co-op managers?
• Individual consumers?
• What do they want?
• How can you fulfill those needs?
• Many will say low price!
– HOWEVER, the key is to identify something besides price that
helps them receive more value or better profitability.RBD—
i.e., quality, freshness, etc..)
Segment Example: Terminal/Shipping
point Markets
• Depending on your scale, these
commodity (need to define
“commodity”) markets might be a good
place to move excess production
– Remember: Multiple marketing outlets allow for
flexibility
• Beware that commodity markets might
have different standards than your local
market niche, never assume!
Segment Example: Restaurants
Requires:
• Effort and relationship building
with chefs and managers
• Consistent supply and quality
• Consistent delivery times
• Ease of communication with
supplier?
Restaurants typically want specific
products and may be willing to
pay more.
Segment Example: Restaurants
(Continued)
• Restaurant suppliers (your
competition) typically already
provide consistent supply, quality,
service, and competitive prices to
restaurants.
• Your typical restaurant buyer also
likes the convenience of fulfilling
all of his/her needs with one
phone call or on the internet.
• If you are going to compete with
other more established suppliers,
you must give the chef a reason
to make an extra phone call to
you.
Segment Example: Restaurants
• Your restaurant customer (this phrase is
somewhat confusing) must provide a
unique dining experience at a competitive
price.
– How can you help your customer provide
that?
• The local, family farm, or organic attributes might
be important… freshness, quality, helping local
economy…
• Can you provide unique cuts of meat that help
provide a unique dining experience
• Food prep time is a costly and difficult part of
restaurant management. Can you help your
customer decrease food prep time?
Segment Example: Community
Supported Agriculture (CSA)
• Requires consistent
supply and quality
• You can pre-sell your
production
• Delivery to a specified site
or direct to customer is
often required.
RBD: Seems like “segment” is equivalent to
“marketing channel”…also, I’m guessing
most folks using this will be doing
veggies, not livestock, so we need to
make this more relevant to that
segment…
Know your CSA Customer (continued)
• If you have customers that are cost conscious,
you need to show that you are competitive on
cost.
– Often, buying a whole carcass is actually cheaper than
if you bought equivalent cuts through retail channels.
Do your customers understand this?—again, animals
vs. veggies…
• If you have customers that are nervous about
paying up front, you need to alleviate this
problem.
– Can you deliver smaller individual quantities to a
group and charge on a weekly or monthly basis?
Segment Example:
Retail/Wholesale
• Requires consistent
supply and quality.
• May require GAP
certifications
• Very competitive.
• Potential for volume
Know your Grocery Store Customer
• What are retailer/wholesaler constraints?
– Cash is a significant limiting factor in retail venues.
It takes a lot of money to fully stock a store!!
– Retailers typically try to maximize their
sales/profit per square foot. RBD: But what do these 2 points
have to do with the farmer?
• Where does your retailer/wholesaler lose
money?
– Spoilage
– Devoting shelf space to products that have either
low margins or low rate of sales
Know your Grocery Store Customer
• How can you charge premium prices in a retail
store?
– Sufficiently increase inventory turns —this term
needs clarifying..
– Sufficiently increase profit per shelf (per square
foot)—how can a farmer effect this?—that’s the
owner’s decision..
• Sell a business deal:
– Sell numerous items (try 20 – 30) with frequent
delivery (low inventory ; low spoilage)
– Provide store signage to add value
Win-Win Scenarios
• Is dropping the price your first and only
method for increasing sales?
– This is win-lose. Your customer wins with cheaper
meat, you lose with cheaper meat.
– Is there a better way?
• Remember, if you don’t win you won’t be in
business for long. If your customer doesn’t
win … you won’t be in business for long either.
Win-Win Scenarios (An Example)
• If “my price sensitive customer, who is
nervous about the high upfront meat CSA
costs and would rather go to the grocery to
buy small quantities is resistant to buying
from me.” —hmm, this isn’t clear to me-RBD
• And If “I need to make sales and move the
entire carcass at a decent price.”
• Then “is it possible to deliver smaller
quantities on a weekly or monthly basis”
Win-Win Scenarios (An Example)
• The Result:
– you are selling a whole or half, giving the customer a better value than
they could get at the retail store, while also maintaining a fair price
– AND you allow them to pay in smaller increments, helping to alleviate
a customer’s resistance to buying your product.
• You win by making more sales at a fair price, thus
making more money. The customer wins by getting a
great product at a great price with payment terms
he/she can live with. Win – Win!
Tip sheets: how to use them
• You have 11 tip sheets in your packet
describing 11 different marketing channels
• These sheets are meant to help you think
about each marketing channel individually
and how well it might fit for your farm
• Read through each one and ask yourself the
questions at the bottom
• Try to answer those questions before moving
on to the next tip sheet
Marketing worksheet: How to use it
• This worksheet is meant to help you think
through how your selection of 2-4 marketing
channels will work together as a whole
marketing plan for your farm
• Use this worksheet to:
– Write down your choices for marketing outlets
– Why you chose them, and
– How they complement one another