marketing 101 introduction to marketing farm products ginger myers university of maryland extension...
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MARKETING 101Introduction to Marketing Farm
Products
Ginger Myers
University of Maryland Extension
Director, Maryland Rural Enterprise Development Center
[email protected], 301-432-2767
WHICH IS BEST FOR YOU?
Tell me about yourself:
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
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
Farmer Final Customer
Off-the-Farm
Off-The-Farm
Most simple form of marketing
Cash and carry Minimal advertising Word of mouth Customers come to
you
Possible Regulations Interruptions
PLUSES MINUSES
Farmers’ Markets
FARMERS’ MARKETS
Low cost Low risk Easy to start and exit Test market products Learn skills Share information
Profitable? returns Market politics Volunteer time
PLUSES MINUSES
U-PICK (PYO)
U-PICK
Low cost Low risk Stay on farm Fewer crops
Declining popularity Deceptive simplicity Liability
PLUSES MINUSES
Farm Market / Roadside Stand
Farm Market / Roadside Stand
Moderate risk Your own little store! Great range Local institution
Investment Zoning Space
Self Help Stand?
PLUSES MINUSES
E-Business
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
PLUSES MINUSES
Community Supported Agriculture
M em bers of W est H av en Farm , a C SA in Ithaca, New York, work in the f ie lds, westhav enfarm .ithaca.ny.us.
CSA
Sense of community Income in the Spring Educate the public
Complex organization
$$ financial return
PLUSES MINUSES
Robyn Van En Center
DIRECT WHOLESALE
Institutions Grocery stores Restaurants Food co-ops
Level of Complexity
Farmer Buyer Final Customer
Hendersonville (NC) Community Food Coop
Food Coops
Like farmers Educated market Tend to be
flexible
Prefer organic Price inelastic Manager
turnover Politics
PLUSES MINUSES
Restaurant Agriculture
Restaurant Agriculture
Good Chefs love farmers
Price premiums for quality
Some flexibility
PLUSES MINUSES Few good chefs
Late payers Go out of
business Chef leaves Can be fussySlowfood.com
Chefs Collaborative
GROCERY STORES
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
INSTITUTIONAL SALES
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
TRADITIONAL WHOLESALE
Cooperative Wholesaler/Distributor Auction Level of
Complexity
Farmer Re-seller Final Customer
THE “MIDDLEMEN”
WHOLESALER
WholesalerPurveyorShipperBrokerJobber
Grower Cooperatives
Produce AuctionsLeola Produce Auction in Lancaster County, Pennsylvania
HOW THE MARKET STRATEGY CHOOSES YOU
Skills
Location
Product
Resources
1. SKILL SET
Merchandizing high medium People skills high medium Multi-tasking high medium Self Discipline high high Negotiating medium high Flexibility high high
Retail Direct Wholesale
LEVEL OF IMPORTANCE
2. LOCATION
Customers proximity high moderate Visual Appeal high moderate Highway access mod moderate Safety high moderate
Retail Direct Wholesale
LEVEL OF IMPORTANCE
3. PRODUCT
Volume mod larger Variety mod larger Quality high mod-high
Retail Direct Wholesale
4. START-UP RESOURCES
Sweat equity high mod-high Marketing cost low-mod low Land base smaller larger Total investment low mod
Retail vs. Direct Wholesale
LEVEL OF IMPORTANCE
Marketing BasicsRelationship Marketing
MerchandizingPricing
Promotion
“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)
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)
WHAT CUSTOMERS WANT
Convenience Value A Taste of Place Entertainment Memories Expression of their values Safe food
Merchandising Tips 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
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!
Recognize the customer immediately Smile sincerely Keep work areas neat Be neat and well groomed Don’t be over solicitous
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
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
Rule of Thumb Marketing Sequence
Direct Mail
Mass Media A (newspapers, billboard)
Mass Media B (television, radio)
Word of MouthNewsletter
Time
Collateral Marketing Material
Logo/trademark Stationery Brochure Biz card Answering machine Website Signage
Unifying themeand artwork
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 Don’t be stingy
DIRECT MARKETING PROMOTION STRATEGIES
The most popular
The most effective
The most expensive
TYPES OF PROMOTION USED
Sign Newspaper Farm Fresh Food guide County guide Brochure TV Ag association Direct mail
WWW Chamber of Commerce Radio Yellow Pages Newsletter Tourism association Magazine Motorcoach tours
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
INFORMATION RESOURCES
LocalHarvest.com Direct Marketing websites ATTRA.com University of Maryland Extension Maryland Department of Agriculture Commodity Groups