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MARKETING 101 Introduction to Marketing Farm Products

MARKETING 101 Introduction to Marketing Farm Products

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MARKETING 101 Introduction to Marketing Farm Products

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  1. MARKETING 101Introduction to Marketing Farm Products WHICH IS BEST FOR YOU? Ginger Myers University of Maryland Extension Director, Maryland Rural Enterprise Development Center, 301-432-2767

  2. Tell me about yourself: • What kind of farm? • Are you currently marketing? How? • What are your key marketing issues, questions, and concerns

  3. A TALE of TWO MAPS… 2007 US Population Concentrations 2007 Direct Marketing Concentrations

  4. TYPES OF MARKETING STRATEGIES Retail Direct Wholesale Wholesale

  5. 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

  6. Off-the-Farm

  7. 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

  8. Farmers’ Markets

  9. 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

  10. U-PICK (PYO)

  11. U-PICK PLUSES MINUSES • Low cost • Low risk • Stay on farm • Fewer crops • Declining popularity • Deceptive simplicity • Liability

  12. Farm Market / Roadside Stand

  13. Farm Market / Roadside Stand PLUSES MINUSES • Moderate risk • Your own little store! • Great range • Local institution • Investment • Zoning • Space Self Help Stand?

  14. E-Business • Modest investment • Market is increasing • Seasonal • Great for educating • Convenient (Secure credit cards or 800#) • Consider “drop shipping” for a giant PLUSES MINUSES • No get rich quick • Time consuming • Must keep updated • Seasonal • Cost-effective shipping is key to profitability

  15. Community Supported Agriculture

  16. CSA PLUSES MINUSES • Sense of community • Income in the Spring • Educate the public • Complex organization • $$ financial return Robyn Van En Center

  17. DIRECT WHOLESALE Farmer Buyer Final Customer • Institutions • Grocery stores • Restaurants • Food co-ops Level of Complexity

  18. Hendersonville (NC) Community Food Coop

  19. Food Coops PLUSES MINUSES • Like farmers • Educated market • Tend to be flexible • Prefer organic • Price inelastic • Manager turnover • Politics

  20. Restaurant Agriculture

  21. 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 Chefs Collaborative


  23. 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


  25. 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

  26. TRADITIONAL WHOLESALE • Cooperative • Wholesaler/Distributor • Auction Farmer Re-seller Final Customer Level of Complexity


  28. WHOLESALER Wholesaler Purveyor Shipper Broker Jobber

  29. Grower Cooperatives

  30. Produce Auctions Leola Produce Auction in Lancaster County, Pennsylvania

  31. HOW THE MARKET STRATEGY CHOOSES YOU Skills Location Product Resources

  32. 1. SKILL SET LEVEL OF IMPORTANCE • Merchandizing high medium • People skills high medium • Multi-tasking high medium • Self Discipline high high • Negotiating medium high • Flexibility high high Retail Direct Wholesale

  33. 2. LOCATION LEVEL OF IMPORTANCE • Customers proximity high moderate • Visual Appeal high moderate • Highway access mod moderate • Safety high moderate Retail Direct Wholesale

  34. 3. PRODUCT • Volume mod larger • Variety mod larger • Quality high mod-high Retail Direct Wholesale

  35. 4. START-UP RESOURCES LEVEL OF IMPORTANCE • Sweat equity high mod-high • Marketing cost low-mod low • Land base smaller larger • Total investment low mod Retail vs. Direct Wholesale

  36. Marketing Basics Relationship Marketing Merchandizing Pricing Promotion

  37. “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)

  38. 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)

  39. WHAT CUSTOMERS WANT • Convenience • Value • A Taste of Place • Entertainment • Memories • Expression of their values • Safe food

  40. 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)

  41. 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

  42. 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

  43. 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

  44. 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

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

  46. Collateral Marketing Material • Logo/trademark • Stationery • Brochure • Biz card • Answering machine • Website • Signage Unifying theme and artwork

  47. 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

  48. DIRECT MARKETING PROMOTION STRATEGIES The most popular The most effective The most expensive

  49. 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