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Economics in High Tunnel Production Making High Tunnels Pay

MN High Tunnel Season Extension 12/5/08 - Karl Foord. 2. Keys to Success. PriceCompanyCustomerManagement Labor Self. MN High Tunnel Season Extension 12/5/08 - Karl Foord. 3. Economics

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Economics in High Tunnel Production Making High Tunnels Pay

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    1. MN High Tunnel Season Extension 12/5/08 - Karl Foord 1 Economics in High Tunnel Production Making High Tunnels Pay Minnesota Statewide High Tunnel Season Extension Conference December 5, 2008 Alexandria, Minnesota Karl Foord

    2. MN High Tunnel Season Extension 12/5/08 - Karl Foord 2 Keys to Success Price Company Customer Management Labor Self

    3. MN High Tunnel Season Extension 12/5/08 - Karl Foord 3 Economics & Price Determination Tomato Budget – Price / Yield Matrix Breakeven analysis Cost of Construction of High Tunnel Profitability analysis (Net Present Value)

    4. MN High Tunnel Season Extension 12/5/08 - Karl Foord 4 Management Keys to Success – People Skills Labor – managing other people Pricing – managing your perception of value

    5. MN High Tunnel Season Extension 12/5/08 - Karl Foord 5 Tomato Budget Price / Yield Matrix Breakeven analysis

    6. MN High Tunnel Season Extension 12/5/08 - Karl Foord 6

    7. MN High Tunnel Season Extension 12/5/08 - Karl Foord 7

    8. MN High Tunnel Season Extension 12/5/08 - Karl Foord 8

    9. MN High Tunnel Season Extension 12/5/08 - Karl Foord 9

    10. MN High Tunnel Season Extension 12/5/08 - Karl Foord 10 Enterprise Profitability Cost of Construction of High Tunnel Profitability analysis (Net Present Value)

    11. MN High Tunnel Season Extension 12/5/08 - Karl Foord 11

    12. MN High Tunnel Season Extension 12/5/08 - Karl Foord 12

    13. MN High Tunnel Season Extension 12/5/08 - Karl Foord 13

    14. MN High Tunnel Season Extension 12/5/08 - Karl Foord 14

    15. MN High Tunnel Season Extension 12/5/08 - Karl Foord 15 Price – Company/Customer “One important factor in our plan is that we are not afraid to ask a profitable price for all of our produce.” “Our customers need to be aware that it costs more to produce early crops and must remember that highest quality is the only crop you should market.” Ed Person, Ledgewood Farms

    16. MN High Tunnel Season Extension 12/5/08 - Karl Foord 16 Customer perceptions Exchange – Something of Value for an amount of satisfaction The perceived value > the price Largely behavioral not mathematical Usually an emotional trigger Buy and justify Guy with railroad injury – emotional trigger – grain marketingGuy with railroad injury – emotional trigger – grain marketing

    17. MN High Tunnel Season Extension 12/5/08 - Karl Foord 17 Price Sensitivity / Behavior Price ~ Quality Unique ~ Value Fairness Price-Quality Challenge Lexus vs. Mercedes – the system is dynamic People who get comfortable with the status quo do so at their own peril Fairness – most people think it is fair to pass on your increased costs i.e. our situation – some will think not - coke machines whose price varies with ambient temperature Unique – University of Minnesota – don’t ever discount your data or your ability to interpret it – we are not a commodity, will never be a commodity, and we would be making a critical error to ever consider ourselves to be one Behaviors: Give people the option to continue their learning with your materials Price-Quality Challenge Lexus vs. Mercedes – the system is dynamic People who get comfortable with the status quo do so at their own peril Fairness – most people think it is fair to pass on your increased costs i.e. our situation – some will think not - coke machines whose price varies with ambient temperature Unique – University of Minnesota – don’t ever discount your data or your ability to interpret it – we are not a commodity, will never be a commodity, and we would be making a critical error to ever consider ourselves to be one Behaviors: Give people the option to continue their learning with your materials

    18. MN High Tunnel Season Extension 12/5/08 - Karl Foord 18

    19. MN High Tunnel Season Extension 12/5/08 - Karl Foord 19

    20. MN High Tunnel Season Extension 12/5/08 - Karl Foord 20

    21. MN High Tunnel Season Extension 12/5/08 - Karl Foord 21 Understand Key customer perception factors Product use & impact of attributes on value Value varies among buyers Manage customer perception proactively Expand gap between value received and price paid

    22. MN High Tunnel Season Extension 12/5/08 - Karl Foord 22 What Are We Really Selling? “Revlon sells chemicals Women buy glamour” Fruits and vegetables Flowers Talk about Kevin CFFM and their consultant – features vs. client benefits Farmers may have a different perspective on the “cool” parts of software than Win Talk about Kevin CFFM and their consultant – features vs. client benefits Farmers may have a different perspective on the “cool” parts of software than Win

    23. MN High Tunnel Season Extension 12/5/08 - Karl Foord 23 What Are People Really Buying? Health Taste The experience of the market itself Support of local growers The visual side of roundup ready fields Bailey’s view on the taste of his wine – what about a French lady bug All things being equal what can you add in this realm – HP Calculators Experience Engineering Inc. - Michael Vance and Walt DisneyThe visual side of roundup ready fields Bailey’s view on the taste of his wine – what about a French lady bug All things being equal what can you add in this realm – HP Calculators Experience Engineering Inc. - Michael Vance and Walt Disney

    24. MN High Tunnel Season Extension 12/5/08 - Karl Foord 24 Improving customer experience Parking & Access Ease of movement within market Stall Presentation Comfort in all weather 5 Sense your market Taste, touch, smell, sight, sound

    25. MN High Tunnel Season Extension 12/5/08 - Karl Foord 25 People Skills - Labor Management Placing people where they will: Thrive Develop a sense of accomplishment & achievement Be committed to the enterprise Knowing what they want A Coach more than a Boss Intrinsic thinking

    26. MN High Tunnel Season Extension 12/5/08 - Karl Foord 26 Intrinsic > Extrinsic > Systemic Systemic Labor law, insurance, safety Extrinsic Compensation, employee manual, job description Intrinsic Employee’s self-interest

    27. MN High Tunnel Season Extension 12/5/08 - Karl Foord 27 Employee’s self-interest You must be joking! “Why should I care what they want? We have a job to do and they need to do it. After all I am paying them.” Two assumptions: The company’s interest and the employee’s interests could not possibly be similar People function best as automatons

    28. MN High Tunnel Season Extension 12/5/08 - Karl Foord 28 People Management If Atoms behaved like people, physics would be very different. Intrinsic coaching Reduced turnover Shortened management conversations More motivated employees Happier people

    29. MN High Tunnel Season Extension 12/5/08 - Karl Foord 29 Author and References Karl Foord Ph.D. MBA Regional Educator, Horticulture foord001@umn.edu (651) 480 7723 Stegelin, F.E., Profit Impact of Customer Retention, SNA Research Conference Vol. 45 – 2000

    30. MN High Tunnel Season Extension 12/5/08 - Karl Foord 30 Handouts Tomato Budget (2 sided assumptions on back) Tomato Sensitivity Analysis (financial) High Tunnel Construction Budget

    31. MN High Tunnel Season Extension 12/5/08 - Karl Foord 31 References http://www.ledgewoodfarm.com/ http://www.farmtek.com/farm/supplies/home http://plasticulture.cas.psu.edu http://www.plasticulture.org http://www.intrinsiccoach.com/english/home/

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