MARKETING 101 Introduction to Marketing Farm Products Ginger Myers University of Maryland Extension...

MARKETING 101Introduction to Marketing Farm

Products

Ginger Myers

University of Maryland Extension

Director, Maryland Rural Enterprise Development Center

gsmyers@umd.edu, 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