1996 Farmer to Farmer Conference
When Jim McConnon, Jr., Business and Economics Specialist with the University of Maine Cooperative Extension, asked a room full of participants at the Farmer to Farmer Conference how many had written marketing plans, no hands were raised. “You need to budget the time to think about the future and let that dictate your acts for the present,” said McConnon. “Don’t let your business drive you.”
Basic Marketing Concepts
McConnon first described two approaches to marketing, the traditional and the niche. The traditional approach involves the flow of goods and services from production to consumption. It is production oriented; you sell what you can make; the focus is on technology and cost cutting; the business determines the production; and mass marketing techniques (often brokers) are often used.
Niche marketing, on the other hand, involves finding out what customers want or need and providing it for them. This is the approach taken by most small farmers, who focus on consumers. It is consumption oriented; you make what you can sell (McConnon told of an organic melon farmer in Delaware who claims that he didn’t plant a seed that wasn’t sold.); you focus on new opportunities; the customer determines production; and you target your marketing techniques – you are clear about your customers’ characteristics. “Most businesses that fail, including small farms early on, try to take too many products to market at one time, and they … assume that everyone’s a potential customer,” said McConnon.
McConnon urged growers to develop a marketing strategy, a plan of action to identify and meet the wants and needs of the customers. A profile of the target market can be developed by knowing the demographics, lifestyles and expectations of your customers, with expectations being the most important with respect to price, quality and service. “A lot of customers come in because they like the product mix,” said McConnon. “Before you change the mix, survey your customers.”
The marketing strategy manipulates items over which you have some control: the product, place of sale, promotion and price. You can ensure that the product is right for the target market, for instance. You can sell large or small units. McConnon told of an herb grower who won’t sell her tinctures in anything smaller than an 8-ounce bottle because she doesn’t want to contribute to the waste stream, so she targets people who she knows will use the particular herbs over time. You can also adjust the cultivars of crops you grow to suit the customer; you can process your product (McConnon gave the example of making cream cheese flavored with blueberry paste, a technology being studied at the University of Maine); and your packaging and brand name can help you connect with customers.
The place of sale involves the channels of distribution, the actual physical distribution itself (how you get products to customers), and the atmosphere of your place of distribution.
Promotion involves telling your target market what you have. It can include advertising, brand name recognition, sales promotion and packaging. One woman at the conference talked about an open house she held; she advertised with homemade posters and gave out coloring books at the open house.
Regarding price, McConnon said to make it right. “Too many people underprice their products for the market. Nowhere was that more true than the Orono Farmers’ Market,” where McConnon and his colleagues surveyed 450 customers throughout the summer. “We asked consumers how much more would they be willing to pay for products sold through the Farmers’ Markets than through conventional outlets. Seventy-five percent said they were willing to pay more. Within that group, they said they’d pay 18 to 19% more. We asked the same question for organic. Twenty-two to 23 percent. Yet, when we asked the vendors how they priced...they said ‘supermarket.’” (A report of this study is available from McConnon at Univ. of Maine Cooperative Extension, 5741 Libby Hall, Orono ME 04469-5741; Tel. 581-3167 or 800-287-0274.)
“Also, with respect to products, people tended to sell all grades of products at the same price. We found that a processing market was being missed.” Because the customers at the markets included a lot of university people, a lot of high income people, and a lot of low and medium income folks, “we recommended that they differentiate their products. Raise the price for the high quality products, lower the price for the processing products, thereby getting increases in revenue from both sides of the market. You can increase price for the high end market and not lose much in sales. Likewise you can lower the price for the processing product and increase overall revenue. A lot of people wanted to do processing but felt the price was too high.”
Also, you can change the price of your product depending on the market, e.g., mail-order versus farmers’ market. You can also give discounts sometimes to attract business. “An effective marketing strategy will focus on manipulating the marketing mix to meet the wants and needs of the target market,” said McConnon.
Key Elements of a Marketing Plan
A marketing plan is a written document that communicates the marketing goals and objectives of your farm and tells how you plan to achieve them. It should include the marketing situation (what’s happening now); marketing objectives; marketing strategies; a budget; an action plan; and an evaluation. A sample plan is given in the chart accompanying this article. The budget figures are off-the-cuff; the plan is meant to serve just as an example.
The marketing situation includes the products you plan to sell; your target market (people coming off of boats at a harbor; early summer people; neighbors …); the market potential; marketing outlets (mail order; CSA; PYO; restaurants; sales agents; trades shows such as the Northern New England Trade Show held in March in Portland and attracting 2,000 wholesale buyers); your competition; the industry trends; and advertising and promotional channels.
Marketing objectives tell where you want to go, both short-term and long-term. The objectives must be measurable (e.g., you want to increase your customer base by 5% next year); specific (you want to educate 10% of your customers about a method you use to grow your products; you want to add one or two new products; you want to tap into three more markets); realistic; and completed during a specified time. You should review your objectives regularly.
Marketing strategies indicate how you will achieve your objectives: What will you produce to meet customer needs? How will you package and position these products? What price will you charge? You should cover your variable costs, labor, overhead, and give yourself a return after that. “This requires keeping records, knowing your costs and how you value your time,” said McConnon. How will you distribute your products? How will you advertise or promote them? Advertising means paying someone to get the word out about your products. Promoting means you let people know what you have to offer through such channels as in-store demonstrations, brochures or newspaper articles.
Your budget tells what these marketing strategies will cost, their expected financial returns, how you’ll keep track of costs and returns, and how you’ll control the costs.
The action plan tells who will implement the strategies – who will take the products to market, for example, or who will go to the library to check out different mail order catalogs; when strategies should start and end; and which strategies should be done first and last.
The final column, the evaluation, tells whether you are progressing toward your objectives; whether you’ve met any objectives; whether you’re within budget; and what changes need to be made.
Understanding Your Market
Before you can develop a marketing plan, you need to research your market, i.e., collect and analyze systematically information related to the market for your goods and services. This includes knowing whether anyone wants your goods and services; who your customers are (where they work, how much they earn, what they want); whether enough customers exist to support your business; how you compare with your competitors; how you advertise and promote your product; and how much money you can expect to make. “Be on top of these all the time,” advised McConnon. “Market research is a frame of mind.”
Understanding your market can reduce business risks by giving you credible information to help you make decisions. It can help you spot problems in the current market by getting out and being involved with your customers; it can help you identify and profit from opportunities as you talk to food processors and others involved in your field; and it can provide evidence to support your business idea. McConnon told about Island Artisans, who developed a list of customers, based on retail sales, just last year and asked if they would be interested in receiving a mail order catalog. He also told about a woman who makes mustard; she went to the Trades show to do market research and, as a result, ended up co-marketing with an established mail order catalog.
To research your market, you can use secondary market research – information that has already been collected – or primary market research – gathering information by observing people, conducting surveys, interviewing or other direct action.
As an example of primary research, McConnon told of a person who made wind chimes out of recycled spoons. The chimes were enclosed in clear plastic and were placed in front of the cash register – and were not selling. McConnon told the man to develop an in-store display and to put it near the door so that the wind would make the chimes ring. “What goes close to the checkout?” asked McConnon. “Value added products and products that are below the price of the general merchandise in the store.”
Another example involved garden tools that were packaged in boxes that sat on the floor of a store. After the producer designed an in-store display with the tools hanging on a wall at eye level, they sold better.
At a produce market, you can collect the names, addresses, phone numbers and items bought by customers so that you can call those customers if you have, for instance, a glut of basil, suggested one conference participant. “By keeping in touch with customers,” McConnon added, “you provide them with a nonconfrontational way to offer suggestions for improvements. Ask them what they want, what they like or don’t like.”
Secondary research may be available at the public library; a college or university (the URSUS system, for example, is a computerized, online catalog of the holdings of the University of Maine, Colby, Bowdoin and Bates); cooperative extension; the Department of Agriculture; trades shows; business publications; similar businesses; and the Internet.
You can use primary research to learn about the local market situation; unusual products or services; specialized markets; and rapidly changing markets. Secondary research can help you learn about established industries; demographics (the Eastern Maine Development Corporation, for example, has demographic profiles of six Maine counties; contact Ron Lloyd at 942-6389 or 800-339-6389); consumption and production patterns; and price and market outlooks.
To identify your target market, McConnon suggested focusing on a particular geographic area, on your best selling product, and on those who are most likely to patronize your business. “Don’t focus on too many things at once when you’re starting,” he said. “Consider the 80/20 rule: 80% of your profits come from 20% of your customers; 80% of your sales come from 20% of your normal product line. Most of your money comes from a fairly narrow and loyal customer base.”
A customer profile would describe the demographics (typical age, income level, location of home or work and education level) of your potential customers; their lifestyle, including common interests (outdoors enthusiasts, kayakers, educators...), beliefs, values and behavior patterns; and their expectations for quality, service, product mix and price. “The population in the United States is aging,” said McConnon. “In Maine, the fastest growing segment is age 46 and over, while the slowest growing is 18 and under. The first group is a larger population base with more spendable income and different needs than those under thirty.” Regarding price and quality, he said, “the larger grocery stores and mass merchandisers sell plants. You can’t compete on price. Service and quality are the only ways to get part of the market. You need to talk with the customers.”
Elaborating on demographics, McConnon said, for example, that since some 70% of shoppers are women, you would want to advertise on a radio station that has women listeners, predominantly. If you are selling nursery and bedding plants, you should know that 45% of purchases of these plants are made by women shopping alone; 19% are made by men shopping alone; 27% by couples; and that affluent people spend the most money but the least time landscaping, so you would want to target landscapers in high income areas.
Regarding lifestyle patterns, McConnon said that people who are highly involved in yard care purchase plants at nurseries and garden centers, so you would want to hold seminars promoting your products at those places of business, or you could target garden clubs. Those with medium involvement in yard care purchase their plants at nurseries, supermarkets and roadside stands; while those with low involvement make purchases at garden centers, variety stores, supermarkets and roadside stands.
To analyze your competition, McConnon said that primary research methods are typically used to identify competitors, their strengths and weaknesses, their customers, and whether they are direct competitors (offering the same products and services as you) or indirect competitors (offering products that can substitute for yours).
To understand your market options, McConnon said to consider well-established markets; take an active role in marketing; identify several alternative options; and estimate the costs and benefits of each. Examples of marketing options include selling: to restaurants, hotels, markets; at local farmers’ markets; through a catalog; at fairs and trade shows; through distributors, representatives or brokers; to wholesalers or processors; through community supported agriculture enterprises; at a roadside stand or farm store; through a pick-your-own operation; or by co-marketing with other producers or developing a tourist attraction.
McConnon ended his presentation with seven marketing tips:
• Survey your customers on a continual basis, formally and informally. Ask them questions when you make a sale.
• Educate your customers. Marketing expert Eric Gibson says that market research is also educating your customers, said McConnon. The herbalist whom McConnon mentioned earlier must educate her customers about why she is putting her tinctures in 8-ounce bottles and nothing smaller.
• Personalize your products through labeling and by distributing literature about your farm and its products.
• Diversify your marketing channels. “Those who have diversified their marketing channels have done better in the long run than those who haven’t,” said McConnon. Sell wholesale and retail, for example; processed products can be sold through the Internet.
• Provide good customer service. “You’re selling satisfaction. What are the benefits of your products to the consumer?” asked McConnon. “Pick-your-own apples offers an experience outdoors” in addition to apples. “Connect with your customers,” McConnon advised. “Develop loyalty. Send notes to customers.”
• Consider co-marketing your products; form a cooperative; develop marketing agreements; or find an established mail order catalog in which to market your products;
• Price your products for the market. “Know your costs. Be flexible. Don’t underprice.”
McConnon, James C., “Market Potential for Retail Businesses in Maine,” Univ. of Maine Coop. Extension Bull. No. 3006, March 1991.
McConnon, James C., “Strategies for Surviving Mass Retailers,” Univ. of Maine Coop. Extension Workshop Pamphlet, March 1996.
Cottingham, John, et al., “Direct Marketing of Farm Produce and Home Goods,” Univ. of Maine Coop. Extension Bull. No. 2300, Feb. 1996.
Gibson, Eric, Sell What You Sow! The Grower’s Guide to Successful Produce Marketing, New World Publishing Co., Placerville, California, 1994.
During the workshop following McConnon’s presentation, growers shared their marketing experiences. One woman who grew heirloom varieties of vegetables said that she was able to sell them at above market price to people who were “into cooking,” and that they did better at an urban farmers’ market than at a rural one. In a rural market, she found that a lot of customers were “afraid of organic” produce. Another grower found that her customers wanted to buy heirloom tomato seedlings but not the actual fruits, so she had to mark the fruits down to sell them at the market.
Nicolas Lindholm told about the Hancock Organic Growers Coop, which took over a farm stand that had been shut down and sold a lot of produce to summer people in Hancock County. The growers also wholesaled to restaurants and to accounts developed by some of the member farmers over the years. “More than anything we were short on the product line that was [at the stand] in the past,” said Nicolas. “We had no eggs, cheese, raspberries...things that the stand previously had. We did have whole wheat flour, dry beans, produce, flowers, jams …”
Mollie Birdsall, one of the grower members, said that the stand didn’t have enough vegetables for canning. “We were missing the beat on local people who want to put some away. But we would have had to lower prices” to satisfy that market.
Nicolas said that the stand was buying “all kinds of carrots” from different member farms and selling them at one price. “We need to sell at two prices.”
One blueberry grower suggested labeling boxes “First of Season” so that people know why that batch is tart, and later, “Late Harvest” or “Extra Sweet,” so that consumers know the berries are a little soft but ripe. “You can still charge the same price, and the customer knows what to expect. If the berries are better for cooking, put ‘Great for Cooking.’”
Holly Taylor of Orland told about making blueberry sticks, a fruit-leather type of product. She and her husband sell to people who are interested in health food; to tourists who take the sticks home with them; and to leaf peepers, which actually comprised the Taylors’ biggest sales. The sticks are sold to sports enthusiasts at the Bar Harbor Bike Shop, as well. “We originally had them in ziplock bags,” said Holly, “but we needed a tamper resistant bag.” They folded a perforated label over the ziplock and, to make it easy to open, put a blueberry string under the perforation. “It’s become an incredible marketing tool. Kids love to pull it, and we’re recycling the string,” which is used to mark blueberry fields. Holly and Tom have been approached by German markets to sell their product there. “The problem now is that we can’t make enough,” said Holly. She thinks that she and Tom could survive just by marketing blueberry sticks, since they have low shipping costs and a long shelf life, but they would need to invest in more equipment to do so. They are also thinking of pulling some of their fresh-market berries off the market for two weeks in the middle of the season, freezing them, then selling them later to extend the season.
When one participant asked how to survey “boat people” – tourists coming off of boats in Maine harbors – they were told to check with the harbor master, marinas and local markets and coffee shops. Holly added that “people are starved for something fresh [to eat] when they come off of boats, but they also need something they can take with them easily.” She suggested getting in touch with schooner owners. “Let them know you have raspberries.” (She tried making raspberry sticks, incidentally, but they were too seedy. She suggested that you could run the raspberries through a mill to remove the seeds, but then you would get less product.)
Moderator Marjorie Hundhammer asked conference participants how they have researched their markets. McConnon suggested going to Shop ‘n Save to see whether potatoes are sold by variety with accompanying information about how to use each variety. “I challenge you to find one!” he said. He added that within a growers’ co-op, it might pay to have one person with merchandising skills to do that job.
One participant talked about the organic salad mix from the farm where she works. When it wasn’t selling at a university dining hall, the growers sent in some student friends to find out why. These “researchers” noted that the mix was placed at the end of the salad bar, and by the time people got to it, their trays were full. “Imported” iceburg lettuce, on the other hand, was at the front of the salad bar. The growers are trying to get the dining hall workers to move their product to the front of the line.
Another point concerned packaging. “We didn’t want to put spinach in plastic bags anymore,” said one grower. “We made bunches and just marketed bulk spinach. It’s difficult. It’s more work, and we had to educate our customers. We gave people 50 cents off if they brought their own bags.” When cellulose bags were suggested, some conference participants said that cellulose production uses a lot of energy and bleach.
One way to get to know your customers is to bring them together for potluck suppers. This has worked well with some CSAs, helping the growers determine what their customers liked and disliked. Mollie Birdsall said that the farmstand where she sells produce cooperatively previously had had an open house at the end of the summer. The new farmstand coop has various activities: a grand opening; horses, chickens and sheep present for viewing; a goat for milking; a spinning demonstration; a pumpkin carving party. These events have gotten the press involved. “People with kids like to show them around,” she added. Others mentioned having farm tours, and having events and artists at farmers’ markets.
McConnon noted that the farmers’ market at Orono had been open on Tuesdays and Saturdays from 8 a.m. until growers sold out. A survey by the Univ. of Maine found, however, that people in this area shop on Thursday, the University’s pay day. In response, the market narrowed its Tuesday and Saturday hours to 8 to 1, and added Thursdays from 4 to 6 p.m., with success.
Ideas for getting people to come to a farm stand included having a trout pond and/or nature preserve; having demonstrations that would interest home gardeners; staying open late; and having produce that’s very clean and quick and easy to cook.
– Jean English