02 Sep2002

Overstory #108 - Direct Marketing

Written by Appropriate Technology Transfer for Rural Areas (ATTRA).

Introduction

Many growers, especially new ones, are inclined to start production without giving a second thought to the business of marketing. Good marketing is an absolute must for a successful agricultural enterprise. Some would even argue that it ranks higher in importance than production itselfespecially for farmers planning to diversify. After all, what good is a product if one cannot sell it consistently for a profit?

Diversification out of commodity crops may mean becoming familiar with, or even creating, new marketing systems. Existing marketing channels very often do not accommodate the new producer wellespecially the small producer.

Some farmers may use direct marketing for particular products while simultaneously participating in traditional markets. No two growers are the same, and the reader will have to determine through trial and error what works best.

Sustainable farming, has given impetus to diversified, decentralized systems in which farmers take greater control of marketing by bypassing traditional channels and marketing directly to consumers at the local and regional level. Foods that do not require much processing before consumptionlike fruits, vegetables and meatare ideal for one-on-one marketing. Direct marketing is often quite unorthodox and may take the form of roadside stands, pick-your-own operations, farmers' markets, and sales to restaurants, upscale retail or specialty storeseven supermarkets and institutional food service. Prospects for direct farmer-consumer interaction are particularly promising at the rural-urban fringe, where producers can take advantage of specialty market niches and the demand for local and ethnic food and non-traditional products, while promoting agricultural tourism and education.

Direct marketing can give the farmer a larger share of the retail sales price and possibly a higher return on each unit sold, offset to some extent by loss of economies of scale. For some farmers, adding value or marketing some minimally processed farm products directly to the consumer is a way of enhancing financial viability. Farmers who are unable to compete in, or are locked out of, distant markets can build a thriving local business. However, finding the right niche and marketing directly to the public is a hard and labor-intensive job requiring time and effort, creativity, ingenuity, sales expertise, and the ability to deal with people in a pleasant and positive manner.

Importance of marketing

For too long, farmers have thought of marketing simply as how to dispose of their products. Locked into producing a very small number of major crops and insulated from the market, they have not been required to have a clear understanding of ever-changing consumer wants and needs. Producers have traditionally taken whatever price they could get while wholesale and retail distribution networks undertook the business of marketing.

Marketing does not begin after production, but well before the first seed is planted. For farmers working outside the conventional system, the importance of marketing cannot be over-emphasized. Consumer-focused marketing is the single most important factor that determines the success of an enterprise. Marketing is not just about selling. It requires a clear and astute understanding of what consumers want and the ability to deliver it to them through the most appropriate channels for a profit. It includes the planning, pricing, promotion and distribution of products and services for consumers, both present and potential.

The qualities of a successful marketer (Hils 1989)

Not afraid to take risks
Takes pride in the product and is not shy about saying so
Willing to plan, research and experiment
Flexible
Independent
Creative
Thrifty

Enterprise evaluation

A good marketing strategy begins with making sure the enterprise is right for you and is feasible. This will require a review and evaluation of your present situation, goals, possible enterprises, physical, financial and marketing resources, and market potential. The evaluation should help you answer some key questions, chiefly: Is this really what you want to do? Is there a market for the product? Do you have the necessary skills to do it? Are you going to develop the market? Or will you raise a crop for which there is a pre-existing market? Will it be profitable? Can you expand in the foreseeable future?

Start by listing your business and personal goals. Prioritize them.
Is this going to be a full-time enterprise?
Is your family involved and supportive?
Inventory physical resources like land, soil, machinery, water, buildings, livestock etc.

Define constraints:

Is family and/or off-farm labor available?
Is your spouse involved in the planning? A spouse's knowledge of medicinal herbs or cooking for example, could spin off into an additional on-farm enterprise.
Do you have access to financial resources in the form of savings, credit or investment by family or friends?
What are some of the crops that will grow well in your area and will fetch the price you need?
What are the marketing resources in your region? Check out the farmers' markets and the retail stores. Is a roadside stand feasible? Talk to others who have one. Are there restaurants, grocery stores and supermarkets willing to buy locally raised produce or meat?
Who are your potential customers? Would they like to buy direct-marketed products or do they prefer buying at mass retail outlets where price is the main consideration? Is there scope in your business plan for consumer education? Have you considered the potential for entertainment farming and tourism?
What information and resources do you need to help you along the way? How can you best access such resources?

Market research

Following the enterprise evaluation, begin to identify and define your product. Get all the information you can about sources, marketing, production, processing, packaging and sales. This will require a good bit of systematic research. Check the libraries in your area. Read all the extension publications you can lay your hands on as well as trade journals and periodicals, books on market gardening and seed catalogs.

Talk to your extension agent, visit the local stores (gourmet and otherwise) and supermarkets to see what is selling, and why one product appears more appealing than another. Talk to customers, local stores, food clubs, specialty distributors, ethnic stores, restaurants and other prospective outlets in your region. What do they want? Is there an unfilled niche? With your production, labor and marketing resources, will you be able to fill this niche?

Find out what your prospective competitors are doing. Look for ways to improve upon what they are offering.

You can either start small and grow bit by bit, or you can start in a big way from the very beginning. Either way, you must be prepared to do your homework and get to know your markets to be successful. One way to identify potential markets that exist in your area is by using the "30-mile market technique" (Rocky Mountain Inst. 1987). Most customers of direct marketers are believed to live within 30 miles of the point of sale. Market research within this radius will unearth useful information about production possibilities and the presence of competitors. Detailed market analysis and research is imperative before you promote and sell your product. Not only does it reduce business risk by providing credible information, it can help identify problems in the market as well as little-known opportunities for profit. By knowing the size and makeup of your market, its geographic location, demographic and behavioral characteristics, it will be easier to create the appropriate marketing strategy and you will avoid wasting time and money marketing to the wrong people.

Marketing plan

Marketing is an essential element of a small agricultural enterprise. The marketing environment will ultimately exert a strong influence on the nature of the business. The crop grown will be determined less by the farmer's personal tastes than by what the market will absorb at a price the farmer is willing to take. A good market plan broadly aims to define the consumer, the products or services they want, and the most effective promotion and advertising strategies for reaching those consumers (Bjergo 1986). It clarifies objectives, appropriate actions, projected income, pricing structures, costs and potential profitability.

A market plan alone does not guarantee success, but it does indicate that many of the factors that affect the profitability and continued survival of the operation have been given consideration. A market plan is usually part of a larger business plan that includes production, financial, staffing and management plans. The process of writing a business plan is not within the scope of this paper but listed at the end of this section are resources to help you find more information on the subject.

Elements of a marketing plan are (J.E. 1997):

Marketing situationa summary of your present situation, what you are currently selling and how, who your customers are, what their needs are, your competition, your own strengths and weaknesses, how you are promoting your product, what the current food and marketing trends are, etc.
Marketing objectivesa summary of your short and long term goals, product diversification, additional market segments (alternative outlets) to tap. Objectives should be realistic and measurablee.g., you would like to increase sales by 10% within the next year.
Marketing strategiesways to achieve your goals, what you will produce, how you will promote and advertise the new product, the channels of sale, how you plan to beat your competition.
Budgetsinclude estimated costs and return based on sales, and strategies for monitoring and curtailing costs.
Action planimmediate steps (e.g., look in the yellow pages for graphic artists to design logo, shortlist names of newspapers for a press release, assign person to deliver products to market, etc.)
Evaluationa summary of progress on marketing objectives. The frequency of evaluation depends on the plan and could be each month, every six months or annually. Objectives and strategies are a dynamic part of the planning process and change depending on the market situation and competition.

Pricing and profitability

Setting a price is one of the more challenging tasks faced by the direct marketer. How does one know how much a pound of tomatoes or a head of lettuce is worth? On what information are these pricing decisions based?

In general, prices are set by production and marketing costs at the lower end, while the upper limit is set by what your customers are willing to pay, how much competition you have, and your own desired profits. It pays to figure your costs and set your prices accordingly, rather than just going by what others are charging; steady, consistent prices encourage steady, consistent customers.

Clearly marked prices are a must to let customers know exactly how much a grower is charging.

Finally, this advice from growers:

Don't sell your goods for a lower rate at the end of the day
Compete fairly on quality and service, never undercut
Don't badmouth other growers
Raise a good product and ask for a good price

Direct marketing alternatives

Ordinarily, retail markets command the highest price per pound of product, while wholesale markets move more of the product than retail markets but at lower prices. Farm sales and farmers' markets, you-pick, mail-order are typically low-volume markets. Restaurants, retail stores, cafeterias, health food stores, and caterers constitute mid-volume markets, where prices are better than wholesale but on the lower end of retail. Smaller farmers may find that selling to low- and mid-volume markets works best for them. Mid-volume markets, especially, offer the advantage of small to medium crop production as well as medium to better prices (Warr 1993).

Organizing and selling at farmers' markets

Farmers' markets seem to work best for growers who offer a wide variety of produce of the type desired by customers. Consumers want markets to be easily accessible with good parking facilities. A little related entertainment never seems to hurtseasonal festivals, street musicians, tastings, demonstrations, etc. Sales help must be pleasant and courteous, willing to answer questions. Farmers interested in this marketing method can find opportunities for creative selling and fresh ideas through participating in the local farmers' market association and direct marketing meetings.

Community Supported Agriculture (CSA)

Community Supported Agriculture (CSA) plans operate in several different ways. One involves a single farmer selling "subscriptions" or "shares" at the beginning of the season and then delivering, on a regular schedule, baskets of whatever is produced. Another method involves consumers who band together to rent land and hire a farmer to raise food for them.

On-farm sales and agri-tourism

On-farm sales include pick-your-own (PYO) and roadside stands or farm markets. Pick-your-own began in response to the 1974 energy crisis, appealing to customers (mainly families) who had the time and the necessary expertise to process their own foods in quantity. More recently, PYO enterprises have been integrated into the growing "farm entertainment" sector. Marketing strategies may include educational tours, an on-farm market with opportunities to buy fresh produce or value-added products, ready-to-eat food, festivals, classes, seasonal events such as a personalized pumpkin patch, or agricultural mazes. A buffalo ranch, besides selling hides and meat, charges admission to view the animals.

Such enterprises work best when farms are within thirty miles of a major population center, preferably on or near a good road. Pick-your-own is most adapted to crops which require stoop labor to harvest.

Selling to restaurants and stores High quality is a prime requisite for sales to such restaurants. Specialty crops such as herbs, garlic, mushrooms, salad greens, cut flowers, and edible flowers for restaurants may be grown on very small parcels of land. One of the main requirements for selling to an upscale restaurant seems to be developing a good relationship with the chef. In some instances sales by local farmers to local institutions may be arranged.

Mail order and home delivery

Mail order sales generally involve value-added products or fresh fruits. Value-added products are often decorative, rather than culinary. Home delivery of fresh farm products was much more common in the U.S. sixty years ago than it is today. The sight of a horse-drawn farm wagon loaded with bushels of apples, squash, potatoes, and live chickens making its way slowly through a residential neighborhood while the farmer (or his children) knocked on doors was not unusual. But it is still possible for farmers to meet consumers at the doorstep and deliver quality food. This method is currently most used by dairy and meat producers. Transactions are more likely to take place in offices than in residential neighborhoods. Nowadays arrangements are made in advance by telephone or e-mail and meats are usually frozen.

Marketing on the internet

Farms can do business on the internet either by maintaining their own individual websites, or participating in a directory listing. Research providers and costs; look at bartering to get a website designed. Look at internet marketing as an opportunity to attract a new clientele, but first determine whether existing customers are on the internet. Do they have e-mail? Be aware of certain barriers to internet buying:

pricing (include shipping costs)
potential return hassles
credit card concerns of customers
privacy issues
navigating the site

Do everything possible to show you are honest and reputable. Do not sell or lease e-mail addresses. Have a privacy statement that you won't sell customer information.

Customers like a website that is easy to use, quick to download, and updated frequently. Be cautious about graphics that take a long time to come up on screen. At least give customers the option to bypass graphics.

Promotion and publicity

Promotions help to increase sales per customer and the number of clients, and enhance the image and visibility of the farm, company and/or product. Promotions come in different shapes and sizes but they all have some common characteristics.

They draw attention and communicate information
They provide an incentive or premium to the consumer
They invite the consumer to buy

Word-of-mouth advertising by satisfied customers is priceless and cannot be purchased or engineered except by providing good service and a good product. Because an estimated 80% of business comes from return buyers, the focus is on rewarding loyal customers by offering discounts, gift certificates or a free service.

Coverage by the local newspaper or radio/television station can bring in more sales than any paid advertisement. Events on the farmfestivals for children, availability of a new and unusual food item, a tasting contestmay lure reporters in search of human-interest or weekend-event stories. Invite the local newspaper's food editor over for a dinner of grass-fed beef, or pastured chicken so she or he can taste the difference from supermarket fare. While writing up a press release, look for the news peg that makes the storyan accomplishment, an award, anything that seems interesting or valuable to the community. Give the press plenty of notice, good photo opportunities, and always return phone calls.

Paid advertising is the non-personal promotion of an idea, product or service directed at a mass audience. Its aim is to generate an increase in sales, induce brand recognition and reinforce the "unique selling point," inform potential customers about the availability of a product, and create demand for that product. An advertisement should emphasize benefits, not objects. What will people get from your product or from a visit to your farm? High-quality, fresh, delicious produce or meat? Family fun? Friendly service? You can either advertise continuously through the season to maintain your presence in the marketplace, or you can advertise just before a product is available.

Attractive road signs are another effective form of advertising. Signs that are legible to the speeding motorist are a way to induce people to stop and visit the roadside market or farm-stand. Signs should have a logo and should reflect the kind of goods being soldmore upscale if they are high-priced and a 'no-frills' sign if otherwise. Signs that advertise an unusual or out-of-the ordinary product will draw the curious to the farm. The first sign should be placed a good distance (at least 2500 feet) before the market to give the motorist time to decide whether or not to stop. Keep signs neat and well-maintained.

Direct mail is advertising with a personal touch and requires an up-to-date and extensive mailing list. Postcards with pictures of your farm, a logo and a promotional message may be sent just before a farm festival or when produce is available. Direct mailing is only as effective as its mailing list (i.e. its targeting of people who will buy your product). Mailing lists should be revised each year. Target groups of people likely to buy your product (e.g., members of a health food store or co-op). A mailing list can be developed by asking people to sign up for mailings. Also, ask them where they heard about your product or farm. This information will help you plan future advertising.

The catalog is marketing tool that serves many purposes. Common elements of a catalog are:

It should tell a story which differentiates your business from others by explaining why and how you are different.
It should work like a reference, providing detailed information about the product, service and business.
In addition to providing information, it must promote your product, service and business.
It should create a good first impression.

Business cards have a way of sticking around in people's wallets long after they have been distributed. Print and hand out business cards with your name, phone number, farm location and product.

The internet offers a whole new world of marketing opportunities. Its key features are 24-hour accessibility by anyone with internet capabilities and greatly expanded reach without the costs and limitations of direct mail. Customers may be to able to place an order on line, but the chief value is the publicity an attractive website can bring to a producer. Another advantage is making your on-line catalog available to internet users.

A lively and regular newsletter, written in the first person, discussing upcoming produce, recipes, farm events and life on the farm, makes the reader feel more involved and connected. Ideas for content may come from customers or from employees.

When creating a newsletter, consider the following (Frederick 1996):

What items do you want to promote?
What should you say to induce readers to buy?
Are readers made to feel included and important?
Have necessary details such as farm hours, phone number, deadlines, etc. been included?
Is the newsletter uncluttered and visually pleasing?

Including a map of how to get to the farm is always helpful. Newsletters may also be sent to the news media or published as an insert in the regional newspapers.

Single event promotions like harvest festivals, and other holiday events can be combined with ongoing promotions like school tours or Friday happy hours or open house. Publicize the promotions well ahead to ensure a good turnout.

Conclusion

Finally, some parting advice to people considering direct marketing or processing of farm products. First of all, do something you love and enjoy doing. Success will follow. Invest time and, if necessary, money in research. Have a well-considered plan before proceeding but don't be rigid. Learn as you go. Start small and keep your costs and debt as low as possible. Provide a reliable supply of high quality products and build a good relationship with your customers. Take time to listen to their wants, identify market possibilities, and find a unique market niche for your product. Be adaptable to shifting market opportunities. Ensure diverse markets, so that if one fails, you can fall back on the others. Set a fair price and avoid competing directly with big business, especially on price.

References

Bjergo, Alan. 1986. Marketing: Why Have a Marketing Plan? University of Montana Coop Extension Service, Missoula, Montana.

Frederick, Peggy. 1996. "Newsletters to encourage customer loyalty." In: Proceedings 1996 North American Farmers' Direct Marketing Conference. February 22-24, 1996. Saratoga Springs, New York.

Hils, R.J. 1989. Market What You Grow. The Chicot Press, Atlanta, Georgia.

J.E. 1997. Marketing ideas for small farmers. Maine Organic Farmer & Gardener.

Rocky Mountain Institute (ed.) 1987. "Marketing" How To Survive As A Small Farmer. RMI, Snowmass, Colorado.

Warr, A.M. 1993. Basil, Chives, Parsley...Idea Sheet: Farming and Farm–Related Business Ideas. Skylands Small Business Development Center at Warren County Community College.

Original source

This article was excerpted with the kind permission of the authors from:

Appropriate Technology Transfer for Rural Areas (ATTRA). 1999. Direct Marketing., Fayetteville, Arkansas. Web: attra.org/attra-pub/directmkt.html

The PDF version of this document is available at: attra.org/attra-pub/PDF/directmkt.pdf (36 pages 698 KB)

About the author

ATTRA (Appropriate Technology Transfer for Rural Areas) is the nationwide sustainable agriculture information project of the National Center for Appropriate Technology (NCAT) and is funded through the USDA Rural Business-Cooperative Service. Publications and technical assistance from the ATTRA project are available free to farmers, ranchers, Extension agents, and other U.S. agriculture professionals by calling 800-346-9140 or on the Web at attra.ncat.org.

This article was authored by By Katherine Adam, Radhika Balasubrahmanyam, and Holly Born. Many thanks to Katherine Adam, the lead author of this article, for her support in excerpting this article.

Contact information: Appropriate Technology Transfer for Rural Areas (ATTRA) PO Box 3657 Fayetteville, AR 72702 USA Phone: 800-346-9140; Fax: 501-442-9842 web site: attra.ncat.org