Get the most out of your promotional efforts
Increased profitability is the common goal for all growers. A well-planned marketing campaign can help you achieve this objective. When Paula Schafer, extension resource educator in agricultural economic development, meets with farmers in Saratoga County, N.Y., she refers to the five P’s of marketing: product, producer, promotion, price and place.
Each of the five P’s is interconnected and plays an important role when developing a marketing strategy. “The key aspect is to understand who the buyer is, who makes the decision to choose your farm and not a competitor’s,” said Miguel I. Gómez, assistant professor of applied economics and management at Cornell University.
The product you sell is more than the cucumber, strawberry or peanut grown on the farm. In addition to being a fruit, vegetable or nut, the product you sell is considered a commodity, sold on thin margins and large volume, or a differentiated product, sold on larger margins and smaller volume.
Offering a high-quality product is a given. Without quality, buyers will not return for repeat sales. The more you know about the buyer and their needs, the stronger relationship you can cultivate. “Know how much the buyer will need, how often they will need it and how they like it packaged,” Schafer said.
“You have to ask yourself, ‘what can I do differently to make my product stand out?’” Schafer explained, “There are many farms that offer the same fruits, vegetables and nuts.” Are you able to create a unique flavored product or one that is packaged more conveniently for the end user?
A fruit like pineapple can be both a commodity and a differentiated product. “Think about what situation the consumer will use this product. Some people prefer to purchase it in ready-to-eat chunks. That product can be branded, labeled and sold at a higher margin than a basic pineapple,” Gómez noted.
If you are going to rely on wholesale buyers to purchase your product, make sure you have the volume to support their purchase, he added.
The second element in the five P’s is producer. “Share your farm’s story,” Schafer emphasized. “Publicize the history of the farm and its growing philosophy.” While this works best in direct sales like farmers’ markets, more and more of today’s consumers want to know where the apple they are going to eat came from.
“Only 2 percent of the entire United States population has contact with the agricultural industry. If you have the opportunity to establish a direct link with the consumer, listen to the feedback they have to offer. Be prepared to answer any questions they may have about how the product was grown,” she added.
Educate yourself on the latest buzzwords used in the media and by consumers. Be ready to combat images portrayed in the media, especially scare tactics. Identify the steps your farm takes to avoid health risks for the consumer, and let the buyers know that you work proactively to grow food that is safe.
How do you spread the word about the products you grow? That is where the third P, promotion, comes in. Promotion can be divided into four categories, price promotion, advertising, personal selling and publicity. Price promotion is based on a set, discounted price to encourage a sale. This tactic can be tricky, especially when working with the wholesale buyer rather than with the end consumer.
Advertising is usually too expensive for growers to consider. However, in New York growers are able to purchase advertising spots at a reduced rate if they are members of the Pride of New York Program, an organization developed to support the sale of agricultural foods grown and processed in New York state. “Growers in the Albany/Capital District area get a discount on advertising on Channel 13 if they are members of the Pride of New York,” Schafer explained. There may be similar agreements between grower organizations in your city and state.
Most often, growers rely on personal selling and publicity. Create a farm identity. “Have a logo designed that is unique to your farm, create business cards, brochures, farm signs, Web site, T-shirts and hats so that your farm is visible,” Schafer added.
Every member of the supply chain is demanding more and more information on who produced the food they are about to eat. Farmers’ markets provide one of the best ways to interact with the consumer and circulate the farm’s story. “Farm markets allow the owner and the staff to develop a lasting relationship,” Gómez explained.
Grocery retailers are also recognizing the importance of promoting a farm’s story. “I see retailers who are trying to develop the relationship between farm and end consumer by featuring the farmers in their stores,” he said. “Stores like Whole Foods and Wegmans are using their Web sites to show pictures of the farmer with his family and out working in his fields.”
Publicity for the farm can also include press releases for the local media outlets, the Internet, farm newsletters, open houses and word-of-mouth recommendations.
Each of the five P’s is closely related. Even with a focus on the first three P’s—promotion, produce and product—without a place to sell a farm’s fruits, vegetables and nuts, a well-planned marketing strategy would fail.
Auctions and wholesale buyers may be the easiest because the entire crop is sold at once, but it offers lower margins. “Make sure you have enough volume for the buyer and consistent quality if you choose the wholesale buyer,” Gómez advised.
Outside of wholesale and auction outlets, produce can be sold through direct distribution, high discounters and food service. Direct distribution includes community supported agriculture (CSAs), farm markets and the Internet. “This is really a niche, it is attractive, but a small volume. Only 2 percent of the food we eat in the United States comes from a direct channel,” Gómez said. That being said, it is hard for the large grower to target consumers and be profitable through a direct channel.
High discounters like Aldi’s and Save-A-Lot are increasing their offerings of fresh fruits and vegetables. “This has been growing over the past three years and will continue to grow along with the other supermarkets,” he added.
The food service channel has also gained momentum. Hospitals, schools, restaurants and hotels are striving to offer more fresh products. “This channel is very segmented. While there can be great success, growers face competition from larger food service distributors like Sysco in these institutions,” he said.
“Diversify your portfolio of distribution channels. Manage each distribution channel as a separate business unit to understand the performance of each. This is similar to the way Pepsi has considered its brands,” he explained.
Pricing strategies are determined by individual growers, though in large part price is determined by whether you are selling a commodity, a niche product or a combination of both. “In commodities you are the price taker. It is easier than deciding what price to charge, but you have to be mindful of the costs of [the] product,” Gómez commented.
Value pricing is critical. Many businesses use a straight markup on their product to determine profit. The markup method simply multiplies the cost of production by the profit desired to determine the price. For example, if the product costs $1 to produce and the farmer wants a 20 percent profit, the selling price is $1.20.
With a niche item, value pricing can actually place a much higher selling price on the end product. “I am from Colombia. We were exporting yellow gooseberry to Germany. What we found out was that the customers were using it for decoration rather than to eat and they were willing to pay much more for it,” Gómez said. “We had to change the way we priced it so that we were not underselling the product.”
Pricing can cause the biggest headaches when considering the five P’s of marketing, but is no less important than the others. Gómez and Schafer agreed you never want to underprice or undersell your product in the marketplace.
Education is key
The marketplace is changing quickly, and attending education seminars on growing methods and marketing will help your farm remain viable. “I recommend, especially for smaller and midsized growers, to take advantage of the services offered by the local universities and extension programs. They will help you develop plans to go to market,” Gómez noted. “They are an underutilized resource.”
An effective marketing strategy takes time and effort. “Utilize the various markets available to fit your ultimate farm goals,” Schafer suggested, “and remember the five P’s: product, producer, place, pricing and promotion.”
Kathryn Navarra is a freelance contributor based in Clifton Park, N.Y., and writes about agriculture and the equine industry regularly.