Marketing Basics for Your Farm Business

Brian  J.  Schilling  

Assistant  Extension  Specialist,  Agricultural  Policy  Rutgers  Coopera<ve  Extension  

 An  Annie’s  Project  Presenta<on  

February  13,  2012  

A Threat?

or an Opportunity?

Suburbanization and Agriculture “Impermanence” in Farming

Speculative Effects

Technical Effects

Regulatory Effects

Market Effects

Berry  1978;  Lopez  et  al.  1988  

The Market Buzz

•   “Buy local”

•   “Community supported agriculture”

•   “Agritourism”

•   “Farm to….”

•   “Value added”

•   “Local food systems”

•   “Food-sheds”

•   “Farm markets”

•   “My farmer”

A Market Perspective

•   Roughly 29 million people within 100 miles of central N.J. –  $740+ billion in personal income

•   How have NJ farmers adapted to suburbanization pressure (or, market access)? –  Rank 40th in farm sales but 12th in farm direct marketing sales

–  Rank 6th in percent of farm income from direct marketing (among 48 coterminous states)

–  Rank 1st in percent of farm income from agritourism and recreation services (among 48 coterminous states)

Translating Good Ideas Into Good Business!

The world is full of good ideas!

Good marketing helps turn good ideas into business volume and drives entrepreneurial success.

–  Your business success will be predicated upon presenting your ideas to the right audience, in the right manner, at the right time and place.

Simply put, marketing is a series of activities designed to facilitate a market transaction, or in other words, an exchange of something of value between a seller (YOU!) and a buyer.

Seller Buyer

Goods, services and experiences

Cash, credit, etc.

What is Marketing?

Marketing Misconceptions

Marketing is often viewed too narrowly as advertising and promotion, or confused

with “making the sale”.

If the marketer does a good job of identifying

consumer needs, developing appropriate products, and pricing, distributing, and promoting them effectively, these goods will sell very easily.

Dr. Philip Kotler

(Northwestern University Professor, marketing consultant)

Where Do I Begin? The preceding passage from Professor Kotler’s Principles of Marketing relates sales success to the “Four P’s” of marketing.

 Product (or service): What are you offering to your target market?

 Price: How much will you charge?

 Placement: What distribution channels will be used to reach your market?

 Promotion: How will you raise awareness of your product within target markets?

The First P - Product

The point to remember about selling things is that, as well as creating atmosphere and excitement around your products,

you've got to know what you're selling.

- Stuart Wilde (author)

Advice:

•   View your “product” from the eyes of your consumers.

•   It’s not just peaches or sweet corn or hayrides.

•   It is the totality of the farm experience that you are providing to them.

Defining Your Product Your farm product is multifaceted. You are in the business of providing products, services, and experiences.

What will be experienced by your customers?

 The courtesy of your employees  The safety, visual appeal and cleanliness of the farm  Convenience and availability of parking  Ancillary services

  acceptance of credit cards,   restroom facilities,   accommodation of individuals with special needs (e.g., the elderly, persons

with disabilities, parents with baby strollers)   recipes or information on how to cook/prepare/store fresh products

Defining Your Product The Role of Your Employees

You, and your staff, contribute to the quality of your customers’ experience. Agritourism and direct marketing are hospitality businesses. The importance of customer satisfaction cannot be overstated.

Helpful Hints:

 Are your employees readily visible and identifiable? (Consider apparel with a farm name/logo and name badges.)

 Are employees instructed to approach and welcome customers in a friendly and helpful manner?

 Are employees knowledgeable about all aspects of the farm, its history, and its products?

 Are your employees well-versed in a list of FAQ?

Defining Your Product The Role of Your Employees

Consider likely questions from visitors to your farm.*

 Are there any other local attractions I should visit?  What accommodations are nearby?  Are there any good places to eat?  Where is the nearest gas station?  Are there any special events happening in town?  Are there any retail stores near here?

An informed, knowledgeable employee enhances the visitor experience.

*Source: Adapted from Michigan State University Extension Bulletin, E-2064.

Defining Your Product

A Few Words of Wisdom

Seek customer feedback (the good, the bad and the downright ugly) and take it seriously!

The Second P - Price Setting an appropriate price point for each product or service is critical – and possibly challenging.

–  Know your costs! (e.g., conduct break-even analysis)

–  Analyze competitors’ pricing –  Examine trade publications –  Conduct research on your target customers’ willingness to pay

for your product(s)

Break-Even Analysis

Break-even analysis is a tool for determining the number of units of a product that needs to be sold to cover all fixed and variable costs associated with offering a product.

A break-even point (BE) can be calculated as: BE = Total Fixed Costs / (Price – Variable Costs)

Example - How many 1-hour farm tours do I need to offer in order to break-even on my investments in farm infrastructure?

Total Fixed Costs: $4,000 �   Insurance - $1,000 �   Improvements to parking area - $1,000 �   Improvements to farm market - $1,500 �   Child play area - $500

Total Variable Costs: $80 �   Wages/hour (5 workers @ $8/hr) - $40 �   Desired proprietor income - $40

Cost charged per tour: $100

BE = TFC / (P – VC) BE = $4000 / ($100 - $80) BE = $4000 / $20 Break even point = 200

farm tours

Example - How many 1-hour farm tours do I need to offer in order to break-even on my investments in farm infrastructure?

•   Is 200 farm tours feasible? –  Is it consistent with your expectations in terms of time

commitment? –  Is the price I am considering competitive?

•   What if I raised the price per tour to $150? * –  Would this price point be acceptable to consumers? –  Would I be competitively priced compared with other farm

tours offered in my market area?

* (Answer: 58 farm tours would be required to break-even)

The Third P - Placement Placement refers to distribution. How will you provide access to your products?

–  The goal of direct marketing and agritourism is to bring

customers onto your farm. –  Your farm is therefore your primary distribution channel. It must

be safe, clean, and inviting to the public.

The Third P - Placement

•   Ensure that risks of injury to visitors on your farm are minimized –  Designate and secure areas that are not open to the public –  Carefully plan and prepare for safe movement of all farm visitors

•   Maintain a high level of aesthetic appeal –  Decorations and appearance should be welcoming and reflect

seasonal or special events

•   Make it easy for customers to identify:

–  Driving directions to the farm –  Days and hours of operation –  Product availability for seasonal items

The Third P - Placement

Helpful Hints: •   Assume that visitors may not be familiar with your products

–  Clearly mark items in retail displays

–  Offer preparation tips and recipes

–  Clearly identify and direct visitors to specific areas in fields open for PYO (and provide signage identifying each crop)

•   Identify rest room facilities

•   Provide areas for resting or children’s play –  Consider accessibility issues and the needs of parents with baby strollers,

elderly visitors, and individuals with limited mobility

The Fourth P - Promotion Next to doing the right thing, the most important thing is to let

people know you are doing the right thing.

- John D. Rockefeller (American industrialist & philanthropist)

Question: Which of the following advertising and promotion options do you think is most

effective?

A.  Word of mouth B.  Road signage C.  Internet/website D.  Print media E.  Other

Advertising & Promotion Options Studies conducted in both New Jersey and Pennsylvania found that agritourism operators rank “word of mouth” as the number one resource for marketing.

Schilling, Brian, Marxen, Lucas, Heinrich, Helen & Brooks, Fran. (2006). The Opportunity for Agritourism Industry Development in New Jersey. Food Policy Institute Report No. RR-0706-010. New Brunswick, NJ: Rutgers, the State University of New Jersey, Food Policy Institute. October 2006.

Ryan, Susan., DeBord, Kristy, and McClellan, Kristin. Agritourism in Pennsylvania: An Industry Assessment. The Center for Rural Pennsylvania. California University of Pennsylvania. March 2006.

But What Do Farm Visitors Use?

The Pennsylvania study also found that “word of mouth” ranked only fifth among agritourism visitors in terms of resources used in trip planning. What did visitors to Pennsylvania agritourism operations identify as the most frequently used resource for identifying destinations?  Internet websites!

Welcome to the new age of marketing!

Advertising & Promotion Options   Print media (newspapers, magazines)   Press releases   Radio or television   Yellow pages   Farm website   State or county promotional websites   Farm visits directories   State departments of agriculture   State Farm Bureaus

  Road signage and billboards   Direct-to-consumer mailings   Brochures   Hosting community events   Travel and tourism sites   Customer E-mail list serves   Networking   Cross promotions with other

businesses   Social networking tools

Factors to consider Geographic coverage

Accessibility to/use by target audiences Cost (???)

A Final Word on Advertising!

For a business not to advertise is like winking at a girl in the dark. You know what you

are doing but no one else does.

- Stuart H. Britt (advertising consultant)

A Fifth “P”? Some marketers discuss a fifth “P” of marketing: Positioning.

This refers to the process of creating a unique impression for your operation within the minds of your customers.

Ask yourself:

“How will my customers describe my farm to their friends?”

(Or, more importantly, how do I want them to describe my farm?)

Positioning

Assume you are Farmer Brown. How would you want your customers to complete the following statements?

Loyal Customer 1: “Oh! Farmer Brown? His farm is wonderful! They are really great at [fill in the blank].”

or…

Loyal Customer 2: “The Brown Farm is famous around here for its [fill in the blank].”

How Much Should I Budget for Marketing?

•   Estimates vary widely, but marketing probably should account for 10-30% of your total operating budget.

  Desmond Jolly (2000), former director of University of California’s Small Farms Program notes that marketing costs often range from 10 to 25 percent of total operating expenses in the early stages of agritourism development.

Why Spend Time and Money Marketing? I find that the harder I work, the more luck

I seem to have.

- Thomas Jefferson •   You may spend considerable time, effort, and money

developing a wonderful farm destination.

•   Invest equally in developing your agritourism or direct marketing business.

•   Luck does not bring visitors; however, proper marketing will!

Contact Information

Brian J. Schilling, Ph.D. Assistant Extension Specialist, Rutgers Cooperative Extension

Assistant Professor, Department of Agricultural, Food and Resource Economics

School of Environmental and Biological Sciences & New Jersey Agricultural Experiment Station

Rutgers, The State University of New Jersey Cook Office Building, Room 108

55 Dudley Road New Brunswick, NJ 08901

Tel: (732) 932-9155 ext. 215 FAX: (732) 932-8887

schilling@aesop.rutgers.edu