Which market is right for me?
Posted: May 3, 2011
Which market is right for me? Most beginning farmers state this question incorrectly! "What products does the market want?" is a more appropriate form of this important question. All too often, farmers produce what they enjoy producing without sufficient consideration of market opportunities and market demand.
The "how to market" question breaks into several sets of decisions. One has to do with searching for marketable products, which drives many other farming considerations. You need to match up the product with the most suitable market approach. For example, you may be good at producing high quality apples. Unfortunately, marketing apples is extremely competitive, with large scale, established producers competing very effectively in local, national and international market places. One key to success is seeking a few reliable markets for those apples before production begins. As we build these markets – our effectiveness is enhanced when we explore – 1) What makes our products unique? 2) What level of value – price, customer service, convenience, unusual – does our target customer seek?
We are less stressed when we match market options with our market preferences, too. For example, do you want to wholesale or direct market? If you are considering direct sales – somebody on staff must possess a retail-personality. Is adding value to your product a good strategy? Value added requires additional skills and capital. How about selling on-line? Do any of these options pencil out in a business plan? We can increase our probability of success through learning about market opportunities and barriers.
Marketing is also about promoting your product(s) to meet -- actually exceed -- customer expectations. The marketing plan is a critical part of farm operation. If we look at the U.S. food industry as a whole – The roughly $138 b. of farm gate food value gets another $700 b. spent on processing and marketing before it reaches the dinner table. Producing crops and livestock is just the beginning of farm marketing.
Common area of discussion among new and beginning farmers and their consultants often include:
- What are the market options to sell my product? What are the pros and cons of each? Some examples would be direct marketing on-farm (Community-Supported Agriculture, farm stand), off-farm (farmers markets, sales to restaurants, internet, catalogs), and using brokers or wholesalers.
- Who are my customers? What do they want? How do they want it presented, prepared, or delivered?
- Why would a buyer choose my product? What makes my product interesting? What is our story?
- What are the current consumer trends? Studying consumer demographics and food industry studies offers insight to the potential farm product market.
- Typically, a beginning farmer can benefit by not attempting to compete with large-scale agriculture. Are there suitable specialty markets for our product(s)?
- Trying to produce a farm product takes considerable skill. Trying to add value to this product takes considerable skill. Do you have the necessary facilities, capital, time and expertise to bring your product(s) to the customer?
Direct marketing considerations
You will have to
- prepare your product in a form that can be sold
- generate customers either by going to them or having them come to you
- deal with individual customers
- address customer satisfaction and deal with a few customers who are not satisfied
- Volume: less product is usually sold than with some other marketing ventures
- Time: requires more of a time commitment
- People skills: you are dealing directly with people (where’s your happy face?)
- Marketing skills: its competitive, you are going to have to sell your product
Typically available direct market structures
- Startup: costs and marketing skills can be developed
- Direct interaction: best feature is contact between customer and producer
- Comfort: out in the weather
- Time: will spend the better part of a day
- Direct competition: producers are all together in a smallish area
- Regulations/policies: have to be able to follow rules set by market management
- Customer pays to pick: if it was just that simple, everyone would be doing it
- Cost reduction: transportation, handling, storage (not labor)
- Customers buy more: PYO pickers typically purchase more volume
- Privacy: you are allowing the public on your farm
- Liability Insurance: people roaming around
- Damages: customers will pick-over and ruin crops
- Bad weather: problem with limited season crops
- Labor costs: need cashier, parker, people mover
- Attracting repeat customers is key to long term success of market
- Overhead costs are higher due to facilities
- Planning and Zoning: government red tape
- Location: enough to attract customers (?)
- Facilities and buildings: first thing people see, neatness counts
- Shareholders have input
- Fees are paid in advance
- Advanced payment creates working capital for the farm operation
- Frequent deliveries: lack of storage at restaurants may require more transportation
- Out of business: turnover is typically high in the restaurant business