Lesson 2: Marketing

Outline of presentation

• Goals of Marketing Lesson• Basic Marketing Concepts

– Market segmentation RBD—use better word/concept—”defining your markets?”

– Segment examples– Win-win scenarios

• How to use the tip sheets• How to use the marketing worksheet and how

it relates to your business plan

Goals for Lesson 2• To learn about a variety of marketing channels• To understand the value of combining a few

marketing channels • To consider each market channel individually

and what it would take to enter that market• To identify the 2-4 market channels that seem

like the best fit for your farm business• To identify challenges and next steps in

entering those markets

By the end of this lesson, you’ll have a basic marketing plan for your farm business! RBD: for slides 2&3, what

graphics could be added…also, where would some of the Cornell videos fit

in?

Two ways to think about marketing• Niche Market

– Specializes in satisfying specific needs of consumers

– Niche products are attractive for specific demographics, at specific price points, and at differing levels of quality. RBD-remember our audience—demographics & price points sound like jargon…

• Commodity Markets– A standard product that is

undifferentiated (not different) from other products within the market.

– Commodity prices are volatile (RBD: we need to discuss what “commodity” means..) and typically set through commodity exchanges like the Chicago Board of Trade.

Let’s talk about niche marketing

RBD: I love graphics, but can we get something that might be more

representative—we don’t cover a lot of

meat niche markets..

• Two sections of a market are segmented if price changes in one segment do not cause a corresponding price change in another segment (RBD: I’m going to be obnoxious and ask, “Why does the user need to know about market segmentation—isn’t it enough to point out that different markets have different prices and requirements?—market segmentation sounds a bit like business school jargon….)

• For example:– You have two customers. One is price sensitive and buys

in volume. Another wants frequent deliveries, specialty cuts, and buys in lower volumes. The product is the same, but the price is different depending on value-added attributes.

What is market segmentation?

Why do we segment the market?

– If there is more than one type of consumer, then your job is to figure out how, and if, you can sell to the different kinds of consumers…) the market is not uniform

– A non-uniform market implies that among consumers of your products, there are different perceptions of value

– If there are different perceptions of value, then it is possible to charge a different price for the same product based on value-added traits

– Creates a more resilient business model.

What kinds of segments are there?• Market Channel Segmentation: Segments based on different

outlets to sell products.– Grocery, Farmers’ Markets, CSA, Restaurant

• Service Platform Segmentation: Segments based on the services provided to a customer.

– Delivery, further processing• Cultural Demographics Segmentation (RBD—need plain

language..I like the ideas, but not the language..)– Halal, kosher, cabrito, organ meat, asian vegetables

• Values Segmentation: Segments based on customer perceptions of value

– Organic, natural, local, grass-fed, farmer owned

No market segment type is an island, many overlap.

How do we segment the market?• Identify different market venue, service, and

individual value segments in your area.• Requires some sales legwork. • Are you out talking to:

• Restaurant owners? • Grocery Co-op managers? • Individual consumers?

• What do they want? • How can you fulfill those needs?

• Many will say low price!– HOWEVER, the key is to identify something besides price that

helps them receive more value or better profitability.RBD—i.e., quality, freshness, etc..)

Segment Example: Terminal/Shipping point Markets

• Depending on your scale, these commodity (need to define “commodity”) markets might be a good place to move excess production– Remember: Multiple marketing outlets allow for

flexibility

• Beware that commodity markets might have different standards than your local market niche, never assume!

Segment Example: RestaurantsRequires: • Effort and relationship building

with chefs and managers• Consistent supply and quality• Consistent delivery times• Ease of communication with

supplier?

Restaurants typically want specific products and may be willing to pay more.

Segment Example: Restaurants (Continued)

• Restaurant suppliers (your competition) typically already provide consistent supply, quality, service, and competitive prices to restaurants.

• Your typical restaurant buyer also likes the convenience of fulfilling all of his/her needs with one phone call or on the internet.

• If you are going to compete with other more established suppliers, you must give the chef a reason to make an extra phone call to you.

Segment Example: Restaurants• Your restaurant customer (this phrase is

somewhat confusing) must provide a unique dining experience at a competitive price.– How can you help your customer provide that?

• The local, family farm, or organic attributes might be important… freshness, quality, helping local economy…

• Can you provide unique cuts of meat that help provide a unique dining experience

• Food prep time is a costly and difficult part of restaurant management. Can you help your customer decrease food prep time? (trh-e.g. pinched basil and parsley)

Segment Example: Community Supported Agriculture (CSA)

• Requires consistent supply and quality

• You can pre-sell your production

• Delivery to a specified site or direct to customer is often required.

RBD: Seems like “segment” is equivalent to “marketing channel”…also, I’m guessing most folks using this will be doing veggies, not livestock, so we need to make this more relevant to that segment…

Know your CSA Customer (continued)

• If you have customers that are cost conscious, you need to show that you are competitive on cost.– Often, buying a whole carcass is actually cheaper than

if you bought equivalent cuts through retail channels. Do your customers understand this?—again, animals vs. veggies…

• If you have customers that are nervous about paying up front, you need to alleviate this problem.– Can you deliver smaller individual quantities to a

group and charge on a weekly or monthly basis?

Segment Example: Retail/Wholesale

• Requires consistent supply and quality.

• May require GAP certifications

• Very competitive.• Potential for volume

Know your Grocery Store Customer

• What are retailer/wholesaler constraints?– Cash is a significant limiting factor in retail venues. It

takes a lot of money to fully stock a store!!– Retailers typically try to maximize their sales/profit per

square foot. RBD: But what do these 2 points have to do with the farmer?

• Where does your retailer/wholesaler lose money?– Spoilage– Devoting shelf space to products that have either low

margins or low rate of sales

Know your Grocery Store Customer• How can you charge premium prices in a retail store?

– Sufficiently increase inventory turns —this term needs clarifying..

– Sufficiently increase profit per shelf (per square foot)—how can a farmer effect this?—that’s the owner’s decision..

• Sell a business deal:– Sell numerous items (try 20 – 30) with frequent delivery

(low inventory ; low spoilage)– Provide store signage to add value

Win-Win Scenarios

• Is dropping the price your first and only method for increasing sales?– This is win-lose. Your customer wins with cheaper

meat, you lose with cheaper meat.– Is there a better way?

• Remember, if you don’t win you won’t be in business for long. If your customer doesn’t win … you won’t be in business for long either.

Win-Win Scenarios (An Example)

• If “my price sensitive customer, who is nervous about the high upfront meat CSA costs and would rather go to the grocery to buy small quantities is resistant to buying from me.” —hmm, this isn’t clear to me-RBD

• And If “I need to make sales and move the entire carcass at a decent price.”

• Then “is it possible to deliver smaller quantities on a weekly or monthly basis”

Win-Win Scenarios (An Example)

• The Result:– you are selling a whole or half, giving the customer a better value than

they could get at the retail store, while also maintaining a fair price– AND you allow them to pay in smaller increments, helping to alleviate

a customer’s resistance to buying your product.

• You win by making more sales at a fair price, thus making more money. The customer wins by getting a great product at a great price with payment terms he/she can live with. Win – Win!

Tip sheets: how to use them

• You have 11 tip sheets in your packet describing 11 different marketing channels

• These sheets are meant to help you think about each marketing channel individually and how well it might fit for your farm

• Read through each one and ask yourself the questions at the bottom

• Try to answer those questions before moving on to the next tip sheet

Marketing worksheet: How to use it

• This worksheet is meant to help you think through how your selection of 2-4 marketing channels will work together as a whole marketing plan for your farm

• Use this worksheet to:– Write down your choices for marketing outlets– Why you chose them, and– How they complement one another