You’ve decided to start a farm or small batch food business. Congratulations! The goal of this article is to briefly familiarize you with the basics of marketing to local food buyers. Specifically we will discuss marketing steps to generate sales for your small farm or small batch business. This article will cover the four P’s of marketing for producers seeking to sell locally. Those include: Product, Price, Position, and Promotion.
You may plan on providing food for your family, possibly some friends, but your ultimate goal is to sell to your local community. Your first major harvest or small batch might be months, weeks or days away. You’ve certainly done a great job of getting to this point, but you might be thinking, now what? How do I sell my product?
Why think about Marketing?
As a single owner operator, it can be easy to overlook marketing because your day to day focus is on the product itself. But marketing is a critical link between growing or creating and selling. In fact it’s never too early to start thinking about marketing. Marketing can help shape what you are selling.
Consider this – marketing doesn’t need to be hard. But you will have to set aside some time to think through the different marketing elements. Some tasks you will only need to do once such as create a logo. Other components will require regular maintenance such as pricing and building demand through promotion.
How Small Farms and Small Batch Food Sellers Define Their Product
Your product is not just your goods, but the story behind your farm or your business. The sustained growth in local food is linked consumers’ desire to seek more transparency and connection to their food source. Importantly as a small producer, you need to create an emotional connection to your buyer. Consequently, you need to craft and convey the story of your business and your products. That connection will help to achieve a 10 – 25% price premium for your product over conventional products.
When crafting your story, think about:
- What drove you to farm or start your own business? What are your special practices? Special varieties? Why do you grow what you grow? Why are you passionate about what you do?
- Telling your story in two sentences. This 10 – 15 second statement should convey the most important elements of your business to potential new customers or business partners. Meanwhile, use the About Us section of your website to expand your story and provide a more robust narrative. Later in this article we will discuss the important of having a presence online. A website is an ideal online presence, but social media can provide an easy online entry point.
- A tagline that represents your business and is easy to remember. Describe what you do in the shortest possible way. Most importantly, the tagline should be memorable for your potential customers. In a nutshell, a tagline boils down exactly what you do.
- Investing in a logo. A logo provides a great way to grab attention. A logo visually communicates your business personality and values to potential customers. Concerning cost, a logo does not need to be expensive. For example, online templates and easy custom graphic design has brought the price of unique logos down. Prices start around $90 for a custom logo using online tools.
The Importance of Market Research in Product Definition
An overlooked step in the enthusiasm to get a product to market is market research. Still, market research can help guide what you sell, how you position your product(s), and to whom you sell.
For example, market research might include walking around a farmers market or co-op to see what other food producers are offering locally. Also consider talking to chefs, institutions and grocery stores to see if they have unmet needs. Another great resource is your local food and farm alliance organization. These organizations may have a comprehensive view of the local marketplace and information on unmet needs for consumers and wholesale buyers.
A few considerations when researching your market:
- Who are you targeting with your product? Seek to understand their buying characteristics and identify unmet needs.
- Upfront market research might help optimize your product offering. If an abundance of a certain type of product exists, you may want to select a different product, or consider out how to differentiate yourself. That is, you will want to be able to articulate what sets your product apart from others on the market.
- Instead of viewing other producers as competitors, consider a collaborative strategy that might help you get a toehold in the market as you learn the ropes of the business.
In summary your product is both your story and the goods you are selling. Most importantly, know your target audience. Be able to differentiate your product offering, or choose to collaborate with others in the marketplace.
How Small Farms Set Prices to Sell Locally
There are two ways to come to a price. Top down, which is what the market will bear. And bottom up which looks at the cost of bringing a product to market. You need to have a handle on both in order to stay in business and hit the sweet spot in the market.
Top down pricing
If you’ve done some market research, you should have a handle on market pricing. If you haven’t already, research how similar products are priced in your market. Be prepared to articulate what is special about your product if you are aiming for a premium.
Bottom up pricing
How much does it take to grow a specific crop and to sustain your operations? If you want to stay in business, record keeping becomes an important step. Knowing your costs enables you to run your operations like a business. You should have an idea of both fixed and variable costs involved in bringing your product to market. Here is a link to a document outlining fixed and variable costs for agriculture related businesses.
Briefly, fixed costs include the cost of land if you have a lease, depreciation, interest, repairs, taxes, insurance. These are your costs of ownership and costs that you need to be able to cover if you intend on staying in business over the long haul. Variable costs include items such as fertilizer, seed, gas, labor and marketing costs associated with a single product or crop.
Additionally, plan for a profit margin. A profit margin will enable you to survive in the long run. What’s a reasonable margin to shoot for? Food producers average a little over 1%. Processors average a higher margin, somewhere around 6%.
What if you want to grow a crop that loses money?
For example, you really want to grow onions. Maybe you cook with onion every day. From a cost accounting and market price standpoint, you’ve learned the cost of growing onions is greater than the price you can reasonably achieve at market. There are a couple of strategies that may help you meet your target margins:
- Consider your Product Mix. Make sure you have enough high margin items to offset losses with profit.
- Bundle products. CSA’s are a classic example of bundling high and low margin products together to achieve target profit margin. Additionally, logically bundling products, such as a meal package, may enable you to achieve a target margin per meal package.
Position (Distribution): Evaluating Small Farm Options for Selling Direct
Position translates to distribution channels for food producers selling direct. Are you targeting wholesale buyers or retail consumers? The characteristics of each channel in addition to the lifecycle stage of your business may help determine which channel is most appropriate for you.
A look at USDA data of small farm direct sales in 2015 shows that most farmers employ a mix of distribution channels.
Direct to consumer
A majority (69%) of small farms engage in some direct sales to consumers. The benefit of selling direct to consumers is that a farm is able to achieve the highest price point for their product. Additionally, USDA data indicates that farms that engage in direct to consumer sales are more likely to stay in business during an economic downturn. Examples of direct sales to consumers include CSA’s, farmers market stands, on farm sales, and roadside farm stands. The downside of selling direct to consumers is that each transaction tends to be small, and it can be difficult for a small farm to increase sales when only selling direct to consumers.
Direct to wholesale or wholesale intermediary
Looking at the total dollar volume of sales, a majority of sales (66%) are conducted through wholesale channels. Wholesale channels offer a higher per transaction volume, but at a lower price point. Examples include selling direct to a restaurant, institution or grocery store. Direct to wholesale allows farms to quickly increase sales. However, during economic downturns, wholesale channels maybe the first to experience a decrease in volume.
Most farmers employ a mix of channels. While a majority are selling direct to consumers, they are also selling in bulk to wholesale buyers. For those new to farming and producing low volumes, selling direct to consumers may provide a comfortable on-ramp. CSA’s are a popular place to start. Once operational kinks are worked out and your business is ready to scale, wholesale channels may offer an attractive way to rapidly increase sales volumes.
Top Promotion Strategies for Small Farms or Food Businesses
Promotion is likely what you think of when you think of marketing. Specifically, the objective of promotion is to generate sales leads. Yet in order to effectively promote your business you will have had to consider the other three marketing P’s.
A great way to think of promotion is as a funnel that will bring in interested parties. Some percentage of those interested parties will make a purchase.
The key to promotion is to cast the widest net possible at your target market with the least amount of cost and time. Below we will review both online and offline promotional strategies. In addition we will emphasize high value strategies that don’t carry a large price tag.
The 3 most effective marketing tools for any business are e-mail marketing, social media and blogging. Most importantly, businesses that use online marketing are 280% more likely to grow than those not using online marketing techniques. Case in point, 81% of consumers research a product online before buying. And with 95% of adults in the US having a smart phone within an arm’s reach, much of that research is done on a mobile device. Read this article to further learn online marketing strategies.
Specific to food, another study tells us that 27% of consumers have shopped for fresh food online. Another 72% say they plan on shopping for fresh food online in the future.
An online presence in the form of a website or social media page provides the medium to tell your story. The primary reason why online is an effective sales tool is the ability to marry content with action. Consider making your website and/or Facebook page “actionable.” Once a buyer has found you, ultimately you want to make it easy for them to place an order.
- Your website is the place that buyers will go to learn your story. In fact, the About Us page is the most frequented page (besides the home page) of a website. Prospective buyers want to know who is behind their food. About Us is where you can provide a robust narrative about who you are and what is special about your products. You can spend a lot of money or a little money on a website. There are many do it yourself templated website that allow you to register your domain, select a template and then add content. That’s the low cost route. The price goes up as you customize and add different features and functions. Here is a link to resources for building a website.
- Facebook is another online directory – but space can be limited. The goal of social media is to engage and then refer visitors for your website where shoppers can make a purchase. Here is a link to an article with actionable tips on how social media can boost farm viability.
In person marketing
Marketing in person includes anywhere you have the chance to interact with a potential customer. Farmers markets and stands are a couple of examples. Effective tools of marketing in person are brochures, or displays providing photos and snippets that help to tell your story.
Think about face to face interactions with shoppers not only as a sales opportunity but also as a marketing opportunity. For example, at a farmers market, promote your subscriptions or CSA’s. Also, sign up interested shoppers to your e-mail marketing list.
Typically public relations occurrences are positive. For example, a well constructed article in your local newspaper, an interview on the radio, or an online story all can reap benefits to your business. PR is basically free advertising. Most local newspapers and publications are eager for content. Reach out to media in your community. Make it easy to report on your business by writing an article yourself to submit. In the article, emphasize the story behind your business and what makes you special. You may hit a home run with a published story. Alternatively, the story may solicit a phone call from a reporter.
A paid way to increase awareness for those who have the budget is to advertise. Important to using your advertising dollars wisely, make sure the advertising vehicle you choose hits your target market. If you are considering advertising on social media, read our tips on social media. Consider how many people your ad would reach and what percent of that audience is a part of your target demographic?
It can be difficult to measure the effectiveness of print advertising. Measuring the effectiveness of digital advertising is easier in that digital can track who visited your website, and how many people purchased.
If you are considering advertising, think about offering a trade – product for advertising rather than cash. In smaller communities, this might be an effective strategy, saving precious cash and offering a win-win for everyone.
The four fundamentals of marketing, product, price, position and promotion, work together as a system. If you adjust one aspect, consider reviewing the other three in order to optimize your sales opportunity. Good luck with your food business!