What is Crowd Funding and Does It Really Work?

One of the major challenges of starting a small business is finding financing. Banks are giving out fewer and fewer loans in this economy, so where is an entrepreneur supposed to get startup money? You may need to get creative and try alternative financing options like crowd funding.

According to Wikipedia, crowd funding is "the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations. Crowd funding occurs for any variety of purposes,from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns, to funding a startup company or small business or creating free software."

In a July 2011 post, I described a Pittsburgh brewery that was using crowd funding to fund their expansion into a larger facility. Below is a video of a New Jersey woman who recently used crowd funding to open a storefront for her baking business.



Is this type of funding right for you? As I've said many times before about trying a new idea, DO YOUR RESEARCH! Every business is different and you must weigh the pros and cons to tell if this is right for you. In the near future, I'll write a post about different kinds of crowd funding websites.

If you are an ag entrepreneur and have tried crowd funding, how was your experience? What kind of promotion did you do? What kind of advice would you give others thinking about trying crowd funding?

Getting people to "see" your brand on Twitter

If you have used Twitter, you know that there is a very small amount of space for you to post (only 140 characters). To show a picture, you must include a link or use a third-party photo app like Instagram, Twitpic, or yfrog. To get people to click on your picture, you need to create a description that catches readers' attention, all in 140 characters or less. Sounds a little daunting, but it can be done!

Some tips on creating a better visual of your brand from an article posted on OpenForum.com with examples created for my fake business "DJM428 Cheesesteaks":

1. Twitter voice should be consistent and relevant. Try to keep the same person as the main Tweeter so that your Twitter account has the same style and voice. When composing tweets, they should be descriptive and relevant. Explain as much about the product (in 140 characters or less) and then add a picture.



2. Favor native images. As I mentioned above, third-party photo apps allow you to attach a picture right in your tweet. The reader just needs to click on the embedded link and the picture will show up in the feed. This is much more useful than just adding a link because it doesn't force your users to open another screen to see the picture (which might deter some readers). Research the different photo apps and how they work on mobile devices. Some work differently than others in how they display images.




3. Pageviews are paramount. As always, you want readers to visit your website. Be sure to frequently link back to your website so that readers can see all that you have going on. In doing so, don't be vague. Links with little or no description discourage readers from clicking.

What to do:



What not to do:



As an ag business owner, how do you use Twitter? How many followers do you have? How do your customers respond to your tweets? What advice would you give another ag business owner who is thinking about tweeting?

UK institutes gluten-free labeling regulations; could the US be next?

In June of last year, I wrote a post about gluten-free products and it was the most read post so far. Since this seems to be a trending topic, I thought I would continue giving our readers more info about gluten-free products.


Starting this year, the UK has developed new regulations in the labeling of gluten-free foods. The labels will include 3 categories (as reported by SupermarketGuru.com):
1. Gluten-free: applies only to food which has 20 parts per million (ppm) or less of gluten.
2. Very low gluten: applies to foods which have between 21 and 100 parts per million (ppm) of gluten.
3. No gluten-containing ingredients: this is not covered by the law and is for foods that are made with ingredients that don’t contain gluten and where cross-contamination controls are in place. These foods will have very low levels of gluten but have not been tested to the same extent as those labeled gluten-free or very low gluten unless otherwise stated on the label.

Is the US next in instituting such regulations? The FDA took steps in 2007 to develop gluten-free labeling (products with less than 20ppm of gluten could use the term "gluten-free"). There was a lull in the FDA's development of gluten-free labeling, but the case was re-opened in 2011.

As a food business owner, what do you think? Will these regulations help or hurt the gluten-free industry? Do you currently make gluten-free products? Do you have customers asking for gluten-free?

What Are Consumers Buying? - Guest Blogger, John Berry

Participating in a recent workshop on communicating with customers, I was reminded of the significance attached to meeting the needs of our customers. After all, they do have the money! Concepts around customer buying behavior are not necessarily new, but they do evolve over time. Jolene Brown was the catalyst for my latest ah-ha when she spoke of the 5 attributes people seek when shopping. She reminds us that people are not buying the goods we sell directly. What they actually seek to buy is: 1) time, 2) youth, 3) health, 4) safety, and 5) experience. It may benefit our businesses to give these concepts consideration as we finalize the 2011 work and start into planning and implementing for 2012.

Time

Convenience is another way to think of this retail shopper expectation. Many people are time stressed. Between family, community and work, there is often multiple demands on our limited available time. Getting the message to our customers on the ease with which our products can be purchased, prepared and consumed can be a challenge worthy of a solution. As an example – the average American male spends 8 minutes on shopping and 15 minutes per day on food preparation and cleanup. The average American female spends 14 and 47 minutes accomplishing these tasks. If our typical shopper is near to these averages – how do our products/services fit? Are we time worthy?

Youth

During a private conversation, a major grocery chain manager described the basics of their decision making process for locating a new store. The gist of this process is “we seek a demographic with relatively high cosmetics transactions.” Having not yet found the secret of immortality we do strive to stay vibrant and active as we age.

Health

Continuing research into our health status leads scientists to project that in a few more years, 70% of American adults will be overweight. As we consider the health needs of our customers, are we providing solutions focused on their demand or our interpretations of what they should demand?

Safety

Between food safety concerns with conventional food sources and food safety concerns with trendy food sources, it’s no wonder the safety of the food we feed ourselves and our families is a primary consideration when shopping. Also, agri-tourism opportunities are evolving as farm marketers develop a more sophisticated and fuller compliment of venues. As farmers step into these non-production roles the risk they accumulate and mitigate can be significant.

Experience

More consumers are also seeking the farm experience as a way to build family quality time and assure themselves of the safety of their food. Not only do consumers expect a delightful experience each and every time they purchase an item, more significant for us, the further removed from farm life consumers get the more they crave a real farm/food experience. The experiences we make available to our customers begin as we initiate promotions and awareness efforts and follow through final product use. It may be worth remembering – our customers’ last impression of us is the one most likely to stay in their head.

Conclusion

I am wildly optimistic when I think about agricultural opportunities. We may only be limited by our imaginations. However, challenges are also many. As we seek new farm ventures, develop and implement plans – let’s also remember to focus on what potential customers actually want. Growing and marketing great farm products is not the point. Successful farm marketers are those businesses that are growing and marketing great farm products that customers want. We may serve ourselves, our communities and our industry best when we focus on customer needs more often.

About John Berry.... Following twenty years of milking cows, raising pigs and making maple syrup  John received an MBA and has been working for Penn State Extension ever since. His adult education work with Extension centers primarily on agricultural marketing issues. Roughly half his time is devoted to commodity marketing concerns with the remainder focused on retail farm market and agri-tourism topics. An annual retail farm market bus tour, in-season farm market employee twilight workshops and a Retail Farm Market School are some examples of the educational outreach programs John is involved with that benefit direct-to-consumer farm families.

Educate Yourself Before Setting Up Religious Food Displays

Christmas, Kwanzaa, and Hanukkah are some of the biggest holidays in December and are associated with special foods. If you want to set up a display in your store dedicated to a religious holiday, be sure to educate yourself on what foods to include and not to include.

By not doing some research before setting up a religious food display, you may offend followers of that religion like Whole Foods and CVS did this year. In the article "Whole Foods, CVS Confuse Jewish Holidays With Incorrect Displays", author Rachel Tepper describes how these 2 stores messed up:
*Whole Foods displayed matzoh- an unleavened bread traditionally eaten during the week of Passover, not Hanukkah.
*CVS made a display showing an image of shofar and pomegranates- items associated with Rosh Hashanah, not Hanukkah.

As an food or farm business owner, have you ever set up a religious holiday-based food display? What were customer reactions? Do you have any tips for other ag entrepreneurs?

'Human Interaction' Making a Comeback

Shopping in a large grocery store doesn't give customers much interaction with store employees. This way of shopping has been popular for a long time, but according to a survey conducted by Adaptive Path (a design firm focusing on customer experience), customers are now looking for a personal experience in their shopping.

Peter Merholz, president of Adaptive Path, says that consumers want "low-key, face-to-face interactions with merchants". Evidence of this can be seen in the decline of self-checkouts and the rise of food trucks and farmers' markets. The Food Marketing Institute reports that in 2007, 22% of grocery store orders in the US were paid at a self-checkout. In 2010, that number dropped to 16%. Agricultural Marketing Service reports a 53% increase in the number of farmers' markets from 2008 to 2011 (as seen in the graph below).




Merholz also said, "In our increasingly connected world, people crave authentic human interaction, and the future of retail is going to look a lot more like it did in the more distant past and a lot less like the bureaucratically driven mass consumerism we grew to expect in the 20th century."

article

Sounds like great news for ag business owners! Do you feel that your business succeeds because of the human interaction? What kind of feedback do your customers give you about "having someone to talk to"? Are there any groups of people (women, men, seniors, married, no children, etc) that you think enjoy the human interaction more than another group?

Three Things I Think I Know About Local Food Systems

If you follow me on Twitter (@jeffhyde) or are Facebook Friends with me, you may know that I recently attended a Forum to discuss Regional Food Systems with about 40 colleagues from Land Grant Universities in the Northeast.  The Forum was wonderful, bringing together many different people from many different states with many different sets of expertise; economists, plant pathologists, nutritionists, food scientists, horticulturists...  The meeting helped me to solidify some of my thoughts on the topic. Here's the top three things I think that I know....

1. The Customer is Always Right
This is the version of the Golden Rule in which those who have the gold make the rules.  At the end of the proverbial day, the consumers have the money that drives the system.  Over time, the distribution system in the US has focused on providing a diversity of food products at relatively low cost.  Economists who study trade, including international trade, talk a lot about exploiting "relative advantages," making all parties better off if we trade.  That argument applies to any scale of the problem, including global trade.  So, it's no surprise that the distribution system doesn't support local food distribution very well.

To really change the system, it's going to take a willingness on the part of businesses and/or government to step in and modify the food distribution system.  Most of the arguments for this focus on government intervention, which is understandable.  In the long run, though, it will take private investment to sustain it, even if it happens initially as a result of government policy.  Private businesses absolutely would be willing to modify the distribution network if there were increased profits to be made in doing it.

In my opinion, the customers must be willing to pay higher prices for some foods if a distribution system is to develop in order to support a more robust local food system.  While some consumers have shown a willingness to do this, most have not.  Therefore, I think this is unlikely to happen any time soon.

2. There Are Opportunities to Innovate in the Middle
It's no secret that a farmer can recover more of the consumer dollar if he or she is able to "eliminate the middle man" on some functions.  For example, selling at a farmers' market eliminates one or more "middle men" that provide food distribution services.  I regularly tell farmers that this extra money isn't free.  The farmer must bear the cost associated with those functions that are being replaced.  One of the Forum participants told a story that made this point clear, describing one farmers' fatigue of harvesting in the early hours, packaging it, transporting to the farmers' market, selling all day, closing down the booth, driving home, handling the business's Facebook page, and then getting up early the next day to do it all over again.  That farmer is now considering a significant scaling back of the marketing function in order to deal with burn out.

In my experience, stories like this aren't unique.  There are "points of pain" in the local food distribution network that provide opportunity for entrepreneurial action.  Distribution, aggregation, processing, packaging, and marketing are all things that "middle men" do.  Maybe we need more middle men if the local food system is to develop and be sustainable.  I believe there are entrepreneurial opportunities to be explored here.

3. There Are Opportunities to Innovate on the Farm
I'm not blue in the face yet, so I better keep saying it... There are opportunities for almost any farm business because consumers demand diversity.  Because the customer is always right, farm and food business owners have to understand these customers and how to meet their needs.  That, after all, is the heart of marketing!

In my opinion, entrepreneurship is the key to long-term survival in agriculture.  Understanding what you can do to meet consumer needs and be profitable/sustainable is critical.  The entrepreneurship research literature is filled with various theories and case studies about this, but it's almost universally accepted that successful entrepreneurs consistently figure out ways to address needs for those who can pay for the solution.  This may mean developing new food products, growing different crops or livestock, opening the farm to the public, or many other options.  So, all in the food system need to keep an eye on their industry, looking for opportunities to innovate.  Consumer demand for local food creates opportunities, but great skill is needed to seize those opportunities and make money from them!

I'm always interested to hear others' thoughts about local food systems and how they can be developed and supported.  Comments are, therefore, welcome!