Wednesday, April 7, 2010

Establishing a business in a “saturated” market

If you are thinking about becoming an agricultural entrepreneur, you are probably thinking about what product or service will set you apart from the competition and excite customers. You don’t want to go into business selling the exact same thing as the competition. For example, coffee shops are everywhere, especially with the Starbucks boom in the 90’s, so one would think that there is little room for another coffee chain, right? The owners of Stumptown Coffee Roasters are trying to break the mindset that the coffee market is already saturated with coffee providers.

An article in March’s Time magazine describes Stumptown as a unique type of coffee shop. One way Stumptown differentiates itself is by buying single-origin beans (the New York Stumptown plant offers more single-origin beans than any other coffee provider). When you purchase coffee from Stumptown, every bag is labeled with the elevation, location, varietal, tasting notes of the beans it contains, and a profile of the area as well as technical information.

Video about Stumptown

Stumptown is also trying to change consumers’ view of coffee from a commodity like sugar and corn to a luxury item like wine. As such, coffee is similar to wine in that it has seasons and varietals. In the article, Duane Sorenson, founder of Stumptown, describes why Stumptown is different from the competition. "We started Stumptown with the idea of getting to the source. That was the concept, and that excitement is what we wanted to bring to our customers." Of course, premium products require a premium price. Sorenson explains, "The first day we opened [in 1999], we weren't in the position to pay what we do for a pound of coffee. But within a few years, people tasting our coffee experienced it as they never had.”

So what is the moral of this story? Even in an industry that seems saturated, there is always room for an entrepreneur to come in and offer a product in a way the customer has never experienced. You must thoroughly research and define your target market. For example, Customer A buys their coffee from the local gas station, Customer B buys their coffee from Starbucks, and Customer C buys their coffee from Stumptown. All are selling coffee, but each has a specific target market that they cater to. When developing your business plan, don’t overlook this crucial information! To get help on defining your target market, contact your local Extension office.

As an agricultural entrepreneur, how have you defined your target market? How did your research help you to differentiate your product from the competition?

No comments: