Friday, July 27, 2012

Collaborate and Stand Out – Differentiating Your Product through Partnerships

Carla Snyder, Penn State Extension Educator – Ag Entrepreneurship and Marketing

When enjoying ice cream made with tree-ripened peaches at a roadside farm market it’s easy to appreciate the local flavor of our community. However, what may not be realized are the unique partnerships and business savvy it took to get that food from seed to delicious first bite.

Producer partnerships to create superb value added products are not a new concept. An easy example is the ice cream cone, delicious, recognized, and hard to be improved upon. Or is it? By adding local ingredients and producing it at a local facility the standard ice cream cone is improved upon and more enticing to the consumer. Creation of a value added product by this model creates greater benefit for both consumers and producers alike.

Consumers determine value based on their benefit from the product and its ability to fulfill their needs and wants for a certain cost. In the ice cream example a fruit based flavor is created through a partnership with a local orchard and ice cream entrepreneur. The most inherent benefit that keeps consumers anticipating this product year after year is the unique taste that comes from the local agricultural ingredients. It is the best selling flavor when it’s available for about 6 weeks out of the year when peaches are ripe.

Partnering with local producers on the creation and marketing of value added items, such as this ice cream, is certainly not new but is enjoying resurgence in many regions. So how do you continue to offer a product that creates sustained benefit to the customer when value added products are now so plentiful in the marketplace? According to the Michigan State University Product Center that studies value added products, innovation in the bundle of product benefits is key to differentiation. As value added products become continually more “commoditized,” meaning there are so many similar products on the market that consumers are reverting to differentiating product based solely on price, pairing with another producer can make you stand out.

Consider a common value added product such as apple cider. If the consumer is not educated on what makes one producer’s cider different from another then in most cases their typical deciding factor comes down to price. However, if that consumer was educated about specific benefits of one cider over another through tasting samples, recognizing a trusted third party certification logo on the label or even just an attractive label itself, they would not be forced to differentiate solely based on price.

Partnership with another producer will allow you to begin your marketing or new product development from the ground up rather than the traditional top down approach. By evaluating the customer base of both yours and your partners you can tailor your new product to fit the specific needs of a consumer group. By fulfilling exact needs through the creation of specific product benefits you will be directly catering to your consumers. Such as in the apple cider example if your product will be sold in an area where consumers value cooking in their homes or entertaining, consider attaching or printing a recipe for mulled cider on your label or partnering with the producer of mulling spices to sell your cider as part of a package. This may be just the push necessary to achieve the sale of your product at the price point you require.

By partnering with other local food producers, many growers are able to provide value added products to their communities. This marketing method not only results in more direct to consumer sales but also builds on existing producer to consumer relationships had by each producer, thereby extending the reach of agricultural products in the region.

In addition there are also inherent economic benefits. In the production of a typical value added product that is processed at an off-farm or even out of state facility the farmer’s share of the consumer dollar is shrinking, according to the Penn State College of Agricultural Sciences. Decreasing from 40% in the 1950s to closer to 20% in the past decade, the producer’s share of per item income is less, however profits overall are increasing in part due to innovative partnerships as described above in the creation of that special once a year peach ice cream.

The development of the partnership to create the ice cream was simple. The ice cream entrepreneur learned about the orchard on a class field trip to the farm with his children. He was in search of a way to differentiate his product from other producers in the area as larger corporations moved in. Based on his knowledge of the community he chose to go local with ingredients, knowing that his customer outreach would be extended by just the inclusion of this popular orchard’s fruit. What resulted was an exclusive once a year product that customers anticipate all season, giving him and the orchard an edge on competition. And by keeping the dollars for not only purchasing the peach ice cream at either partner’s location but the cost for producing it as well, peach ice cream is doing its part to further the agricultural economy in their region.

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