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.
Friday, July 27, 2012
Friday, July 20, 2012
On a recent farm marketing tour a group of growers were able to experience the gamut of retail farm marketing from large corporations that incorporate small market aesthetics to small markets making full use of the mobile and internet tools available to them.
|Giant Eagle's apple display signage|
One large corporation, Giant Eagle Market District in Pittsburgh, is taking marketing back to its roots. Utilizing hand-painted signage and displays that look like I could put them together in my garage, they were able to take what sounds like a rustic set-up and make it eye-catching and even beautiful. Their store displayed a large variety of national brands, local produce, and locally made value added products such as baked goods and sauces all in one convenient location for the consumer. Cues can be taken from their straightforward signage and grouped display stations that dominated the store, making it easily navigable for customers.
|Peach display at Giant Eagle. Notice the inclusion of pie-baking supplies.|
On the flip side we visited a family farm, Covered Bridge Gardens, in Ohio who is utilizing cutting edge technology to get the word out to their CSA and farmers’ market customers. In addition to their slick looking website linking their Facebook page, blog, and e-commerce site, the farm is in the initial development stages of an app for smartphones. This app will alert their CSA customers to surplus produce or changes in their pickup schedules. It will help customers find them at area farmers markets, link to their online store on their website and make every part of their business literally available at their finger tips. With the trend of smartphone users to utilize their devices more for social media and web surfing rather than for simple calling, transitioning to an app is a logical method for Covered Bridge Gardens to reach their customers in the way that is most convenient for both parties.
In discussion after our groups visit to Covered Bridge Gardens, a tour attendee brought up a good point. If you are unable to be lucky enough or willing to pay the money for the development of your own farm app, a great way to replicate some of the functions is through the use of QR codes. Many area markets are starting to add these codes to their value added product labels, door stickers and the backs of their business cards. When incorporated correctly, meaning printed in a clear and easy to identify fashion, these codes can be used as another quick methods to direct customers to your website. Especially useful if your site offers an e-commerce shopping section allowing customers to make purchases directly on the web. Just think if you pick up a jar of your favorite spicy gooseberry jelly at a market while traveling and was savoring the last bits at the bottom of the jar. Wouldn’t it be nice to scan a quick code from the back of that jar with your phone as you savored your last mouthful and be instantly directed to a site where you could order more? I think this sounds downright delightful, and delicious!
For more information on QR codes, straightforward signage and displays for your market, or technology based marketing options for your business check out the Ag Entrepreneurship Team’s past blog posts. Here are a few of my favorites:
This post comes from the newest member of Penn State Extension's Ag Entrepreneurship Team, Carla Snyder. Carla is the Ag Entrepreneurship/Marketing educator in Adams County, PA.
Thursday, July 19, 2012
Much of Pennsylvania is an unwilling participant in the widespread drought that has led to agriculture being a daily national story in the major media outlets. For those farmers who produce crops covered by crop insurance, it may be time to make preparations for submitting a claim. Below is guidance that has been provided by Gene Gants, with the Pensylvania office of USDA-RMA. Maximizing the Benefits of Your Crop Insurance Policy Your “Summary of Protection” or “Schedule of Insurance” should have arrived within a few weeks of you filed your acreage report. It reflected the information on which your 2012 protection is based. Compare it to your acreage report to make sure that it is correct. If there are discrepancies, contact your insurance agent immediately to get it corrected, otherwise it could adversely affect your premium bill and/or claim payment. Reminder and Guidance on Reporting Damage or Loss: Crop damage or loss reporting for the insurance policy for most crops requires that written notice be given to your crop insurance agent (by crop by unit (farm)): • Within 72 hours of discovery of damage or loss, • 15 days before harvest begins **, and • Within 15 days after harvesting is completed but not later than 10/20 for corn harvested as silage; 12/10 for grain corn and soybeans. • A pre-harvest appraisal is required for most direct marketed crops • Don’t destroy evidence of damage until a loss adjuster evaluates it! File timely notice with your county FSA office too, as you may be for some disaster benefits. **Prior Authorization is Required to Leave Sample Rows for Yield Determination: If loss adjusting workload does not permit appraising damaged crop acreage before you are ready to start cutting silage, prior authorization must be obtained from your insurance company, through your crop insurance agent, before sample row areas can be left for later yield determination. For this reason, it’s important that notice of damage be filed with your crop insurance agent as early as you determine that damage occurred so that harvesting is not delayed. Cutting Damaged Corn for Silage: If you plan to cut damaged grain type corn for silage, it’s important that the grain content be determined before harvesting regardless of whether you insure on a tonnage or grain yield basis. If you insured on a grain basis, a loss is determined by comparing the revenue or yield guarantee to the appraised yield (times the October CBOT average price for the December contract for revenue protection). If you insured and harvest on a tonnage basis and your grain content is significantly below normal (less than 4.5 bushels per ton), the grain content appraisal becomes the basis for quality adjustment which may reduce the amount of silage tonnage that counts against your guarantee. Additional details are available from a crop insurance agent.
Friday, July 6, 2012
Among the many topics we discuss in this blog, we often write about differentiation and unique products. One way to take this concept further is to implement mass customization – a way of allowing customers to select from a limited number of components to create product that is “their own.” An easy way to think of mass customization is to visualize a food gift basket – individual items (e.g., candy, food products, cooking utensils) are bundled together in a container and then wrapped or decorated to match the theme. Someone had to develop the idea/theme/look for the gift basket – why not let it be your customers?
So, what are some examples of mass customization?
Several retailers have done well with the concept and according to a 2011 Forrester report, and subsequent blog postings, “Mass customization is (finally) the future of products” (http://tinyurl.com/3mgxxoh). Perhaps you have even been involved in mass customization yourself.
- Have you ever created a colorful blend of M&M’s? If yes, you had a mass customization experience. There are 24 colors to choose from. Not every imaginable color is available, but M&M’s is probably pretty certain that most customers will find a mix of colors that appeals to them.
- Are you a devoted Converse sneaker customer – one that has a pair in almost every color or style? Now you can design your own. Again, you will 24 colors and 24 prints to choose from for the outside body of the sneaker and the same options for the inside, heel stripe, tongue, lining and other sneaker parts.
- Or, have you ever created a “My American Girl” doll for a young child? You can select the hair color (10 options for blond hair), eye color (10 eye colors available for blond haired dolls), and hair styles (seven straight and three curly/wavy options for blonds).
What is the key to mass customization for small or independent ag. businesses?
Limiting the number of options (e.g., colors, types of items) that the consumer can select from.
Why is this important? If too many choices are offered it is likely that customers will be overwhelmed with what they can select from. For American Girl, if all combinations were available (49 hair colors, 3 skin tones, 40 eye colors, and 40 hair styles) customers would have several thousand different dolls to choose from. Most likely, the colors/prints/options available for mass customization are those that have been popular in the past. By narrowing the options to a more manageable number the process is much easier for both customer and retailer– hence, it is called “mass” customization.
If you explore these or other examples of mass customization you may notice that the price point for the completed product is higher than off-the-shelf (not customized) products or the total price for all individual pieces used to make the final product. Why is that? Since you are offering customers a convenience (1. for assembling the components, 2. for coming up with the concept) and there are added labor costs for putting the final product together – you need to account for these “costs.”
So, what can an ag. business do to capitalize on mass customization?
If you are not already offering customers the option to build their own gift basket – it is suggested that the interest in giving gift baskets will continue to be strong – this may be a way to foray into mass customization. Gift baskets can be offered for a number of holiday (Valentine’s Day) and non-holiday (anniversaries, thank you) occasions. So, the possibilities are endless.
Dean & Deluca is an example of a retailer that allows customers to build baskets in-store and on-line. Consider a customer who wants to buy a thank you gift for a friend who is passionate about coffee. Well, Dean & Deluca can help with that. The gift giver starts the process by first selecting the container (limited number of options available). Each container holds a certain number of items based on each item’s size which helps the customer determine how big the final gift will be and not overstuff the basket. Wrapping and decorating finish the product’s look.
What are a couple of other mass customization options for ag. businesses?
- Table-top Christmas trees have been a popular for a number of years – the convenience they offer customers is very appealing. Consider offering customers the ability to designing their own decorated table top tree. Allow them to select from three or four species, three or four decorations styles, and three or four container options.
- Offer customers mass customization for planters, containers, or small landscape designs.
Look though your own inventory and think about how you could help customers create a product that has been customized - just for them.