Thursday, July 31, 2014

Brags and Blunders!

Often the conversation amongst direct-to-consumer farm marketers can turn to “So, what are you doing that’s new and exciting?” I was fortunate to be able to hear some new and exciting ideas recently.
As part of our recent Are You Crazy? bus tour we had a brief session titled “brags and blunders.” The purpose of this session is for everyone to have an opportunity for describing the very best and/or the very worst marketing idea they ever implemented. This session was a great way to learn from each other and get conversations going. I relate here what I heard.

Invisible Fence Maze

Yes, they buried that invisible pet fence in a maze pattern and turned the kids loose. They did replace the buzzer with flashing lights before they started. This project was discontinued after two years. The kids had to crawl along the ground for the collars to sense the buried wire. Blunder!

Burning Fire Truck

Who doesn’t like a fire truck? Well these folks wore a big floppy foam fireperson hat and were driving around when the truck started burning. Of course, the fire extinguisher had been removed recently, so every one at the farm watched as the fire smoldered. Blunder!

Pumpkin Cannon

Have you heard about Punkin’ Chunkin’ celebrations? The one I am familiar with is in Delaware the week after Halloween. A bunch of clever folks tinker up some mechanical devices for flinging pumpkins way down the field. This marketer did the same thing, except after the season was over they decided to see how far they could send a pumpkin. After fanfare and the launch - they never did find the 1st piece of that flying fruit. Blunder!

Ground Hog Pumpkins

I don’t know about your fields, but ours can be full of ground hog living quarters. One year it seemed like most every pumpkin in this one field had ground hog damage. A few bites here and a few bites there. These folks told the touring elementary students to hunt up some of the “pumpkins with the ground hog autographs”. Well, the teachers later heard from the parents that if they were going to a farm could they at least find one that had decent pumpkins. Blunder!

Peach Smoothies

Many multi-generational farms experience family conflicts from time to time. At this roadside stand the elders did not think much at all about the new generation suggesting they start a peach smoothie enterprise. “Too much trouble!” “Who would buy that?” You might imagine the conversations. However, the younger folks persisted and today they can hardly keep up with demand for their simple and healthful recipe. Brag!

Zucchini Storm

Couple years ago when hail hit this farm they found themselves with what seemed like thousands of hail damaged zucchini. They were quite concerned if they would recover any of their production costs. Well, they advertised “zucchini storm” in all sorts of variations and sold every last fruit. Funny, but today they find it as difficult as you do to market perfectly good zucchini. Brag!

All my kitchen knives went to New York city

Many years back people were just beginning to build the NY Green Market. This country family saw the market potential but had no experience of actually being in the city. They had heard all the terrible news on how dangerous NY could be. On their very first market day at a brand new site they took every kitchen knife they owned as protection from whatever it was they might find. Today, over 20 years later they can laugh at themselves. They not only helped start the NY Green Markets movement – they continue to enjoy the experience and benefit from their efforts. Brag!

Selling butterflies

Wouldn’t you know it! Just as the potted plants in the greenhouse are ready to market an infestation of eats all the leaves and makes the remaining sticks very unattractive. Not one to let an opportunity pass, these folks decided to market the potted sticks as “buy a butterfly”. They quickly sold every last plant they had, and to this day still hear from customers what a wonderful time their families had raising their own butterflies. Brag!

“When’s the baby due?”

‘nough said. Blunder!

It goes to show – an excellent opportunity might be right around the corner, or maybe not.

For a photo series on this year's Tour, visit Are You Crazy Tour 2014

Tuesday, July 8, 2014

Mark Up versus Margin

Markup vs. Margin

What is the Difference? Is there a difference?


These two terms are often used interchangeably by folks that do not value accounting skills. However, that misunderstanding can menace of the bottom line of your enterprise. A solid understanding and application of these two separate concepts can enhance our pricing model, and have a drastic effect on the bottom line.

By definition:
  • markup percentage is the percentage difference between the actual cost and the selling price.
  • gross margin percentage is the percentage difference between the selling price and the profit.
Photo credit:  Simon Cunningham

Mark up reflects your cost. Margin reflects your price.
Gross margin or gross profit is defined as sales minus cost of goods sold. If a retailer sells a product for $10 which had a cost of $8, the gross profit or gross margin is $2. In our example the gross margin ratio is 20% ($2 divided by $10).
In our example, the product had a cost of $8 and it had a markup of $2 resulting in a selling price of $10. The $2 markup is the same as the $2 gross profit. However, the markup percentage is often expressed as a percentage of cost. In our example the $2 markup is divided by the cost of $8 resulting in a markup of 25%.
Many people have a problem with accountants’ jargon and often get confused between the terms “profit margin” and “markup” which are often bandied about freely or used interchangeably. Although these two terms are used to express different things, they are also, in fact, two different ways of analyzing the cost and profit of a product or service in your small business.
“Profit” is the difference between what you sell it for and what you paid for it. “Margin” simple means you turn that into a percentage of the selling price. You do this so you can compare different items easily.
So the difference is that markup is your profit as a percentage of the cost price and profit margin is your profit as a percentage of your selling price.
For additional information and insight into the fascinating and powerful realm of prices, check these two research-based resources:

Thursday, July 3, 2014

How Discounting Products Can Hurt Your Business

by Juliette Enfield, Extension Educator, Warren County

Businesses that sell perishable items such as baked goods, vegetables, fruits, or plants often feel that they want to get rid of their product at the end of the day and so they discount it in order to “get rid of it”. While discounting your products will temporarily boost sales and bring in customers who may otherwise not buy your product, discounting too frequently will not help your profit or your product image. Some farmers markets do not allow end of day discounts, and there is a very good reason for this.

Discounting too frequently will not help your profit or your image.
Grocery stores used to offer day old bread at a discounted price but they stopped this practice when they realized that they were losing money from their fresh bread sales. Their customers would continually purchase the day old bread at the discounted price instead of spending more for fresh bread. These stores eventually stopped selling day old bread because they found it was more profitable for them to donate old bread to food pantries than to sell it at a discount.

Niche marketing, or focusing marketing efforts on a specific segment of the population, is a recommended practice for small food businesses who sell directly to the customer. Small food businesses produce high quality food items with attributes that mass produced foods do not such as handmade or locally grown. Higher quality demands a higher price, and price is linked with product image. For example, when you buy an everyday item that is priced very low, you may think that something is wrong with the product. When an item is priced higher than normal, there is a perceived higher value in that product.

There are different types of customers in the market. In a previous blog post “Do YourProducts Meet Your Customers’ Values?”, we learned that not all customers are looking for the same product attributes. Some customers consider price more than other product qualities such as whether it is locally produced or not. Other customers consider the intrinsic value of the product, including where and how it was made and with what ingredients, before price.

Most food businesses know that when a price is too high, the product will not sell. When the price is too low too frequently, the business image and profits will suffer. Even with bargain shoppers, there is a point at which price will no longer influence demand. There are critical limits for pricing. For example, when the cost of a pint of heavy cream drops from $2 to $1, demand increases. But when the cost drops below $1, demand no longer increases (Perner, 2008).

Pricing is just one of many factors which influence a sale. Mark Hunter, the author of High-Profit Selling: Win the Sale Without Compromising on Price says, “Stop thinking the conversation is about price. It’s about the customer and the solution you know you can provide to them”(Hunter, 2013). When the customer’s needs are addressed, the issue of price doesn’t come up as quickly. This statement also reminds business owners to listen to the customer and find out what their needs and wants are.

Keep the integrity of your high quality product. If you are concerned about wasting your products, find a food bank that will accept your old products, or find a way to turn the excess into compost. Today’s customers want to know the story behind your business and they want to know about causes that your business supports (ConAgra Foods, 2014). Making food bank donations or making compost could be a behind the scenes story that you are proud to share with your customers without hurting your profits.