What is Cause Marketing? Part 1

By Dr Kathy Kelley, Professor of Horticultural Marketing and Business Management, and Dana Ollendyke, Extension Associate

Have you seen advertisements like the one below (Image 1) where a portion of the profits benefits a charity or cause?  The official definition of cause marketing from BusinessDictionary.com is "joint funding and promotional strategy in which a firm's sales are linked (and a percentage of the sales revenue is donated) to a charity or other public cause.  However, unlike philanthropy, money spent in cause-related marketing is considered an expense is expected to show a return."

Image 1. With every purchase of this tea, Teavana will donate $1 to the Oprah Winfrey Leadership Academy Foundation.

Although profits should not be the primary reason for building a cause marketing program into your promotional plan, it is suggested that consumers “feel good” about spending their money on goods that support a cause.  In 2013, Cone Communications (a public relations and marketing agency) released their Social Impact Study.  Some interesting take-aways from that study include:

• Over half (54%) of U.S. consumers “bought a product associated with a cause” during a 12-month period ending in fall 2013, which was a 170% increase from 1993.
• A majority of consumers (91%) want “even more of the products and services they use to support [a] cause, and 88% want “to hear how companies are supporting social and environmental issues”.
• If you are looking to better connect with Millennial consumers via social media, they are more likely to “use social media to engage with companies around [causes]” than the general population, 64% vs. 51%, respectively.

This data is just the beginning of your research into determining if cause marketing is right for your business.  

Our next post will focus on cause marketing program development.  

Crowdfunding: An Exciting New Way to Fund a Project

By Juliette Enfield, Penn State Extension Educator, Warren Co.

The success of any business depends on the crowd that supports it.

Crowdfunding captures the essence of the entrepreneurial spirit-that anything is possible. The size and scope of the projects on crowdfunding sites are awe inspiring. In 2012, the JOBS –Jumpstart Our Business Startups Act was passed by Congress and signed into law by the Obama Administration.  This Act eliminated certain restrictions on how new startup businesses could be funded. Since 2012, crowdfunding has become a term that many people are familiar with, but may not have direct experience with. Have you ever considered crowdfunding for your business? Perhaps you are uncomfortable with the high interest rates that may be incurred with a loan, or maybe your credit isn’t the best and you are unable to access a loan in the first place. Crowdfunding can work in a few different ways. Investors can support a new business by buying a share in the business (equity crowdfunding), making donations (donation crowdfunding), or lending money (debt crowdfunding). According to Forbes.com, there are over 500 crowdfunding platforms online, so even if you understand the basic fundamentals of how crowdfunding works, you will need to do some research to find a site that will work well for you. Some sites have stronger reputations than others, and some have easier access to customer service. Also, many crowdfunding sites specialize in a certain type of project or industry. For example, Quirky specializes in funding inventions of new everyday tools, Crowdrise specializes in charitable projects, and GiveForward specializes in funding medical expenses for people will illness. Another difference among crowdfunding sites is how and when payments are received for a project. For example, Kickstarter only accepts payments from investors if the project has been funded, and Indiegogo accepts payments from investors regardless of whether or not a certain goal has been reached. Crowdfunding sites charge a fee ranging from 7-12% of the total project cost, so this may also influence your decision of which platform to use.



Crowdfunding for Farm and Food Businesses

Birchrun Hills Farm, a dairy farm and cheese business in Chester County, PA successfully funded a project to build a new cheese cave on Kickstarter. Kickstarter is a popular donation based crowdfunding website. Kickstarter projects include film, music, art, design, technology, and food. I spoke with Sue Miller, Birchrun Hills Farm business owner, about her experience with Kickstarter. She chose Kickstarter because of the recognition of the site, she liked the all or nothing philosophy of the site, and the fees were reasonable. She also knew of other farm businesses that had success with the site, including North Mountain Pastures in Newport, PA, a meat CSA farm with a charcuterie business. Sue ran a 30 day campaign in December 2014. For different donation levels, Sue offered a variety of different prizes ranging from a hat with the farm logo on it to private cheese and beverage pairing parties. She said the most popular prize she offered was the chance to name a newborn calf on the farm. Sue estimated that less than 5% of the people that were reached about the campaign actually donated. Therefore, the campaign period is an intense marketing time, and having a marketing strategy and a budget in place is essential. Sue said she was delighted to see how the community supported her project, and now that the campaign is over and she is building her new cheese cave, crowdfunding has helped her expand her business network in the region and across the nation. For those thinking about embarking on a crowdfunding endeavor,  Sue recommend that they work for a year or so prior to the campaign period to expand their social media network, since this is the primary way crowdfunding campaigns are advertised. She also said that next time she might consider hiring someone to run the campaign for her, so that she would not have to run the farm and the campaign at the same time. You can still view Sue’s campaign on Kickstarter.

What would you like to do next with your business?

Another crowdfunding site that agricultural businesses should know about is Kiva Zip. Kiva Zip is a debt based crowdfunding site that offers 0% interest loans to funded projects. Kiva was first created to help finance microloans to farmers and small businesses in developing countries, but it has recently grown in popularity in the US with small and beginning farmers. Kiva loans are especially well adapted to new farm and food businesses because the loans are small, from $5,000 to $10,000, and are therefore less risky. Once the money is lent, the business has 3 years to repay the loan. The Kiva fundraising process has three tiers. First, the agricultural businesses must be endorsed by a Trustee, a business or an individual (non-family member) that will vouch for the character of a borrower. Then, once the Trustee is in place, a network of friends and family (ranging from 10-30 contacts) must be the primary lenders to the project. This occurs during the first 15 days that the campaign is launched. And finally, after this primary network has lent to the project, the project is opened for anyone to lend. Kiva projects are live for 45 days. Emily Keebler, Kiva City Pittsburgh Lead, says that the first 15 days of fundraising is the most intense fundraising period. Emily says that many businesses that have a successful lending experience with Kiva Zip then become Trustees themselves for another business, and these small amounts of money continue to support small businesses over and over again. Healcrest Urban Farms, a farm that grows herbs and small fruits in Pittsburgh, PA successfully received a loan on Kiva Zip to pay for the use of a shared kitchen and purchase of an ice cream cart to start their popsicle business, TeaPops. Good Work Farms, LLC, a vegetable farm in Emmaus, PA received a loan on Kiva Zip to purchase draft horses for plowing and lowering energy costs on their farm. BEEBOY Honey, a beekeeper in Pittsburgh received a loan to purchase more hives and a truck for honey deliveries. Kiva Zip may be an option for your food business if you decide that offering rewards for donations may be too much of a challenge and you would rather spend your time and energy repaying a small loan.

Be sure to do your research before choosing your crowdfunding platform. Spend time looking at the projects that are out there. Create a budget, marketing plan, and a clear, concise message about what you are trying to accomplish. Have you had any experience with crowdfunding? Share your comments and suggestions with us!

Sources for this blog:

Caldbeck, Ryan. Crowdfunding Trends: Which Crowdfunding Sites Will Survive. Forbes.com. June 23, 2013. <http://www.forbes.com/sites/ryancaldbeck/2013/06/23/crowdfunding-trends-which-crowdfunding-sites-will-survive> Accessed July 8, 2015.

North Carolina State University Cooperative Extension. Funding Opportunities. June 2014. <http://communitydevelopment.ces.ncsu.edu/funding-opportunities>  Accessed July 8, 2015.

Pollack, Bridget. The Ins and Outs of Alternative Financing. U.S. Small Business Administration Blog. June 4, 2015. <https://www.sba.gov/blogs/ins-and-outs-alternative-financing>Accessed July 8, 2015.

Internet Tools to Help You Learn About New Markets, Part 4

By Dr Kathy Kelley, Professor of Horticultural Marketing and Business Management, and Dana Ollendyke, Extension Associate

In our previous post, we discussed using Easy Analytic Software Inc (EASI), which allows users to more easily search Census data.  This post, which will be the final one in this series, will focus on Geographic Information Systems (GIS) reports from the Small Business Development Center (SBDC).

These reports are free of charge to prospective or existing small business owners who are receiving business-counseling services from their local SBDC Advisor.

Some of the reports include:

• Competition maps—These maps show the location of individual competitors in relation to a small business location.
• Competitor lists—These lists can include a competitor’s company name, location, number of employees at each location, whether the location is a competitor’s single location or branch, estimated annual sales volume, the competitor’s NAICS (North American Industry Classification System) and SIC (Standard Industrial Classification) codes and a latitude and longitude coordinate.
• Consumer expenditure comparison reports—These reports help clients evaluate the relative demand for their chosen industry within their local market area, county, state, and the nation.
• Drive time reports—The time it takes to travel to a local store or restaurant can be a significant factor in defining the target market for a small business. These highly detailed maps show the geographic boundaries of a small business’ target market customized to the amount of time considered acceptable to the small business’ clientele (Image 1).

Image 1. A sample Drive Time Map showing the market area that can reach a small business destination in Lakewood, CA within 10 minutes. (Contact your local SBDC for a customized map.)

Certainly, this blog series doesn’t discuss all that is needed to better understand consumers’ attitudes, behaviors, etc. towards wine based on their race and ethnicity. It does, however, provide some tools that are useful in gathering data and learning about the population of racial and ethnic groups you could serve in your community.

There are other components such as the consumer’s level of “acculturation,” which is the “cultural modification of an individual, group, or people by adapting or borrowing traits from another culture” (http://bit.ly/1xEH2NK). To demonstrate this point, we will use an example from Kathy’s family. Her sister-in-law was born in South Korea and came to the U.S. 15 years ago. As she has become more ingrained in U.S. society, some of her habits and preferences have become more “mainstream” American. Not only can food choices, etc. change over time, but as someone becomes “fully acculturated,” their language preference can change from their native language to English (http://bit.ly/1IxluaM) which could impact how you choose to promote your wine.

Another component is to search the Internet for “wine and Asian culture,” “wine and Chinese culture,” etc. to learn about wine style preferences and how wine is consumed (e.g. wine and Coke or wine cocktails). Also, don’t forget to investigate what culturally significant holidays these consumers celebrate.

Regardless, conducting adequate research is crucial when developing a realistic marketing plan. By finding out as much as possible about viable consumers, you will have a much better chance of understanding their needs and wants and hopefully gaining them as customers.