Direct Marketing NickAugostini Marketing Specialist NCDA & CS
What is Direct Marketing • Direct marketing includes any method by which farmers sell their products directly to consumers. • Justification for establishing a direct marketing outlet is based primarily on the producer’s • desire to increase the financial returns from farm production. • This opportunity for increased returns stems from • 1) opportunities to reduce marketing costs (and capture • profits) attributed to intermediaries (middlemen) • in the supply chain. • 2) consumer desire to buy (and willingness to perhaps pay a • premium for) riper, fresher, higher-quality fruits and vegetables. These two factors combined have often generated substantially higher net returns for producers. • 3) Operators of small farms may find that direct marketing translates into additional • income when there is insufficient volume or product selection to attract large processors • and/or commercial retail buyers. Thus, direct marketing may be the only viable marketing • alternative for small farmers. A substantial number of producers use direct marketing • channels to augment sales to wholesalers, retailers, and processors to reduce the risk of • relying on a single market channel.
Direct Marketing Advantages • Greater control over marketing • Producer sets price • Satisfaction in selling to the people who enjoy your produce • Use of family labor • Cash payment • Greater profit potential • Customer feedback • Less stringent packing requirements than wholesale Disadvantage • Limited volume • Must deal with all kinds of people • Need for greater variety of marketing skills • Greater time & resources spent in marketing
Types of Markets • Pick-Your Own
Advantages Reduced need for seasonal harvest labor--transportation, grading. Washing, packing, packaging,and storage cost are eliminated Average purchase per customer is larger than at other direct market outlets; and Lower capital needed to get started Disadvantage Customers may damage produce or plants Increased cost for insurance May need alternate outlets Need for large parking areas Increase cost for sales and supervisory labor lowest prices Long hours Bad weather may reduce customers Pick-Your-Own
Types of Markets • Pick-Your Own • Roadside Markets
Advantages Reduced marketing costs such as transportation, shipping containers and commission charges Chance to use family labor; and Attractive displays and variety of produce can help draw customers. Disadvantages Higher operating costs Sales labor needed for operating stand higher cost for advertising, promotions and consumer packaging materials; and zoning and planning restrictions Roadside Stands
Types of Markets • Pick-Your Own • Roadside Markets • Farmers & Tailgate Markets
Advantages Minimal marketing startup costs exemption from standard size and packing regulations Little or no packaging, advertising and promotion costs Prices substantially higher than wholesale Disadvantages Limited volume-need for other outlets Greater time involved Weather can keep customers away Rules, policies and politics you have to deal with Volume per sale smaller than wholesale Farmers & Tailgate Markets
Types of Markets • Pick-Your Own • Roadside Markets • Farmers & Tailgate Markets • CSA’s
CSA Advantages • CSA's direct marketing gives farmers and growers the fairest return on their products. • CSA keeps food dollars in the local community and contributes to the maintenance and establishment of regional food production. • CSA encourages communication and cooperation among farmers. • With a "guaranteed market" for their produce, farmers can invest their time in doing the best job they can rather than looking for buyers. • CSA supports the biodiversity of a given area and the diversity of agriculture through the preservation of small farms producing a wide variety of crops. • CSA creates opportunity for dialogue between farmers and consumers. • CSA creates a sense of social responsibility and stewardship of local land. • CSA puts "the farmers face on food" and increases understanding of how, where, and by whom our food is grown.
CSA Special Challenges • Educating consumers about the delights of eating in-season produce • Management-Don’t over commit • Management-People skills are needed to deal with the variety of consumers • Customer turnover 30%-50%/year • Need for continues marketing
Types of Markets • Pick-Your Own • Roadside Markets • Farmers & Tailgate Markets • CSA • Restaurants
Advantages Steady market throughout season Advanced orders Premium pricing Greater flexibility in products grown Disadvantages Not practical unless you are near large population centers Requires frequent deliveries Limited volume may not justify direct delivery Product liability insurance may be required Restaurants
Types of Markets • Pick-Your Own • Roadside Markets • Farmers & Tailgate Markets • CSA • Restaurants • Retail Chains
Advantages Small capital investment to get started Potential for large volumes Upscale markets may be willing to pay top prices for specialty items Potential for brand name product identity Disadvantages Increased transportation costs Increased delivery time and cost Increased packaging costs Dependence on the retailer’s ability to sell the product Retail Outlets
Growing and Marketing for Quality • Quality builds repeat customer business; it’s quality and taste that brings them back for more • Quality brings higher prices • The most important ingredient for good taste is freshness • Don’t mix premium products with lesser grade products • Have an outlet for your seconds
Preparing To Sell • Know yourself and your product • Ask yourself: Why should buyer buy from me? • Have a price list ready • Know what your production and transportation costs are • Never ask a buyer what the best price is he can pay
Satisfying Expectations of the Buyer • Communications
Satisfying Expectations of the Buyer • Communications • Liability Insurance • GAP’s • Constant flow of product: e.g.:Scheduled plantings for that customer. • Post harvest handling.
Satisfying Expectations of the Buyer • Communications • Liability Insurance • GAP’s • Constant flow of product: e.g.:Scheduled plantings for that customer. • Post harvest handling. • Proper packing and labeling.
Satisfying Expectations of the Buyer • Communications • Liability Insurance • GAP’s • Constant flow of product: e.g.:Scheduled plantings for that customer. • Post harvest handling. • Pre-cooling.
Satisfying Expectations of the Buyer • Communications • Liability Insurance • GAP’s • Constant flow of product: e.g.:Scheduled plantings for that customer. • Post harvest handling. • Proper packing and labeling. • Pre-cooling. • Trucking.
Satisfying Expectations of the Buyer • Communications • Liability Insurance • GAP’s • Constant flow of product: e.g.:Scheduled plantings for that customer. • Post harvest handling. • Proper packing and labeling. • Pre-cooling. • Trucking. • Marketing and promotional materials.
Marketing materials • POP materials, signs, recipes • PLU or UPC’s • Boxes
www.ams.usda.gov • Pricing • Packaging • Wholesale Market Reports • Farmers Market Reports • Auction Market Reports • Ornamental Crop Reports
Publications • The Packer • Produce News • Produce Merchandising • Produce Business • American Fruit Grower • American Vegetable Grower
In Conclusion • Marketing research and planning should be done prior to planting. • Marketing is knowing what your customer wants and needs and filling them on a consistent basis with a quality product. • Promotion is a part of marketing and helps to identify and create demand for your product with the buyers. • Communication is a key ingredient of success. • Building buyer confidence is not an overnight thing. • Your not only selling your product-your selling yourself and the reputation of your business.