Marketing Natural Meats: Targeting Consumer Segments in Your Marketing Plan

1. Marketing Natural Meats: Targeting Consumer Segments in Your Marketing Plan Dawn Thilmany National SARE March 2008 Collaborators: Wendy Umberger and Amanda Ziehl Ag and Resource Economics, Colorado State University

2. Previous Literature • Successful products are commonly created with the demands of the target consumer in mind during all stages of product development (Hill et al., 2004; Rowles, 2000). • Consumer interest in beef with production assurances, such as quality and local designations • McGarry-Wolf and Thulin, 2000; Lusk and Fox, 2002 • Sunding (2003) focus on publicly-oriented characteristics • nutritional content, purity, and freshness; • “free-range”, “organic” & “locally-produced” • Civic agriculture issues

3. Colorado Homestead Ranches • 5 ranches started selling freezer beef in 1997 • Product attributes: local, naturally grazed beef, no feedlot antibiotics or hormones • Began selling processed meats in year 2000 • Participate in two farmers markets

4. Colorado Homestead Ranches • Started with freezer beef, then moved into farmers markets, then retail • Opened Homestead Market in May 2002 • Value added products • Sell products to restaurants • New meat processing facility • Complements past wild game processing • Increasing pressure for higher volume sales

5. Background Information • Goal: return $1400/head ($2.00/lb. per carcass) • CHR producers contribute sweat equity (they are not paid for their mgmt. labor contribution • 5 years ago, began paying hourly labor for retail and sales effort • Future goal: pay each producer for contributed labor as market and sales expand • Market analysis to determine smartest sales growth strategy

6. Market Analysis: Identifying Competitors • CHR owners identified 3 specific areas of competition for their products: • Generic, unbranded beef marketed through large-scale supermarkets • Branded beef products, with some combination of genetic, quality, production practice or production location claims. • Direct market beef sales, such as purchasing directly from producers, farmers markets, mail order, etc.

9. Market Analysis: Determining Influencing Factors • Factor analysis was run to determine the top four factors influencing consumer purchases of natural, regionally-produced beef • Concern about production practices • Willingness to pay • Meat attributes (premium brand, fresh product, pre-seasoned) • What motivates willingness to pay more for local, natural products.

10. Factor Analysis: A Summary • One: 14%, Personal Needs Dominate • No “public good” interests except BSE, convenient shopping & low willingness to pay • Two: 60%, Public-Minded, Civic Motivation • High loadings on all alternative production attributes, • Shopping at health food and farmers markets • Three: 20%, High-End Market • Highest WTP, secondary shopping, natural purchases suggest low price sensitivity • Four: 6%, Public Health Concerns • Uniquely concerned about health-related production attributes and testing, less WTP

11. Market Analysis: Consumer Segmentation • Cluster analysis was used to create 5 consumer groups: • High-income professional quality seekers (13%) • Health conscious urban parents (13%) • Moderate consumers (30%) • Empathetic Value Seekers (22%) • Price conscious singles (22%)

12. Market Analysis: Cluster Demographics • The sample is primarily female (over 70%), but the High Income Professional Quality Seekers are significantly more male. • The High Income Professional Quality Seekers and Health Conscious Urban Parents are significantly younger than the sample average. • On average, all clusters except the Price Conscious Singles fall within the income category of $40,000–59,900.

15. Market Analysis: Product Positioning • In addition to identifying potential customers, one must simultaneously consider the appropriate product position for the company’s beef products. • Affects production choices, labeling, claims • Consumers were asked to rate how important different production practices and meat characteristics were to them.

20. Market Analysis: Pricing • The last analysis needed to develop a marketing plan relates to pricing. • Divided by clusters and product line. • Consideration must be given to competitors prices. • Must also assure a price that covers costs. • Consumers were asked their max WTP for natural, local beef products.

23. Target Consumers • Quality Seekers and Health and Natural Consumers (13% each) willing to pay a premium for natural, local beef. • Quality Seekers’ expect quality • Health/Natural Consumers are more altruistic • Ranked production attributes such as “no antibiotics,” “no hormones,” and “humane treatment,” significantly higher • Significantly lower percentage of their premium due to personal benefits

24. Future Target Consumers • Empathetic Value Seekers (22.6%) • Not willing to pay a premium price • Value production processes more than any other segment, but less capacity to pay • CHR has still garnered some of their business • Lower price points on some meat cuts (roasts, ground beef) that otherwise do not sell as quickly, • Overall, these results indicate the continuing role for production claims as product differentiation criteria.

25. Market Analysis: Implications • Consistency was found amongst consumers across places: from US to Colorado to the Western slope of Colorado. • CHR established themselves as a premier beef producer and marketer, as well as a loyal community citizen and steward. • Appropriate targeting is essential as they grow • Attract new customers through word of mouth, promotion and retention of loyal customer base