Exploring Direct and Niche Marketing

1. Exploring Direct and Niche Marketing Lee Meyer and Tim Woods Ag Econ Extension Specialists

2. Quiz: What is Marketing? All of the steps between production and consumption Cannot be eliminated, just moved to someone else

3. What is “direct marketing”? • Concept – straight from producer to consumer • Practice – often includes intermediate steps • Examples: • Farmers’ markets • Restaurant “back door” sales • Internet sales • Roadside markets

4. Direct Marketing – Advantages Prices higher than at wholesale markets More control over price Flexibility in product types Opportunity to build customer loyalty Capture personality value Diversification (products, markets)

5. Direct Marketing – Disadvantages • Promotion is expensive - money and time • Legal issues and insurance • Sales expenses and logistics • On Farm Sales • Investment • Traffic, privacy,

6. What is “niche” marketing? • A niche is a small market segment – in terms of customers and suppliers • Niche markets are niche for a reason • A new product – salmon in the 1950s • A narrow customer base – Halal meats

7. Marketing niche products • Potential to over supply • You • Your competition • Targeting the customer may be expensive • Through direct and/or wholesale markets

8. Some key considerations: Pricing Competition Costs of processing, packaging Budgeting

9. Products Continuum Specialized/ Nich Product Commodity Examples: *corn *soybeans *cotton Examples: *organic feed *beef - direct Examples: *feeder cattle *IP grain * Hort prod. What makes a successful operation in each category?

10. Specialized Products • Have unique attributes, not standardized • Exchange usually depends on direct communication • Competition can be limited by offering services, trust • Competition still happens, but it is more difficult for others to enter your market

11. Marketing - building on changing consumer attitudes Buyers and consumers want to have a relationship with producers. This provides them assurances that can not be easily quantified through grades and standards. Differentiated products fit this model. Adapted from the “Cluetrain Manifesto”

12. Creating Value – three types: • Direct and Observable: • For example, color, condition, freshness • Direct and Hidden • For example, vaccination, moisture level • Indirect • Who (relationships) and how the product is produced, secondary impacts of production

13. Direct and Observable: • For example, color, condition, freshness • Direct and Hidden • For example, vaccination, moisture level, production methods

14. Indirect Who (relationships) How the product is produced (impacts of production)

15. Case Study Discussion: direct sales of Ky raised beef • Product • Place • Price • Promotion

16. MarketMaker– demographics and product promotion www.MarketMakerKy.com Interactive data base system for linking buyers and sellers of food products. MarketMakerKy currently has census/demographic data, a directory of all 16,000 Kentucky food related business, Kentucky Proud farmers, a list of all farmers markets, and more.

17. PRIMER worksheets for entrepreneurs needing a systematic way of evaluating a new enterprise can be downloaded at: http://www.uky.edu/Ag/AgEcon/extpubs.html

18. New Crop Opportunities Center extensive crop marketing information archives of farm market, auction prices fact sheets on selling to restaurants, cooperatives, auctions, farm markets, CSA’s, and other channels. specific crop marketing profiles http://www.uky.edu/Ag/NewCrops/welcome.html

19. Ky. Food Consumer Panel quarterly survey provides consumer market data targeting 1000 Ky. updates, trends, market issues, product opportunities, and market research are provided through the survey http://www.ca.uky.edu/Agecon/index.php?p=269

20. Ky. Center for Ag & Rural Dev. market feasibility projects Helps implement USDA market programs participate in project marketing and management (e.g. management “audits”) http://www.kcard.info/about_services.php

21. Other Resources: • Commodity Market Outlooks – ag. econ. • Focus Groups – • Tim Woods (Ag. Econ), Scarlett Wesley (MAT Dept.) • UK Specialists – every dept. in College of Ag. • Ky. Dept of Ag. – www.kyagr.com • Ky. Farm Bureau – Roadside Market program • SBDC – Small Business Dev. Centers

22. Some key considerations: Pricing Competition Costs of processing, packaging Budgeting

23. Livestock & Meat Opportunities Beef Pork Lamb and Goat Chicken Eggs

24. Livestock & meat examples: Beef: value of cuts $1,600 - $2,000 value of live steer: $1,020 Processing cost: $300 - $400/hd. Yield: 60% dressing; 70% cuts about 40% boneless cuts

25. Beef Example, cont: • Pricing: what is customer’s goal? • Less expensive beef? • Premium quality? • Known source? • Other attributes (organic, “ASH” free, etc.)

26. Beef Example, cont: • Other costs: • Your time and trucking • Consistency of sales, inventory? • Decisions – depending on your customers • Bulk – may be custom exempt • Cuts – requires Fed. Inspection

27. Chicken • Prices - $2-$3/ lb. • Feed cost ~ $3- $4/bird • Processing cost $2.65/bird • Your time: priceless? • Markets - • Both individuals and restaurants

28. Other Species: • Pork – large potential market • Not much experience on production systems • Chicken • Strong market, at both household and restaurant levels • Eggs • Expanding market, consumer price resistance • Lamb and Goat • Lamb market is doing well • goat – ethnic demand