Marketing in Farmer’s Markets

1. Marketing in Farmer’s Markets November 19, 2010. Weslaco, TX Dr. Marco A. Palma Assistant Professor and Extension Economist Texas AgriLife Extension Service Texas A&M University System mapalma@tamu.edu

2. Outline • Introduction: Horticulture Issues of Today • The Economy and US Consumption • DM Driving Forces • Marketing Strategies • Understanding the Customer • Sales and Display 2

3. Issues Affecting Horticulture Industry Stronger competition from less expensive imports Increasing consumer concerns about food safety Increasing Fuel/Energy Costs Availability of labor Economic and financial crisis (-) 3

4. Issues Affecting Horticulture Industry Increased demand for healthy foods, organic, environmental friendly and local produce Trade opportunities Positive health dimensions Horticulture outlook - compared to other crops (+) 4

5. Issues Affecting Horticulture Industry Farm Bill Immigration Reform Food Safety Increased access to fresh fruits and vegetables in Federal Nutrition Programs Recession 5 Topics 5

6. Farm Bill Farm Bill working group: specialty crop industry priorities for the 2007 Farm Bill Farm, Nutrition, and Bioenergy Act of 2007, H.R. 2419 – Nearly $2 Billion for specialty crops Research, food safety, increasing consumption of fresh fruits and vegetables, battling pests and disease from entering the US, increase international markets access, etc. 6

7. Immigration Reform In June 2007, the Senate failed to pass a comprehensive immigration legislation reform Focus is to have a separate vote on the AgJOBs legislation – H2A temporary agricultural worker program Eliminate labor certification process Reduction/elimination adverse effect wage rate Allow aliens not currently in the program to acquire H2A status 7

8. Food Safety US food supply is amongst safest in the world Food safety measures need to be Commodity specific (not just melons) Based on the best available science Supported by strong government oversight 8

9. Federal Nutrition Programs Increasing access to fresh fruit and vegetables in federal nutrition programs Expanding the Fresh Fruit and Vegetable Snack program – 115,000 students, 375 schools in 14 states USDA’s Special Supplemental Nutrition Program for Women, Infants and Children (WIC) to include fruits and vegetables 9

10. A Picture of the US Economy 10 10

11. Dow Jones – 1900 to 2010 Source: StockCharts.com 11

12. S&P 500 – 1960 to 2010 Source: StockCharts.com 12

13. NASDAQ – 1978 to 2010 Source: StockCharts.com 13

14. Consumer Confidence Index Source: Market Harmonics 14

15. Spending During Recessions 15

16. So, What is a Recession anyway? 16 16

17. Definition The National Bureau of Economic Research or NBER officially declares a recession has occurred based upon: “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough”. (www.nber.org) 17

18. Illustration of a recession Source: John Penson, Dept of Agr. Econ, TAMU 18 18

19. Illustration of a recession The key question today is how long and … Source: John Penson, Dept of Agr. Econ, TAMU 19 19

20. Illustration of a recession …and how deep the recession will be Source: John Penson, Dept of Agr. Econ, TAMU 20 20

21. Recessions in the 20th Century Dates of Recession Months Depression Recent Recessions 21 21 Source: National Bureau of Economic Research

22. Recessions in the 20th Century • There have been 13 recessions since the great depression of 1929 • ≈ a recession every 6 years • A regular component of the business cycle • Bubble of over-valuation of goods 22

23. Annual Change in Real GDP 1973-75 1981-82 1990-91 2001 Depression Source: John Penson, Dept of Agr. Econ, TAMU 23 23

24. Introduction • Most business managers have heard “effective marketing is the key to profitability” • But what is marketing? • Tendency to associate marketing with selling or advertising and promotion

25. Introduction • Marketing is the total system of business activities designed to (1)plan, price, promote, and distribute products that (2)satisfy the wants/needs of current/potential customers, while achieving the (3)businesses’ objectives.

26. Introduction • The major emphasis is the customer • What do we need to do to be the most successful business? • Provide customers what they want, when and how they want it. • It is easier to sell customers “what they want to buy” than selling them “what we grow”

27. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process

28. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Gathers two types of Information: a. Internal b. External • Target Market Selection a. Aim at the entire market (all segments) with a single marketing approach. b. Pursue several different segments with different marketing approaches for each segment. c. Focus on just one segment with a very direct marketing approach

29. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Business Related (Internal) Information: (1). Financial resources and Capabilities • Gross profits and net earnings after taxes • Financial ratios- ROI, breakeven analysis, etc. • Cash flow analysis (current and projected) • Record Keeping system • Borrowing Capabilities

30. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Business Related (Internal) Information: (2). Operating facilities • Production capacity based on land, labor, and equipment • Production scheduling • Inventory levels by variety, grade, size and loss rates • Power requirements (human input) • Equipment requirements

31. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Business Related (Internal) Information: (3). Competitive strengths and weaknesses • Competitive status (name recognition, quality perception) • Sales force capabilities • Market share projections (compared to competitors) • Competitiveness of prices (volume discounts?) • Advertising and Promotion • Product mix • Distribution methods and channels • Service capabilities

32. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Market Related (External) Information: (1). Environmental Constraints • Costs and availability of materials (chemicals, soil materials) • Costs and availability of Energy • Economic conditions • Technology advancements • Political Environment – quality, pesticide use, other important issues

33. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Market Related (External) Information: (2). Market Conditions • Market size (pop, fam size, hwd, growth, etc) • Market segments (alternative outlets) differentiated by demographics (age, gender, income, education, etc) • Buyer purchasing habits (time, place, frq, cash/credit • Buyer use habits (when, where, purpose)

34. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Market Related (External) Information: (3). Analysis of Competitors • Number of competitors in your area • Market shares • Strengths and weaknesses in terms of prices, product mix, quality, promotion and advertising, cost structure, transportation costs, technology, management, etc.

35. Sources of Information • State or National trade associations • Landscape contractors and architects • County extension agents and horticultural specialists • Texas Department of Agriculture • The internet • Your customers

36. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Marketing objectives are typically set in such areas as profit, return on investment, sales volume, market share, pricing, advertising, and promotion • Marketing objectives should be SMART • Specific • Measurable • Achievable • Realistic • Time • As market situations and competition change, so must the marketing objectives

37. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process Examples of Marketing Objectives • Increase overall return on investment by x% for the next fiscal year • Increase X product sales by 10% for next fiscal year • Introduce x new products by specific date • Increase sales volume by x % in x region by this date

38. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Market penetration: fill the needs of an existing market • Market development: find new markets for existing products • Product development:develop new products for customers in the business's present markets • Diversification:new markets with new products

39. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • The marketing strategies must be transformed into a set of specific actions or tactics for accomplishing marketing goals • These tactics are often referred to as the marketing mix. • Product Decisions • Promotional Decisions • Pricing Decisions • Distribution Decisions

40. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Product Related Decisions • Determining product mix • Differentiating or branding our products • Using attractive and efficient containers • Attractive and informative labels • Guarantees for our products? • New products • Care information of our products (after sale) • Service- delivery, credit, special wrappings, containers, etc

41. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Promotional Related Decisions • Select target groups and geographical areas • Advertising: • Appeals and specific messages • Size, duration, frequency, measure adv? • Determine sales promotional media (POP, samples, demonstrations, trade shows) • Company recognition, logo, colors, etc

42. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Pricing Related Decisions • Determine base prices for each product • Types and sizes of volume discounts • Promotional pricing • Credit policies • Allow consumers to buy the quality they can afford

43. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Distribution Related Decisions • Provide protective packaging • Determine modes of transportation • Maintain inventory requirements

44. Perform Situation Analysis Determine Marketing Objectives Formulate Marketing Strategies Implement Tactical Procedures Evaluation And Control The marketing Planning Process • Performance of the plan must be measured • Standards must be developed against which performance can be evaluated. • Typically, the manager develops quantitative measures of overall planning performance such as the following: • Comparing total sales and profits with figures from preceding years.

45. Direct Marketing

46. Marketing Margins

47. Direct Marketing Directmarketing involves selling agricultural products directly to the consumer (e.g. PYO, roadside stands, farmers markets, e-commerce, etc.)

48. Direct Marketing – Driving Forces • Dissatisfaction with low farm gate prices. • Retail buyer consolidation. • Urban sprawl. • Consumer interest in food safety & origin. • Increased emphasis on convenience and value added (less volume purchasing).

49. Direct Marketing – benefits to producers • Alternative income streams. • Helps to preserve small farms. • Outlet for organic/specialty niches. • Capture greater share of consumer dollar. • Able to be their own boss/do their own thing – less dependent on wholesale.

50. Direct Marketing – producer’s concerns • Knowing/dealing with consumers. • Liability issues. • Oversaturation. • No benchmarks.