KEY CONCEPTS FOR SUCCESSFUL MARKETING. Megan Bruch Leffew, Marketing Specialist Rob Holland, Director Center for Profitable Agriculture

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1 CPA Info # 225 September 2014 KEY CONCEPTS FOR SUCCESSFUL MARKETING Megan Bruch Leffew, Marketing Specialist Rob Holland, Director Center for Profitable Agriculture Farmers marketing products directly to consumers through farmers markets, roadside stands, CSAs (community supported agriculture) or on-farm retail markets face many challenges. Having high-quality products to sell is vital but is only one piece of the puzzle. This session at the Organics Field Tour will focus on a few of the other important topics or challenges faced by direct marketers. Understanding trends in the industry can be helpful in deciding what to grow and how to market the products. Farmers must also be able to effectively merchandize products by maintaining product quality, enticing customers with attractive displays, providing excellent customer service and engaging in ethical marketing practices. Industry Trends: Census of Agriculture Data The enterprises, commodities and value of sales that make up Tennessee s agriculture have changed over the years. The Census of Agriculture conducted every five years by the United States Department of Agriculture has helped to track these changes in Tennessee and across the nation. Since 1997, the census has provided additional data related to direct marketing, valueadded agriculture, CSAs and organic agriculture. Evaluating the census data provides an indication of the growth and status of these practices in Tennessee and the U.S. Farms with Direct Sales to Consumers for Human Consumption The number of farms with direct sales to consumers for human consumption has increased steadily since Overall, from 1997 to 2012 the number of Tennessee farms with direct sales to consumers increased from 2,694 to 3,679 farms. This 36.6 percent increase was paralleled by a percent increase in the value of agricultural products sold directly to consumers. That is, from 1997 to 2012, the value of agricultural products sold by Tennessee farmers directly to consumers increased from $8,380,000 to $19,182,000. As shown in Table 1, the increase in both the number of farms selling direct to consumers and the value of such sales in Tennessee outpaced the U.S. average. The average value of direct sales per farm has steadily increased in Tennessee by 67.6 percent from 1997 to This is slightly lower than the U.S. average increase for the same time period of 69.4 percent. The average value of direct sales per farm in Tennessee in 2012 was $5,214 compared to the U.S. average of $9,063. The largest increase in the number of farms with direct sales was from 1997 to 2002 when Tennessee experienced a 26 percent rate of growth. From 2002 to 2007 and from 2007 to 2012 the number of farms with direct sales increased at a lower rate, 5.6 percent and 2.7 percent. 1 P a g e

2 In the 2012 Census of Agriculture, direct sales for human consumption was defined as those commodities sold directly to consumers for human consumption such as vegetables, fruit, eggs, milks, cattle, chickens, hogs and turkeys. Farmers were asked to only report commodities grown or raised by the operation and were asked to exclude crops, livestock, poultry or other products that were bought and resold within 30 days. Craft items such as birdhouses and woodwork items were also excluded. Table 1. Average Increase in the Number of Farms with Direct Sales, the Value of Products Sold Direct and Value of Products Sold Per Farm in Tennessee and the U.S. from 1997 to 2012 Tennessee United States Increase from 1997 to 2012 in the number of farms with direct sales to consumers 36.6% 30.1% Increase from 1997 to 2012 in the value of farm products sold direct to consumers 128.9% 121.3% Increase from 1997 to 2012 in the value of farm products sold per farm 67.7% 69.4% Farms Producing and Selling Value-Added Products The census defines value-added as crops, livestock or products such as beef jerky, fruit jams, jellies, preserves and floral arrangements. The number of Tennessee farms reporting value-added processing activities in 2012 was 3,551. This was an increase of 30.6 percent from With 3,551 farms reporting value-added processing activities, Tennessee ranked sixth nationwide in A total of 94,799 farms across the U.S. were involved with producing and selling valueadded products. With a 30.6 percent increase, Tennessee had a greater increase in the number of farms producing and selling value-added products from 2007 to 2012 than the U.S. average of 20.9 percent. Farms Marketing through CSA (Community Supported Agriculture) Enterprises Beginning in 2007, the Census of Agriculture reported the number of farms marketing products through CSA (community supported agriculture) enterprises. While the increase in the number of farms with CSAs in Tennessee from 2007 to 2012 was relatively small at just under 6 percent, the number of CSA farms nationwide was much less at 0.54 percent. As shown in Table 2, many states in the southeast actually experienced a decrease in the number of CSAs in 2012 compared to The number farms with CSAs in Tennessee increased from 251 to 266 while the number across the country increased from 12,549 to 12, P a g e

3 Table 2. Number of Farms with CSAs in Select Southeastern States and United States, 2007 and Change Alabama % Arkansas % Georgia % Kentucky % Mississippi % Missouri % North Carolina % South Carolina % Tennessee % Virginia % United States 12,549 12,617 1% Farms Marketing Products Direct to Retail Outlets The 2012 Census of Agriculture asked farms to report sales of products direct to retail outlets. Marketing products direct to retail outlets was defined as sales to restaurants, grocery stores, schools, hospitals or other businesses that in turn sell directly to consumers. In Tennessee, 1,102 farms reported marketing products direct to retail outlets, accounting for 1.6 percent of all Tennessee farms. Nationwide, 49,043 farms reported marketing products direct to retailers, which is 2.3 percent of all farms in the U.S. Organic Agriculture The Census of Agriculture reported some information on organic agriculture in 2007 and This information is provided in Table 3. It is important to note that actual questions used to capture organic production data differed for the 2007 and 2012 census. In 2012, the census captured data specific to three areas of organic production: (1) the number of Tennessee farms that are USDA Certified Organic, (2) the number of farms that are exempt from USDA Organic Certification and (3) the number of farms that have acres in transition to USDA Organic Certified. The total number of growers in these three areas for 2012 was 122. In 2007, the census questionnaire only identified the farms with organic sales and the value of those sales. Because of the difference in the way organic data was collected, it is difficult to directly compare the number of organic growers from 2017 to The data does show that the value of organic sales increased by 35.4 percent. 3 P a g e

4 Table 3. Summary of Organic Agriculture Data for Tennessee Farm from the Census of Agriculture Change Number of farms in Tennessee that are USDA Certified Organic 36 Number of Farms in Tennessee that are exempt from USDA Organic Certification 51 Number of Farms in Tennessee with acres in transition to USDA Organic Certified 35 Number of farms with organic sales 137 Value of organic sales $1,126,000 $1,525, % Merchandising and Customer Service Considerations Retail is detail. It takes about three seconds for people to form a first impression. Direct farm marketers should strive to make an immediate, positive impression to entice customers to invest time and dollars in shopping with them. Shopping and buying are sensory activities. Customers use all five senses (sight, taste, touch, smell and hearing) to aid them in making purchasing decisions. Merchants who appeal to customer senses will increase their potential for making sales. Merchandising techniques help to accentuate products, appeal to customer senses and make shopping convenient and enjoyable for customers. Direct farm marketers should also consider the image they are trying to convey to customers (i.e., positioning or brand image) when developing merchandising strategies. All aspects of a business, including merchandising techniques that customers come in contact with should be consistent with this image. Sending a consistent message will help solidify the business image in customer minds and help customers recognize the business, thus improving the effectiveness of marketing efforts. Display design, signage, lighting and customer service are all important merchandising components to consider. Find more information on basic merchandising and customer service considerations and techniques in Extension Publication PB1794 Making the Most of the Market: Merchandising Considerations for Direct Farm Marketers on-line at Ethical Marketing Direct farm markers should take care to maintain ethical marketing practices. It is imperative that marketers be truthful and represent the facts of their product clearly. Marketing claims are often regulated. Terms should not be used to promote products unless the marketer is meeting the associated regulations. Direct farm marketers should also avoid sensationalism and negative messages against other segments of agriculture or other marketers. 4 P a g e

5 There are many benefits to conducting ethical marketing practices. Customers appreciate and reward honesty and professionalism with return sales and positive word-of-mouth referrals. Transparency and consistent use of marketing claims across marketers creates a healthy, functional market and a stronger industry. Possible negative consequences may result from unethical marketing. Customers may be distrustful or dissatisfied with dishonest, inconsistent or sensational promotions. This may create a negative reputation or word of mouth and may lead to loss of potential sales. Use of marketing terms outside of regulatory definitions and procedures may result in a dysfunctional market or legal action against a marketer. Negative promotions on segments of an industry may be detrimental to the industry as a whole. Additional Resources Visit the Center for Profitable Agriculture s website to find publications, educational program opportunities and other resources for farmers interested in direct marketing, value-added agriculture and agritourism at 5 P a g e