Direct Marketing: A Shorter Path to Higher Profits

“Every day, farmers are faced with the challenge of making enough money to support their families, maintain their farms, and hopefully make a profit. If you are a farmer, then you know how difficult this proposition can be! Local farming papers paint a grim picture when auctions report 50 pounds of carrots selling for $1.05 and crates of peppers bringing just enough money to cover the cost of their crates."
–Jeff Moyer, Farm Manager, The Rodale Institute

 
RESOURCES

As the US spends $177 billion a year to produce its food and $400 billion to market it, you’ll find that you can never put too much thought into marketing. If direct marketing appears to be a good strategy for you, you can find further information and assistance to develop an effective plan through the following resources:

Organizations
The Rodale Institute
611 Siegfriedale Road
Kutztown PA, 19530
(610) 683-1400
info@rodaleinst.org
www.rodaleinstitute.org
www.newfarm.org

Appropriate Technology Transfer For Rural Areas (ATTRA)
Business Management Series: “Direct Marketing”
PO Box 3657
Fayetteville AR, 72702
(800) 346-9140
www.attra.org

MidAtlantic Direct Marketing Association
c/o PaFarm, Room #104
4184 Dorney Park Road
Allentown PA, 18104-5798
www.madmc.com

Pennsylvania Retail Farm Market Association, Inc.
1000 Thorndale Road
West Chester PA, 19380
(610) 269-3494
(610) 391-9840
market@pafarm.com
www.pafarm.com

Jersey Fresh
New Jersey Dept. of Agriculture
Division of Markets
Trenton, NJ, 08625
( 609) 292-8853

Maryland Dept. of Agriculture
50 Harry S. Truman Parkway
Annapolis, MD, 21401
(410) 841-5700
www.mda.state.md.us

American Farmland Trust (FRESHFARM Markets)
1200 18th Street NW,
Suite 800
Washington DC, 20036
(202) 331-7300
info@farmland.org
www.farmland.org

National Farmers Direct Market Association
14850 Countryside Driv
Aurora OR, 97002
(503) 678-2455

Publications
Growing For Market (newsletter), PO Box 3747, Lawrence KS, 66046. (800) 307-8949.

Dynamic Farmers’ Marketing by Jeff Ishee, 1997. Bittersweet Farmstead, PO Box 52, Middlebrook VA, 24459. (540) 886-8477. www.eMarketFarm.com.

The New Farmer’s Market by Eric Gibson, 2001. New World Publishing, 11543 Quartz Drive #1, Auburn CA, 95602. (530) 823-3886 or (888) 281-5170.

The Legal Guide for Direct Farm Marketing by Neil D. Hamilton, 1999. Drake University Ag Law Center, Des Moines IA, 50311. (515) 271-2065.

A Guide To Successful Direct Marketing by Charles R. Hall and Jeff L. Johnson, 1992. Texas Agricultural Extension Service, Texas A&M University, Attn. Charles Hall, 464 Blocker Building, College Station TX, 77843-2124. (409) 845-1772.

 

 
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Market reports don’t tell the whole story. While one farmer sells a 50 pound bag of carrots for $1.05 at the wholesale auction, another farmer can fetch $1.05 for a single pound of carrots by selling them through his local farmer’s market directly to the people who will eat and enjoy them. The difference in profit lies entirely in the marketing. The farmer who takes the time to nurture a relationship with direct market customers will find the increased profits to be well worth the effort.

What is Direct Marketing?
By definition, “direct marketing” describes any technique that allows a farmer to sell his product directly to the person who will use the product, and, in the process, develop a one-on-one relationship with that person. Examples of direct marketing include:

  • Farm stands
  • Roadside markets
  • Pick-your-own
  • Farmers Markets (“producer only” markets)
  • CSAs (“Community Supported Agriculture” that is funded by a subscription based clientele)
  • Mail order home delivery services, by mail, e-mail, phone, or Internet
  • Business-to-Business sales, including restaurants and other farms
  • Marketing partnerships
  • Any other venue your creative mind can imagine!

Direct market channels allow farmers to make more profit by giving them full control over their product’s delivery, quality, and pricing. The consumer also benefits by paying reasonable prices for products that are locally grown, fresher, tastier, and more nutritious than items they may find at the supermarket. These benefits help to make direct marketing a satisfying win-win relationship for both the farmer and the consumer!

Is Direct Marketing Right for You?
To help decide whether or not direct marketing might be a good strategy for you and your operation, begin by asking yourself the following questions (adapted from “Market What You Grow” by Ralph J. Hills Jr.):

  1. Are you willing to take some risks?
  2. Do you take pride in your products?
  3. Do you enjoy showing and telling people how great your products are?
  4. Are you willing to do some serious planning and research?
  5. Are you willing to experiment?
  6. Are you able to be flexible?
  7. Do you like to operate independently and determine your own path?
  8. Do you like to do creative things, and solve problems creatively?

If you answer “yes” to four or more of these questions, then direct marketing may be a very good strategy for you, especially if you are a small farmer making less than $250,000 a year from your operation.

For a “people person” who grows a diverse mix of vegetables for fresh consumption, the appeal of direct marketing is quite clear. However, if you don’t enjoy working directly with the public, or even if you grow a crop that people don’t consume directly (such as wheat or grain corn), you may still be able to partake in the benefits of direct marketing by forming marketing cooperatives with other growers in your area.

To further assess your interest, be sure to make a thorough and honest evaluation of your operation, your interests, and your goals. The following steps, adapted from ATTRA’s “Direct Marketing: Business Management Series”, can help you develop a thorough assessment:

1. Determine what kind of business and lifestyle you want. Visualize the ways you want your farming business to grow, and commit your vision to paper. Include a clear description of your ideal lifestyle, and develop realistic one-year, five-year, and ten-year goals to help you achieve your vision. Ask yourself the following questions to guide your planning:

  • Do you want your business to be a full-time or part-time enterprise?
  • Do you want to work by yourself, with your family, or with employees hired from the community?
  • What kind of environment do you want to create within your business?
  • What kind of profit do you want to make?

2. Take inventory of your current physical resources. Document all your operation’s resources, with some assessment of their qualities and shortcomings. Include everything you can think of, from machinery and buildings, livestock and water resources, to total acreage of land, soil quality, and location. This information will help you determine the best ways to utilize your current resources, and also help you assess what other resources you may need to achieve your goals.

3. Assess your human resources. Think of the people who will work with you in your operation. Ask yourself the following questions:

  • Is your family supportive of your plans?
  • Will they work directly in your business’ operations, and if so, to what extent?
  • Can you find farm workers within your community?
  • Do you want these people to work on a voluntary, temporary, seasonal, or permanent basis?
  • What kind of pay and benefits would you like to be able to offer these people?
  • What kind of relationships do you currently have with the people in your local business community?
  • Which of these relationships might be developed to advance your business plans?

4. Evaluate your current financial resources and liabilities, and outline potential future resources. If you haven’t done so already, outline your current financial assets and liabilities on paper. Determine what assets you can use to develop your business, such as savings, investments, or credit. Also brainstorm to develop a list of untapped financial resources to which you may have access, such as grants, low interest loans for rural or small business development, or investment by friends, family, or customers.

When you have clarified your vision, interests, and resources, you can more easily identify the strategies that will most effectively develop your direct marketing plan.

Keys to Direct Marketing Success
Successful direct marketing is based entirely on the quality of the relationship you develop with your customer. Because direct marketing removes all middlemen, such as processors, packagers, and other marketers, from a farm product’s “chain of custody”, good direct marketers are able to focus their energies on meeting the needs of their customers.

Positive, interactive customer relationships are fostered through the following steps:

1. Identify your target customers. Decide what customers you would most like to serve. For example, would you prefer to develop relationships with residents of your community, or with restauranteurs and market owners in the surrounding area? Think creatively and “look outside the box” for possible customers that others may not have found. (For in-depth guidance on market research, check the “Resources” section at the end of this fact sheet.)

2. Assess your customers’ needs. Be curious! Ask questions and learn everything you can about your customers’ lifestyles, ages, incomes, interests, shopping habits, and food preferences. Also visit other direct marketing venues, such as those listed previously, and ask what their customers want. By finding out what your competition offers, you can look for ways to improve their product and services, or identify an unfilled niche.

3. Let your customers’ needs determine what you produce. With the above information, you can choose the types of produce and farm products that best fulfill your customers’ needs and desires. (This approach differs from standard farm marketing “strategies” in which the farmer chooses what he wants to grow and then tries to find a customer for his product.) Toward this end, some successful direct marketers emphasize the following points:

  • Grow “people food” - You can make much greater profit from growing human consumable foods than from commodities for processing, livestock feed, or export.
  • Grow a diverse mix of crops - The more types of produce you offer, the more people will come to you, and the more they’ll buy. As you select crops, include a few high-value specialty crops that people will go out of their way to find. Also choose varieties that excel in flavor.
  • Offer other products, too, if you can - Value-added products, such as preserves, flowers, free-range chicken and meat, or dairy products (produced by you or a cooperating farmer) will make the allure of your business even greater, since customers appreciate one-stop shopping.

4. Focus on quality. Let one simple rule guide your work: if you wouldn’t buy it, then don’t sell it. When you offer only the best produce and products, your customers will appreciate your efforts and keep coming back. They’ll also be more willing to pay the price you ask without question. Toward this end, be sure to invest time in post-harvest handling because proper washing, cooling, packaging, and storage are essential to present the best product possible.

5. Be a price-setter, not a price-taker. Make a clear, informed decision on how you will set your prices, and then stick to it! Be sure to set a price that’s fair to you and the quality of your product. (For example, take the top supermarket price for an item and add 5% or more. This price is often easy to get if your product is more fresh, beautiful, and delicious than the supermarket’s offerings.)

6. Promote your business and products effectively. Determine what unique attributes put your farm and products a notch above the rest. Then be sure to announce those qualities “loudly” and repeatedly through every promotional venue you can imagine. Think creatively! Look everywhere for promotional opportunities, such as good signage around your operation, fliers and brochures, product placement at another business, or even a web site. (Be careful when advertising in traditional print publications because the return can be disappointingly low for the money spent.)

7. Be prepared for your customers’ needs to change. Your customers’ needs will change over time. Therefore, you will need to be flexible in the development of your market plans. The most successful direct marketers will tell you that their customers are “moving targets”, and that their direct marketing “success” is measured differently every year.

     

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