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Direct Marketing 101
Dr. Marco A. Palma Assistant Professor and Extension Economist
Texas AgriLife Extension Service
Texas A&M University System
May 3, 2011. San Antonio, TX
2
Outline
Introduction: Horticulture Issues of
Today
The Economy and US Consumption
DM Driving Forces
Marketing Strategies
Understanding the Customer
Sales and Display
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
(-)
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
(+)
5 5
A Picture of the US
Economy
6
Historic Economic Indicators
Source: StockCharts.com
Dow Jones
1900-2010
S&P 500
1960-2010
Nasdaq
1978-2010
7
Consumer Confidence Index
Source: Market Harmonics
9 9
So, What is a Recession
anyway?
10
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)
11 11
Illustration of a recession
Source: John Penson, Dept of Agr. Econ, TAMU
12 12
The key question today
is how long and …
Illustration of a recession
Source: John Penson, Dept of Agr. Econ, TAMU
13 13
…and how deep the
recession will be
Source: John Penson, Dept of Agr. Econ, TAMU
Illustration of a recession
14 14 Source: National Bureau of Economic Research
Depression
Recent
Recessions
Dates of Recession Months
Recessions in the 20th Century
15
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
Recessions in the 20th Century
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
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.
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”
Introduction
The marketing Planning Process
Perform
Situation
Analysis
Determine
Marketing
Objectives
Formulate
Marketing
Strategies
Implement
Tactical
Procedures
Evaluation
And
Control
Perform
Situation
Analysis
Determine
Marketing
Objectives
Formulate
Marketing
Strategies
Implement
Tactical
Procedures
Evaluation
And
Control
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
The marketing Planning Process
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
Perform
Situation
Analysis
Determine
Marketing
Objectives
Formulate
Marketing
Strategies
Implement
Tactical
Procedures
Evaluation
And
Control
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
The marketing Planning Process
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
Perform
Situation
Analysis
Determine
Marketing
Objectives
Formulate
Marketing
Strategies
Implement
Tactical
Procedures
Evaluation
And
Control
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
The marketing Planning Process
Perform
Situation
Analysis
Determine
Marketing
Objectives
Formulate
Marketing
Strategies
Implement
Tactical
Procedures
Evaluation
And
Control
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
The marketing Planning Process
Perform
Situation
Analysis
Determine
Marketing
Objectives
Formulate
Marketing
Strategies
Implement
Tactical
Procedures
Evaluation
And
Control
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.
The marketing Planning Process
Direct Marketing
Marketing Margins
Direct Marketing
Direct marketing involves selling
agricultural products directly to
the consumer (e.g. PYO, roadside
stands, farmers markets, e-
commerce, etc.)
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).
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.
Direct Marketing – producer’s concerns
Knowing/dealing
with consumers.
Liability issues.
Oversaturation.
No benchmarks.
Direct Marketing – benefits to consumers
Perceived higher quality/freshness.
Able to get back in touch with rural
roots.
Able to purchase in larger
volumes.
Engaged in the
“experience”.
Crop Mix
Know
Your
Cost
Pricing
Strategies
Crop Mix
Know
Your
Cost
Pricing
Strategies
Crop Mix
Know
Your
Cost
Pricing
Strategies
Product Life Cycle-
Profits
Sales
0
$
Time
Introduction Growth Maturity Decline
Profits
Sales
0
$
Time
Introduction Growth Maturity Decline
Product Life Cycle-
Know your Cost
Crop Mix
Know
Your
Cost
Pricing
Strategies
Why is important to know my costs?
•Identify items with low cost -- Comparative
Advantage -- GROW THEM
•Identify items with high cost -- Comparative
Disadvantage -- REDUCE THEM
•Determine your “Price Floor”
Crop Mix
Know
Your
Cost
Pricing
Strategies
Costs are different for every grower because:
•Size of Operation
•Location
•Managerial Practices
•Time of the year
•Market Channel
•Volume of production
Know your Cost
Crop Mix
Know
Your
Cost
Pricing
Strategies
Costs are different for every grower because:
•Size of permanent crew
•Availability of labor
•How quickly you pay suppliers
•Etc…..
Know your Cost
Crop Mix
Know
Your
Cost
Pricing
Strategies
Every firm has different costs,
CALCULATE YOUR PER
UNIT COSTS!!!
Know your Cost
Crop Mix
Know
Your
Cost
Pricing
Strategies
How to differentiate your product?
--remember-- real or perceived
•Quality image
•Name your cultivars
•Follow changes in consumer tastes and
preferences
•Add value and let your consumers know…
Pricing Strategies
Crop Mix
Know
Your
Cost
Pricing
Strategies
Add value by adding service:
•Credit
•Delivery
•Special wrappings
•Special containers
•Cards
•Care tags
•Brand names
•etc
Pricing Strategies
Crop Mix
Know
Your
Cost
Pricing
Strategies
•Meet your customers’ needs.
•Crop mix allows you to transform your
marketing opportunity into customer
loyalty, growth in sales and profits.
•Complex (number of varieties, etc.)
•Keep focus on the opportunities and be
open to try new varieties.
Crop Mix, What to Grow?
Crop Mix
Know
Your
Cost
Pricing
Strategies
•Look into Industry Trends --identify
opportunities--
•The industry is becoming more diversified…
•Also, consumers are “willing to pay higher
prices” for desired services and features (real
or perceived): Quality, uniqueness,
convenience, locally grown products, organic,
diversity, etc.
•DIFFERENTIATE YOUR PRODUCT!!!
Crop Mix, What to Grow?
Understanding the CUSTOMER
Tastes & preferences
Visiting patterns
Demographics
Eating/gardening habits
Entertainment styles
Price sensitivity
Understanding the CUSTOMER
Customer Lifetime Value (CLV)
Customer lifetime value is the net profit
earned from sales to a given customer during
the time that customer purchases from your
business.
CLV, as a sales focus, is about how the
customer is treated over time.
Lifetime value is a measure of customer
loyalty.
Understanding the CUSTOMER Example:
The value of a college student =
$960 at a pizza parlor over four years in college,
not $10 per visit
$1050 at the hair stylist during four years in
college, not $35 per visit
$1872 at a gas station during four years in
college, not $18 per fill-up
$3000 at the bookstore over four years in
college, not $75 per book or $375 per semester
Understanding the CUSTOMER
Always have your image in mind.
image: a mental
conception held in
common by members of a
group and symbolic of a
basic attitude and
orientation; a tangible or
visible representation; a
commonly-held
perception.
Understanding the CUSTOMER
What Goes Into An Image?
Physical appearance of the facility
Cleanliness, Convenience, Capabilities
Product selection, uniqueness & diversity
Service and knowledgeable personnel
Honesty, Sincerity, Truthfulness
Value (price/quality ratio)
Sales and Display
Sales and Service
Be neatly groomed
Smile sincerely
Keep the work area and
surroundings neat
Recognize the customer’s presence
immediately
TIPS – YOU!!!
Sales and Service
Personal Success
Personal Satisfaction
Family Stability, security
and enjoyment
YOU are important to Yourself
Sales and Service
68 % - indifferent attitude of employee
14 % - product dissatisfaction
9 % - competitive reasons
5 % - other friends
3 % - move away
1 % - die
Why customer’s quit coming?
Sales and Display
Research – trends, hot cash crops, chefs
cooking in restaurants, magazines, etc
Prepare – yourself, your stage and your
product
Branding – why are you different?
Signs, business cards, your clothing, baskets,
tablecloth, banners, styles - Everything
Sales and Display
The best in your zone – help improve
overall market
Tell people about what’s coming next week
See you next week
Frequent customer discounts
Extra product
Recipes and other services
Gain Repeat Business
Sales and Display
Clean and color coordinated – no green or
red; yellow makes produce “pop”
Multi layers
Shade is important, also leave space to set
down customer packages
Display Farm signs, clearly marked prices
Abundance of products
The Stage
Sales and Display
Farm sign with your location
Put “fresh” on signs
Product description, recipes?
Name TAG
Website
Signs
The Bottom Line
High quality product + the experience + the
right marketing messages =
An engaged customer!
A satisfied customer!
A loyal customer!
A non-price conscious customer!
Horticulture Business Information Network
Dr. Marco Palma
Assistant Professor and Extension Economist
Texas AgriLife Extension Service
Texas A&M University System
http://hbin.tamu.edu
Questions
