By Thea Rittenhouse, NCAT Agriculture Specialist
This publication discusses direct marketing and the benefits and risks associated with selling agricultural products directly to customers. Popular direct marketing strategies covered in this publication include farmers markets, Community Supported Agriculture (CSA), and direct sales to restaurants, institutions, and food hubs, as well as agritourism and Internet-based direct marketing. Additionally, the publication contains information on marketing plans, pricing strategies, and creative marketing techniques. Examples illustrate how farmers are utilizing direct marketing channels to become more economically viable.
More and more farms are distributing their products through direct marketing channels. Customer demand for local, farm-identified products has increased, retail stores and restaurants have begun marketing and labeling local products, and farmers markets have experienced exponential growth. Direct markets also have fewer entry barriers for beginning farmers than other types of markets. As direct markets become increasingly popular, farmers need to better understand the different direct marketing methods and the potential these have for increasing farm economic viability. There is also a need to understand the risks associated with direct marketing.
This publication gives an overview of the types of direct marketing channels and the benefits and risks associated with each type. It offers an overview of the basic components of direct marketing and suggestions of where to go for more information and technical assistance on the topic. Because direct marketing is a complex and rapidly changing topic, this publication does not prescribe specific methods. Instead, it prepares readers for what to expect and lets them know how to enter this type of market, as well as introducing some of the new and innovative tools and resources that are available.
Despite a rapid increase in direct marketing opportunities, direct market farms still represent less than 10% of the total 2.1 million farm operations nationwide, and direct market sales represent only 0.3% of total nationwide agricultural sales. The majority of farms utilizing direct markets are small farms, defined as those with under $250,000 in annual gross sales of products. However, each year more farms are choosing to direct market their products. Although they still represent a small percentage of total farm sales, the 2012 U.S. Department of Agriculture (USDA) Census of Agriculture reported that 144,530 farms across the United States sold an average of $1.3 billion of fresh edible agriculture products directly to consumers. This represented a 6% increase in the number of farms and 8% increase in sales from the 2008 Census of Agriculture (USDA—NASS, 2014).
Benefits of Direct Marketing
Over the past decade, direct marketing has become highly visible and popular among consumers in the United States. Consumer campaigns such as USDA’s Know Your Farmer, Know Your Food have succeeded in bringing awareness to the importance of the farmers who provide food for consumers. Such campaigns have encouraged the growth of existing direct marketing channels and created innovative new channels. It is important to note that each of these marketing channels has different guidelines, considerations, and expectations for farmers.
Some of the most significant new direct marketing channels now available for farmers include farm to school, farm to institution, community supported agriculture (CSA), and food hubs. ATTRA has excellent publications outlining these topics: Selling to Restaurants, Food Hubs: A Producer Guide, and Community Supported Agriculture. Along with these new marketing channels, there is continued growth in local consumer campaigns such as Farm to Table, Farm to Fork, Buy Fresh Buy Local, and many others. These consumer campaigns bring more attention and consumer demand for direct marketing.
Two Important Benefits of Direct Marketing
Direct marketing can improve economic viability for farmers. Farmers can capture a greater percentage of the food dollar through direct marketing, rather than going through another “middleman” such as a distributor, packing house, or processor. Farmers can set their own prices to reflect what they need to earn to be profitable. Competition exists, but it is often among farms of the same size, rather than between large-scale and small-scale farms.
Direct markets provide opportunities for personal connections with customers. Direct markets increase visibility and sales for farm products. They are a great way to learn how to market products successfully, learn how to set prices, and get valuable customer feedback.
Direct Marketing Risks
Although direct marketing can be a great way to increase economic viability, there are some additional risks and responsibilities associated with selling direct. The main difference between direct marketing and the wholesale market is that the farmer takes on the responsibility of marketing and selling the products to consumers. If farmers choose to use direct marketing channels, there is always a greater risk of unsold products. Therefore, a solid marketing plan is key. It will take time to think through a marketing plan and what makes your products unique and appealing to customers. See the ATTRA topic, Business and Marketing.
There are also liability risks to consider with direct marketing. Farmers should be aware of these and address them before beginning to direct market products from the farm. Proper planning is very important: it is always best to prepare for any liability scenario in advance. Table 2 offers examples of different types of liability documentation that might be needed for direct marketing channels.
Now that the benefits and risks of direct marketing are understood, the next section will focus on the types of direct marketing channels and how farmers are utilizing these to become more economically viable.
Types of Direct Markets
There are many types of direct marketing channels to consider, depending on the size, scale, and products of the farm operation. It is important to understand the differences between each of these direct marketing channels/methods and know what to expect. The size and scale of the farm, years of experience, and farmer preferences will help determine the best fit. This may change over time, too, as some farms might expand to incorporate more direct marketing channels, or decide to focus on only one or two direct market channels. This section will outline several different direct marketing channels. It is important to understand the requirements and limitations of each channel. It is also important to understand the average volume of product needed to enter each direct marketing channel and how that differs from a typical wholesale marketing channel.
Numbers of farmers markets have been steadily growing in communities all over the country. Each farmers market is managed differently, and most will have different application requirements. It is always best to attend a farmers market before applying, in order to observe prices, types of vendors, location, and customers. A good practice is to bring a business card and talk directly with the market manager about your farm. After visiting the market, check the application process, fees and requirements, and deadlines for applications. Typically, there is a fee to join a market, which is paid annually. Additionally, there are weekly stall fees that each vendor pays during the market. These fees will vary depending on the market, but the information will be listed in the application packet or on the website. Most markets require proof of liability insurance, vehicle insurance, and other documentation to be included with the application. Many farmers markets have winter or early spring application deadlines. If the market has a rolling deadline, it is always best to apply before the start of the busy summer season because market managers will typically accept new vendors at the beginning of the season, rather than in the middle of the summer. If it is a year-round market, managers will be more willing to accept your application if you can sell products throughout the year.
Farmers markets benefit beginning and small farmers in many ways:
- Farmers markets are especially suited to the small and beginning farmer, and markets often function as business incubators.
- Farmers markets offer better pricing opportunities, often substantially higher than wholesale.
- Farmers markets let the grower set the price, while creating cash flow (Keller and MacNear, 2012).
EBT Machines and SNAP Benefits at Farmers Markets
Federal funds are available for farmers markets to apply for POS equipment to accept SNAP (Supplemental Nutrition Access Program) benefits from customers. Farmers who sell at farmers markets can also apply to accept EBT cards at the market. Many managers apply for POS equipment and give tokens to customers who can use them to purchase any approved products in the farmers market. Vendors can then redeem those coupons to pay market stall fees.
The WIC Farmers’ Market Nutrition Program (FMNP) is associated with the Special Supplemental Nutrition Program for Women, Infants and Children, popularly known as WIC. The WIC FMNP was established in 1992 to provide fresh, locally grown fruits and vegetables to WIC participants and to expand awareness and increase sales at farmers markets. Currently this program does not include meat, dairy, honey, or eggs. A variety of fresh, nutritious, locally grown fruits, vegetables, and herbs may be purchased with FMNP coupons (USDA, 2015). The value of the coupons varies from state to state. For example, in California, eligible families receive a packet of coupons worth $20 that can be redeemed at any farmers market April through November. Farmers mail redeemed coupons to the state agency and receive a check. This program not only increases sales for farmers at markets, but also encourages more families to shop at markets.
CSA — Community-Supported Agriculture
Community Supported Agriculture (CSA) has become an increasingly common direct market channel for small-scale and mid-scale farmers. The 2012 USDA Census of Agriculture data indicate that 12,617 U.S. farms reported marketing products through a community supported agriculture (CSA) arrangement, a .5% increase over the 12,549 farms marketing through CSAs in 2007 (USDA—NASS, 2014).
Community supported agriculture is a direct marketing channel in which farms pre-sell shares of their products to customers and offer weekly or monthly deliveries throughout the season. There are many different CSA models now, depending on the size, location, and products of the farm.
A 2014 Pew Commission report about a CSA research study indicated that smaller, diversified farm operations contribute more to the economic and social well-being of a community than larger, more profitable farms. It also stated that CSA farms have a greater likelihood of realizing a profit sooner than farms that do not have a CSA (Jansen, 2010). Interviews with farmers who have CSAs indicate that there is a great potential for this model to help increase economic viability, if networks of CSA farmers could form through cooperation rather than consolidation (Milholland, 2015).
A study conducted on farms in California showed that community supported agriculture is a crucial direct marketing channel for small and medium- size farmers when used in combination with other direct marketing channels (Galt et al., 2011). More CSA farmers were able to pay themselves a formal salary, compared to farms who did not use a CSA marketing channel. There were other benefits beyond profitability that were identified by CSA farmers. Many identified important social, community, and social-capital benefits, which study participants viewed as equally important as monetary benefits (Galt et al., 2011). California CSA farms’ gross sales on average were $9,084 per acre, compared to the California average of $1,336 per acre gross sales for conventional and $2,087 per acre for organic vegetable production (Galt et al., 2011). CSA planning is often dependent on highly diversified production methods, so that customers can receive different products during the season. This applies to CSA operations that include meat, dairy, and eggs, too. More information about planning for CSAs can be found in the ATTRA publication, Community Supported Agriculture.
Because forming a CSA requires customers to sign up for the service, managing a CSA requires a system for keeping track of payments and deliveries, and also a means for communicating to customers about what they will be receiving in their weekly box delivery. Below are several CSA software management tools to assist with the marketing and finance aspect of a CSA.
CSA MANAGEMENT TOOLS
$ = less than $20/month, $$ = $20-$50/month, $$$ = more than $50/month. (Note: This is not an all-inclusive list.)
($) Brookfield Farm CSA Spreadsheets
This website allows anyone to download Excel CSA spreadsheets for $25 to help manage crop planning for full season of CSA.
($-$$) Small Farm Central-Member Assembler CSA Software
Small Farm Central has different programs to assist direct market farmers. Their CSA software Member Assembler offers free services for up to 25 members, then afterwards incrementally increases up to 1,000-member CSAs. Contracts are annual and billed once per month.
Farm business planning software program with a free trial for up to 10 crops with no time limit for the trial. Company started in 2009. Offers a variety of tools for recordkeeping, production costs, farm maps, crop rotations, and more.
This CSA software for farmers helps organize customers, boxes, and deliveries, as well as manage payments. There are options for food hubs and producer cooperatives too. There is a free trial period for this software. When you sign up for the software, your CSA profile will be listed on their website www.farmigo.com/ so customers can sign up for your CSA.
New, open-source, Web-based farm management and recordkeeping program/website utilizing Drupal technology. Topics include recordkeeping, CSA, soils, distribution, farm logs, farm maps, livestock, and more. The website is still in the process of being created but anyone can participate and contribute to the formation of the site.
Formed with Local Harvest, one of the longest running CSAware programs to help manage CSAs. The cost to use CSAware is 2% of the cost of CSA products delivered. Beginning in July 2015, CSAware implemented a tiered commission structure for CSA operations with high sales volumes.
Conglomerate/Cooperative CSA Models
Many CSA farms have begun partnering with other farms to offer a wider variety of products for their customers. There has been some debate about whether the CSA model should be a single farm or how much of the produce coming from other farm locations needs to be identified. However, a combined CSA model can be something quite simple, like the ability to offer potatoes from a neighboring farm with similar farming practices and mission, or offering eggs, meat, or fruit “addons” to the regular box delivery. This is one way to make a CSA more attractive to customers, who have many different options and styles of CSAs to choose from now. Shared CSAs have started using different themes for their combinations, like vegan share, omnivore share, and bread-and-butter share. This model will require extra effort and commitment for the different farms involved, and will require a great deal more management time for busy farmers. For more information on this combined model, download or order the book Local Harvest, A Multifarm CSA Handbook. See Further Resources section for ordering instructions.
CSA Customer Retention
Many new CSA models have been created, along with CSA software programs. These programs cancel their subscription, and sign up for varying weeks of deliveries. These new systems have greatly expanded the original definition of CSA, which meant that customers paid up front for an entire season’s worth of vegetables from the farm. There are pros and cons of the new ways in which the CSA marketing model is expanding. On one hand, customers do not have to pay so much money up front, thus a CSA share is not so cost-prohibitive, and it gives buyers a chance to try something without committing to three or four months of deliveries. Conversely, the economic benefit to farmers is somewhat diminished because customers are able to sign up and cancel whenever they want, and the farmers do not receive the larger pre-season income that came with a full-season prepayment. For farmers considering implementing a CSA for their farms, it is important to think carefully about what type of model to use, what type of software, and the time it will take to manage your CSA customers. It will definitely take staff time for administration and organizing the CSA customer base and weekly harvest. Additionally, because there are so many different CSA models, customer retention might be difficult, so learning different marketing tricks to keep your customers signed up is important.
Tips for CSA Customer Retention
- Plan for product diversity throughout the season: try not to deliver the same box mix more than three weeks in a row, with the exception of the “staples” (e.g., eggs, onions, garlic, potatoes).
- Many seasoned CSA farmers say “less is more.” Customers can feel overwhelmed by the quantity of items because of the pressure to cook all of the items within the week. A good range is between four and seven items.
- Provide newsletters with recipes in the box. If possible, work with a chef to develop seasonal recipes for each week. Include tips on storage of vegetables, too (i.e., what to do if you can’t eat everything in one week).
- Have a CSA member-only event. This will build loyalty and let customers feel more connected to the farm. This works well with meat and eggs CSAs, so that customers can see the animals on the farm.
- Have a “trade box” at the pick-up sites so that customers can switch out items they don’t want or need.
- Survey the customers and get feedback on varieties. Be creative—this could include asking customers their preference of a type of meat product (bacon or steak), or taste test of two different varieties of the same vegetable, so customers can choose which one they like best for the following season.
- Offer discounts for full-season participation. Some farms offer a full-season CSA share with a delivery every other week.
- Offer bonus add-ons of dried fruit, jams, eggs, flowers, etc. (if available) for long-term customers.
- Arrange discounts with local restaurants or retail stores that also carry the farm products. Give restaurants a discount on produce if they will also offer CSA customers a discount when they dine at the restaurant or shop at the store.
- Donate a share to a local organization, church, food bank, etc.
- Offer customers the option of purchasing half shares for the season.
Farm to School/Farm to Institution
Farm to school, a nationwide movement to bring more fresh, local products into schools and increase the number of school gardens and the amount of nutrition education, has consistently gained momentum and support among farmers, schools, and policymakers. USDA offers farm to school grants for programs, and there are now regional coordinators in different parts of the country to assist with programs. The National Farm to School Network supports local efforts through establishing regional networks, holding conferences, and advocating changes to policies that prevent schools from sourcing fresh, local products for students. The National Farm to School Network has successfully established a Farm to School Month, a Farm to Cafeteria Conference, and farm to preschool programs that support local farms in direct marketing their produce to schools.
Farm to institution has also gained momentum as a viable direct marketing channel. Hospitals, companies, government offices, community colleges, and universities that have traditionally employed a dining-services management company are now looking to source more local food directly from farmers. Depending on the size of the institution, products may be sourced directly, through a food hub, or from a food distribution company that works with local farms.
These programs are opportunities for farmers to sell their products to schools, hospitals, corporate offices, and other businesses to be either served in the cafeterias or offered to employees as an employment benefit. Farm to institution can provide a variety of direct marketing opportunities for small and medium-scale farms, although volume and consistency of products are important, so larger farms have traditionally participated in these markets.
It is important to understand that farm to school has regulations and requirements associated with it. School food contracts are funded by a combination of federal, state, and local sources, and each school district will be different. Because of this structure, schools often require a competitive bidding process to obtain a contract for a school year. School districts cannot often pay high prices, as they are dependent on funding that limits the amount of spending for each student meal. For meat and eggs, schools will need to purchase in bulk, and they are not often able to buy in small quantities. Also, the school year typically runs from August to June, so it can be difficult to grow and market products when school is in session, in the winter months. However, this market can also be an opportunity for fall, winter, and early spring sales, depending on a farm’s products. There is a market to sell frozen meat products, eggs, and honey to schools, providing that the appropriate food safety standards are followed. Hospitals and corporate offices often have similar purchasing rules and regulations, but they are not constrained to a school-year calendar and are not limited by federal funding, in most cases.
Basic requirements of the farm to school/farm to institution market include the following:
- Consistent, high volume of product(s) and the ability to sell produce at reduced prices (typically wholesale prices)
- Proper food safety certifications, typically a third-party food certification such as the GAP (Good Agricultural Practices) guidelines program and food safety plan
- Equipment for sizing, packing, and grading products (this is primarily due to specific regulations schools must follow regarding serving size/portions for students)
- Adequate transportation (with refrigeration if delivering meat, dairy, and egg products) and flexibility to deliver to multiple school sites within the school district.
- Although there are more regulations, there are also many rewards for farmers marketing to schools.
- Benefits include visiting the schools and interacting with students and families, the potential for a consistent and reliable market, and the opportunity to work within the school community. Many farmers state that a main reason for working with schools is to connect with the local community.
Farm to school also has the support of a nationwide effort to improve school lunches and increase the amount of local, fresh produce served in schools. The National Farm to School Network works at the federal level to ensure policies continue to change to support this movement. Several states have passed legislation to enable schools to purchase more food for school meals directly from farmers. For example, in Oregon, a group of organizations published a report entitled The Impact of Seven Cents (Kane et al., 2012). The report examines the effects of a seven cents per meal investment on local economic development, lunch participation rates, and student preferences in two Oregon schools. The results from this report (Kane, 2012) garnered enough support to pass state legislation allowing the increase so that more food could be purchased from farmers. Farm to school continues to grow as regulations and policies change to reflect the demands of schools, farmers, and parents.
For small to medium-scale farms, there have been new developments such as food hubs, which enable smaller farms to market their products collectively to institutions. Consult the ATTRA publication Food Hubs: A Producer Guide for more information. Increasingly, hospitals and larger businesses are interested in offering a CSA delivery to their employees. This type of service could be another direct marketing channel for farmers, but it would require significant market research and knowledge of local institutions.
Agritourism is growing in rural and urban areas across the country. There are many different types of activities that can highlight rural areas and farming communities and bring customers out to the farm. Agritourism can provide opportunities for farms to connect with customers, increase visibility for the farm, and also increase economic viability for farm operations. Agritourism activities can include u-pick operations, farm stays, Christmas tree farms, hunting and fishing, wedding and events, farm tours, pumpkin patches, corn mazes, wine tastings, and other activities. Agritourism can create a supplemental income for the farm beyond raising, growing, and selling products. However, this type of marketing requires specific types of insurance and a general willingness to open your farm to customers. The ATTRA Tipsheet Tips for Selling with: Agritourism and “Pick-Your-Own” lists some general considerations and tips for this type of marketing channel. Also, the California Small Farm Program Agritourism website has several publications and practical tips for farmers interested in agritourism.
Each state and county might have different regulations for agritourism activities, especially if the new venture requires new infrastructure and accommodations for visitors (e.g., bathrooms, parking lots, seating). It is important to note that farms will need to conduct thorough research into local and state regulations, as well as insurance requirements. The Agricultural Marketing Resource Center has information and links for best practices, insurance requirements, zoning requirements, and successes and challenges.
Some of the most common reasons farmers stated for getting out of agritourism were dealing with visitors, higher property taxes, and liability insurance (AGMRC, 2015). Because agritourism means more traffic and visitors to the farm, another important consideration for future endeavors should be the views and opinions of the neighbors. Many farms have been sued or fined for noise complaints and traffic congestion by neighboring farms or residents who value a quiet rural environment, so it is a good idea to conduct research in advance. The University of Vermont has an agritourism website with links and resources.
The recent growth of the local food and “farm to table” movement has prompted an increase in the number of restaurants and chefs featuring fresh, local produce on their menus. Selling to restaurants requires making contact with a chef or manager of a restaurant, bringing in samples, and understanding what chefs are looking for in advance. Restaurants also have a bottom line, and because many distributors now carry a wide variety of beautiful produce at cheaper prices, it is very important to know how to market your product and your farm story to the restaurant. Although restaurants are a direct market channel, often prices will be close to wholesale trends. The restaurant market requires significant marketing research in advance, in order to understand trends in restaurant purchasing and menu options. It is a good idea to read the restaurant section in the newspaper or food blogs to understand what might be a trend for the upcoming season and consider growing that product. Often, chefs will shop at farmers markets to find new items for their menus. It is a good idea to have business cards and an availability list and to offer samples of produce for chefs who may visit the farmers market. For more information and tips for selling to restaurants, see the ATTRA publication Tips for Selling to Restaurants.
In addition to fresh farm products, value-added products such as jams, pickles, dried fruits, preserves, desserts, and sauces can be marketed at farmers markets, retail stores, farmstands, and farm websites. Two main benefits of creating value-added products are the ability to sell more of the farm produce instead of it going to waste, and the possibility of selling the products during the off-season months. Time is the most important factor when making value-added products. There is often not enough time during the busy season to create value-added products. Also, in many urban areas, there is increasing competition because many others are now creating value-added businesses.
Recently, some states have enacted legislation to support producers who want to create value-added products in their own homes instead of a certified kitchen. This cottage food law allows certain foods to be produced in a home kitchen. For a complete directory of cottage food laws by state, see here. The California Small Farm Program has a Marketing and Specialty Food website with tools and publications related to value-added products. USDA also has a website with information and links to resource guides on cottage food laws and value-added products.
Farmers can also work with a co-packer business to make value-added products. These businesses can package and prepare value-added products from the farm. Some co-packers can help with creating a new recipe. It is very important to conduct a feasibility study and enterprise budget analysis before beginning to develop value-added products. One of the few grants available for farmers is the USDA Value Added Producer Grant, which will provide grant funding with a 50% match to conduct feasibility studies or for capital startup costs. See ATTRA’s Adding Value to Farm Products: An Overview for more information on this topic.
New Direct Marketing Cooperative Business Models
There are several new direct marketing cooperative business models that have emerged in recent years due to the increase in demand for local products and growth in the number of small and midscale farmers who need to market their products cooperatively. Alternative distribution models can mimic direct marketing practices by providing information about the farms to customers and sometimes partnering with farms to host farm events or farm speakers at events.
Food hubs are designed to link farmers and ranchers with regional buyers by providing a physical or on-line location to aggregate and distribute produce to customers. Often, they serve a critical need for farmers in an area, such as providing a delivery vehicle or a storage facility, or a website that links multiple farmers with customers.
According to the USDA’s Regional Food Hub Resource Guide, a food hub is a “business or organization that actively manages the aggregation, distribution, and marketing of course identified food products primarily from local and regional producers to strengthen their ability to satisfy wholesale, retail, and institutional demand” (Barham et al., 2012). In response to consumer demand for source-identified products, food hubs have started to emerge as an alternative to regular product distributors. Typically, a food hub can assist smaller farms with transportation and aggregation of agricultural products. This can be very helpful for farmers in reducing transportation costs and providing options for farms that do not have adequate refrigeration and storage space of their own. However, the drawback is that the farm will get a lower price, and the food hub markets the produce independently. If the products are resource-identified, working with a food hub can create greater regional visibility among customers and have a positive impact on the farm.
One example of a food hub model is FEED Cooperative located in northern California. This food hub took over a small, established produce-delivery company whose owners were retiring, and revamped it into a social capital, values-driven food hub business that works with 50 farmers. FEED Cooperative creates markets for regional farms; stores and delivers products such as dairy, cheese, meat, eggs, honey, flowers, and produce in the region; and offers training opportunities and workshops for farmers through partnerships with other organizations.
Because this is a relatively new business concept, there are resources available online to assist with either starting a food hub or explaining how they work. This distribution model is still in the early stages of development and there are different business styles depending on the individual company. It is important to conduct research and speak with companies to decide on adequate prices, methods of source identification, and transportation logistics. The Southern SARE Sustainable Agriculture Working Group has a Food Hub Starter Kit.
The concept of farm cooperatives has been around for many years, but has recently begun to reemerge as small farms find new ways to market their products collectively. If several farms are able to create a contract that works for all partners, cooperatives can help small farms become more economically viable operations. USDA Rural Development offers a publication that details the steps for forming a cooperative (USDA, 2011).
Two examples of farming cooperatives
Letterbox Farm Collective
This is a traditional cooperative farm model, for farmers working with one piece of land and direct marketing their products.
A cooperative organic label and distributor that works with beginning and immigrant farmers in the Central Coast region of California. Many of the farmers who sell under this label are also graduates of the ALBA farmer training program, who farm separate pieces of land but cooperatively market their products under one label.
Now that the main types of direct marketing and business models have been discussed in detail, the following section will outline how to create your marketing plan and offer tips for setting up a direct market farm business. ATTRA has an excellent and detailed webinar series, tutorials, and other resources about creating a marketing plan, along with other resources for direct market farmers.
Creating a Marketing Plan
The concept of direct marketing can be overwhelming. Farmers need to know which consumers will buy the farm products and know how to find those consumers. Farmers often need to learn a new set of marketing skills to sell farm products successfully. The first step before production begins is to conduct market research and create a marketing plan. This section discusses marketing research, how to develop a marketing plan, different types of marketing, and pricing considerations. Marketing plans typically include the Four Ps: product, promotion, pricing, and placing.
Market Research and Developing a Marketing Plan
Marketing does not begin after production, but well before the first animal is bought, the first egg is laid, and the first seed is planted. Developing a marketing plan requires careful research into where farm products will be sold. For farmers working outside the conventional system, the importance of marketing cannot be overemphasized. Consumer-focused marketing is the single-most important factor that determines the success of an enterprise. Marketing is not just about selling. It requires a clear understanding of what consumers want, and the ability to deliver it to them through the most appropriate channels, for a profit. It includes the planning, pricing, promotion, and distribution of products and services for consumers, both present and potential. Market research can be as simple as visiting farmers markets, restaurants, and retail outlets and talking to produce buyers. Monitoring prices and menus, as well as reading the food section of the newspaper, to understand the latest trends in restaurants and retail is also important. The USDA-AMS daily wholesale terminal market price list is very helpful in understanding fluctuations in prices over the season and when certain products are in demand.
After conducting marketing research, the next step is to create a marketing plan. A marketing plan is a starting point, but it could change over time. A marketing plan begins with the farm’s story and what makes the farm unique, and projects how it will fit into the target markets. A marketing plan also identifies target consumers, markets, and pricing strategies, and it outlines strategies and techniques that will raise awareness and build loyalty among customers. ATTRA has publications and other online resources on this topic: Evaluating a Farming Enterprise and Planning for Profit in Sustainable Agriculture, to name a couple.
An enterprise budget is an estimate of the costs and returns of a particular product (Chase, 2008). Enterprise budgets typically focus on all of the fixed and variable costs associated with production of a crop through harvest. Enterprise budgets are important tools for evaluating profitability of individual crops or products. Enterprise budgets determine how changes in production, price, and/or product mix can affect future profitability. After evaluating the enterprise budgets, the farmer can identify which products are the most profitable and which are not. Enterprise budgets are important decision making tools that can help farmers increase their economic viability. ATTRA has a helpful publication on this topic, Planning for Profit in Sustainable Farming.
There are four basic ways to develop/enter a market:
- Market penetration: the producer uses more of his current product mix to meet the needs of the market. This could mean boosting sales by improving linkages between the buyer and seller and serving more customers in the existing market or by increasing consumption per customer.
- Market development: the farmer looks for new uses or new markets for the product.
- Product development: the farmer produces a new product for the existing market. This could be something that is less expensive to grow, or value added to the original product or crop so that it meets the customer’s needs better.
- Diversification: the farmer raises a unique product for the market.
The Importance of Promotion and Branding: Telling Your Story
Every farmer has a story. In direct marketing, your story is the most important part of making your endeavors financially successful. There are many ways to tell the farm’s story and promote your products. Promotion can be online through social media, business websites, and newspaper or magazine articles, or in person, when meeting new potential buyers or interacting with customers. Compelling farm stories, accompanied by a Web presence, are important keys to building a reliable customer base.
Online Promotional Strategies: Websites, blogs, Facebook, Instagram, Twitter
An online presence is an important component of direct marketing. A Pew Research Study found that over 85% of adult Americans use the Internet, and over 78% search for products and product reviews online before purchasing them (Jansen, 2010). It is essential that a farm have a place or site for customers to find more information on the farm. If you don’t want to set up a website, there are website directory listings, which include basic information, pictures and where to find the farm’s products. Directories such as Local Dirt and Local Harvest are both alternatives to farm websites that give customers an opportunity to learn a little more about the farm. Some of these website directories charge a fee to join, and some are donation-based due to their non-profit status.
Creating a website is a fun and easy way to tell your farm’s story in a compelling manner. You can post pictures or recipes, showcase what products are available, and promote opportunities for visiting the farm or farm events. Personalizing the farm is a way to create a bond with customers, who don’t often get to see where their food is produced. Because there are more and more farms with websites, it is important to also list other keywords to describe your farm products, such as heirloom, organic, or non-GMO so that search engines will display your website when people search for those key terms (Pesch, 2012).
Farms can set up a basic website with a variety of different programs; some of the best ones are listed below. It is important to look at other farm websites and choose a style of website that you can easily manage during the farm season and during the winter. Be sure to look at other farm websites and plan out what parts of the website are the most important for promoting your business and story. It is important to have some pictures to accompany the website, too, although many programs have templates that you can use. Basic components of a website include location and mission statement or description of your farm, what you grow, where you sell your products, and how to contact the farm. Additional information might include farm events, an online store to purchase a CSA share or value-added products, or a blog page. Many website software programs will charge to purchase a domain name or have a monthly fee for using their services. There are many different programs to choose from, but Table 3 lists some programs that are easy to navigate, provide high-quality design, and are relatively affordable. There is always an option to hire someone to produce website content and design.
Finding the time to engage with social media programs can seem like a daunting task. However, engaging with customers through social media is very important. Taking pictures of various farm activities and writing posts to increase your farm’s social media presence can bring economic benefits to the farm, as well as build customer or brand loyalty. Many social media applications connect to a smart phone, thus making it relatively easy to take pictures and upload content. ATTRA’s webinar Using Social Media to Grow Your Farm Business is an excellent resource for information on different social media programs.
Many farms have a business Facebook page that can be connected to an Instagram account, which allows more people to access information about the farm. These programs allow farms to spread the word about sales and deals and promote different activities, as well as show the customers what is going on at the farm, such as new lambs, fresh eggs, or new fruit trees being planted. If you already have a personal Facebook page, you can sign up for a business page through that account. Instagram is a photo- and video-sharing social media site. Other users can share and follow pictures and videos taken on the farm. This site requires the use of a smart phone to take pictures, upload, and post them on the site.
In addition to using a website to promote the farm, it can also be used to sell farm products. Websites can be used for online marketing of CSA shares, non-perishable products, and value-added products. Online stores can increase customer base and lead to greater economic viability; however, it is important to research shipping costs, packaging, and the additional staff time needed to package and ship the products. It is also important to consider online methods of payment processing; companies such as Paypal and Square can be linked to a website to accept payments from customers. Bluebird Grain Farm provides an example of an online marketplace component for a farm website. This grain farm in northern Washington state has both a local customer base and an online store for customers who would like to have the products shipped to their homes or businesses. Because their products are not extremely perishable, the ability to sell online and ship to customers is a very valuable business tool. Many farms have online stores to sell their farm products directly to customers.
Business cards and flyers are still the most important basic tool for marketing a farm business. It is always good to have a stack of business cards because you never know who you might meet and need to give contact number, website, phone, and email. There are many affordable business card templates online. You can build your own design from existing templates, or you can upload your own design and logo. Two examples of companies that offer affordable business card templates are Moo and Vista Print.
If you need a farm logo, there are several companies that utilize open crowdsourcing to let designers compete to design your logo for a fee of $300 to $500. A good example of this kind of company is 99 Designs. Graphic designers can also design a farm logo, but it could cost up to $1,000 for this service. In the end, a logo and a brand are important for promoting your farm both online and in person, and over time these costs will be returned in the form of increased sales and visibility for the farm.
Insurance and Food Safety Considerations
In general, most direct marketing channels will require knowledge of the following items related to liability: liability insurance, food safety plans, and/or Good Agricultural Practices (GAP).
The new Food Safety Modernization Act (FSMA) regulations took effect in January 2016. These new federal regulations will have impacts on many small and medium-scale farmers. Direct market farms of all sizes will be affected by the new regulations associated with this law. ATTRA’s website has a food safety section with up-to-date information on these regulations and how they will affect farmers.
All direct marketing channels require liability insurance, and all direct market farmers should carry a liability insurance policy to protect their business. Most farm insurance companies will offer different levels of liability protection. Farm Commons, a nonprofit organization, has a two-part webinar series called “Managing Farm Risk through Insurance.” It is a great guide for assistance with issues of liability insurance for direct market farms.
Food Safety Plan or Third-Party Food Safety Audit/Certification
While there is no formal requirement yet, direct market farmers should have a food safety plan. Organic operations already require basic elements of a food safety plan and accurate records for food safety and sanitation procedures. Good Agricultural Practices (GAP) and Good Handling Practices (GHP) are voluntary audits by a third-party certifier who checks to see if farm products are grown, packed, handled, processed, and stored in a safe manner to minimize food safety risks. Many retail and wholesale companies, institutions, and organic certifiers require this paperwork, and it is likely that these types of audits will continue to grow in importance. Farmers can create their own plan or work with a consultant or third party to develop a food safety plan.
Direct marketing offers many opportunities for farmers to increase their economic viability. It requires research and careful planning, but the benefits continue to grow. Direct marketing channels continue to change as new outlets and opportunities are created nationwide. Customer demand for farm products purchased directly from a farmer continues to increase, which in turn increases the competition from other farms. It is important to conduct market research and find innovative ways to promote your farm if you choose to use direct marketing channels.
Websites with Programs/Organizations Related to Food Safety
A non-profit that has developed a food safety webinar that discusses the importance of a farm food safety plan.
Produce Safety Alliance
This program at Cornell University offers information, trainings, and resources about food safety and the latest information about the new FSMA regulation.
USDA Good Agriculture Practices and Good Handling Practices website
This website offers current information and resources about GAP and GHP trainings and regulations.
By Katherine Adam et al., NCAT Agriculture Specialists
Published November 1999
Updated May 2016
By Thea Rittenhouse, NCAT Agriculture Specialist
This publication is produced by the National Center for Appropriate Technology through the ATTRA Sustainable Agriculture program, under a cooperative agreement with USDA Rural Development. ATTRA.NCAT.ORG.
- Adding Value to Farm Products: An Overview
- Community Supported Agriculture
- Evaluating a Farming Enterprise
- Farmers Markets: Marketing and Business Guide
- Food Hubs: A Producer Guide
- Direct Marketing Lamb: A Pathway
- NCAT Marketing Tip Sheet Series
- Planning for Profit in Sustainable Agriculture
- Tips for Selling to Restaurants
- Understanding Organic Pricing and Costs of Production