What are the methods in selling farm product?

Answer 1

Direct Marketing of

Agricultural Products

Direct marketing is a strategy farmers

can use to sell their products directly

to the end customer. Farmers' markets,

roadside markets, subscription marketing,

pick-your-own, and community-supported

agriculture are common types of direct

marketing. Direct marketing is essential

to the profitability of small-farm

business ventures.

Advantages of Direct

Marketing

Direct marketing has

several benefits

over selling through a

wholesale market. Farmers can

potentially make higher profits

because there is no middleman.

Direct marketing saves costs

in packaging, handling, and

transportation. Because the

transaction is directly between

you and the customer, you

receive your money right away. You

do not have to wait for a middleman to

send you a check.

$elling

Your Farm Products

Fact Sheet 804

Direct marketing works well for owners of

small farms because it promotes a diversity

of production and reduces the pressure

to produce in high volumes. You are free

to grow what you want and to decide on

quantity. You have the opportunity to set

your price within a marketable range.

Disadvantages of Direct Marketing

Direct marketing has a downside.

The volume of product you sell through

direct marketing is often lower than what

you would sell through other marketing

methods. However, the higher prices you

typically receive should compensate for

the reduced volume. In some cases, direct

marketing requires more of your time than

other methods do: you need to be present at

the market selling your product.

Required Skills

Respect for customers, imagination and

creativity, and attention to product quality

control are three essential elements of

successful marketing. If you want to succeed

at selling your product, you will need

"people skills"-you'll be dealing directly

with your customers. While people are not

always pleasant, you are always expected to

be courteous.

As a salesperson your challenge is

persuading customers to buy your product

rather than a competitor's. Put yourself in

the position of the customer and ask: "Why

should I buy your product over someone

else's?" Differentiate your product from

the competition's. Develop your own logo;

offer recipes; use attractive, eye-catching

displays; develop an inventory of unique or

specialty products; or grow your produce in

a unique way, such as "certified organic,"

"all natural," or "grown the old-fashioned

way with no genetically modified seed or

chemicals." Or go retro or "back to the

future" by raising all heirloom produce

(varieties from the past)-anything that will

make people want to visit your market site.

Convincing people that they should buy

your product is only a part of the challenge,

however. You need to keep your buyers as

customers. Repeat customers are essential to

the long-term success of your business. The

reality is that not everyone has the skills to

be a direct marketer.

Types of Direct Marketing

Farmers' Markets

One of the fastest growing methods of

direct marketing agricultural produce are

farmers' markets. They are located within a

short drive of most locations in Maryland.

They are popular with both the producer

and the public. Preparation for the producer

can be as simple as picking the produce in

the morning, loading it into the pickup

truck, and driving to your assigned spot at

the farmers' market. The produce is sold

out of the back of your truck. Many direct

marketers in farmers' markets spruce up their

spot with signs, displays, and decorative

touches designed to attract customers. These

additional touches don't have to be time-

consuming or elaborate to be effective.

Farmers' markets have several benefits.

They are ideal for new producers because

start-up costs are low and only simple

marketing skills are needed. One of the best

features about farmers' markets is the face-to-

face contact between producer and customer.

This permits the producer to promote the

product and to receive customer feedback.

Farmers' markets have all the

general drawbacks associated with

direct marketing. In addition,

bad weather can be a problem.

Producers can waste time sitting

at a farmers' market in the rain,

waiting for customers who never

show up. The producer's level

of comfort with being outside in

various types of weather is a factor

to consider.

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Other factors to consider are your time

and your marketing skills. A producer may

spend much time sitting at the market

at the expense of performing other farm

duties. Producers at the market are in direct

competition with each other. Marketing

skills are needed to sell items common to

other sellers in the marketplace, such as

tomatoes and sweet corn, and to receive

a good price for them. For example, to

differentiate your produce from others' you

may want to produce tomatoes that you

can market as "the best-tasting tomatoes in

the county because of a unique, secret-

formula fertilizer and pesticide-free

growing environment."

Introducing new or specialty products and

persuading customers not only to buy them

but also to pay high prices for them can be

a challenge. The primary goal of marketers

in a farmers' market is to develop successful

strategies to attract customers.

Another challenge of farmers' markets is

their regulations and policies. One of the most

common policies is that you can sell only

what you produce. If you cannot accept this

rule or other rules set by market management,

a farmers' market is not for you.

Roadside Markets

Roadside markets are fixtures of the

summer landscape along many highways.

On tourist routes, roadside markets flourish.

For instance, roadside markets appear

almost every quarter of a mile along Route

50 as you leave Ocean City, Md. They can

be successful places for large and small

producers to market their products. As

with farmers' markets, roadside stands are

a convenient place for the public to buy

locally grown produce. The key to successful

roadside marketing is attracting repeat

customers. They in turn will spread the word

about your wonderful stand.

As you do with a farmers' market, you

need to attract people to your site. Road

signs and catchy displays are needed to get

people to stop. Customers could be traveling

60 mph down the road.

The benefits of roadside markets are:

producers can save costs associated with

transportation, packaging, and middlemen;

the produce is marketed near where it is

produced and displayed in bulk or with

minimal packaging; and usually no direct

competitor is sitting beside you.

Roadside markets have disadvantages

compared to farmers' markers. In order to

be successful, you must be available to your

customers on a regular basis. You need to

pay the overhead costs of buildings, utilities,

repairs, parking, and taxes. There are zoning

issues to consider and more planning is

involved. You will also need to maintain a

parking area for your customers. Because

of all of these factors, selling at a roadside

market requires more planning ahead than

selling at a farmers' market.

Location is the key to successful roadside

marketing. The stand needs to be convenient

and easy to find. It should be located near

well-traveled roads so that repeat customers

stop by regularly and new customers can

easily find you. You'll need enough parking

to have room for the heaviest likely crowd,

with easy and safe access between the

parking area and the highway. The facilities

and buildings are one of the first things

people notice, so their appearance

is important. Falling-down sheds and

barns, rusted and abandoned equipment,

poorly maintained fences covered by scrub

trees, and weed-infested crop fields don't

present a good first impression to your

customers. Stands can be pole buildings,

renovated barns, tents, pickup trucks, or a

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small

table. It's

important

to put the best

face possible on your

stand. Make it attractive,

keep it neat and clean, and display your

products creatively.

Subscription Marketing

Some producers use subscription

marketing, a relatively little known method

of selling products that has become popular

with some producers. Under this system,

customers meet with the producer before

the growing season to prepay for a specified

assortment of produce. At harvest, the

producer packages up the customer's order

and delivers it to a drop site or customers

may pick their own products at the farm.

The farmer keeps a record of the products

purchased, but money is not exchanged

during the season. At the end of the season

the producer and customer settle up any

balance that may exist.

The advantage of subscription marketing

is that before the season the producer knows

what to produce and how much. The crop

is sold before it is put in the ground. Pre-

payment supplies the producer with funds in

advance to grow the crops and operate the

farm business.

The drawbacks, however, can be major.

This system requires that the subscription

marketer have strong people skills because

interaction with customers has potential

for conflict. For example, in farmers'

markets and roadside markets, if there is a

dispute over product quality, availability, or

selection, an unsatisfied customer will simply

leave and go to another farmer. However, in

a subscription market,

the customer has

already paid in advance

for a specific quality,

availability, and selection of

produce. Customers will expect

their produce to be of good quality

and available when you told them it would

be. For this reason, subscription marketing

requires a higher level of customer service

than most other marketing options and is

therefore not for everyone. Also, the time

required for filling customer orders and

needs limits the number of customers you

can have in your "club." This limits your

production and income.

Pick-Your-Own Marketing (PYO)

In pick-your-own marketing, customers

come to the farm and harvest their own

produce. PYO has been a successful method

of marketing for both large and small

farmers.

The biggest advantage of PYO marketing

is the reduction in harvesting costs.

Transportation, packaging, handling, and

storage are other areas where costs are saved.

PYOs, therefore, are less expensive to get

started than other types of direct marketing

operations. Typically, customers buy more

produce at a PYO than they do when

shopping at roadside or farmers' markets or

through subscription.

Although it appears easy to plant your

crop and have people come and pay

to harvest it, if it were so easy, as the

saying goes, everyone would be doing it.

Actually, PYO marketing has a number of

disadvantages. By the very nature of PYO,

the producer allows the public to come

onto the farm and roam around. Some

producers are uncomfortable with this, so

PYO marketing is not a good method for

them. The producer has to accept the fact

that customers will damage plants and

produce and selectively pick the crop. Bad

weather discourages customers, which poses

a problem in areas with limited harvest

periods such as Maryland. People do not like

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to pick crops when it is too cold, too hot, or

too rainy.

During the season PYO operations require

long hours: you need to meet the schedules

of a wide range of customers. Besides offering

adequate parking, you need to provide

lanes into the farm and onto field sites.

There are labor costs for hiring cashiers and

the "people movers" needed for directing

or leading customers to picking fields and

keeping customers out of other areas. The

prices you receive at PYO operations are

often less than prices received under other

marketing methods. In addition, insurance

companies often increase their liability

premiums for farms that become PYOs.

Community Supported Agriculture (CSA)

CSA marketing is a relatively new and fast-

growing direct marketing venture. In this

system, members buy shares of the farm's

harvest and also accept some of the risks. As

the crop matures, it is harvested and divided

up among the shareholders. Shareholders

get a fresh supply of produce and support

local agriculture. This is known as urban-

rural linkage.

Shareholders have input into what

is grown and pay fees in advance. This

guarantees the producer a market for

everything grown; the crop is sold before it

is planted. The advanced payment creates

working capital for the farm operation.

CSAs allow better preseason planning,

since the producer will know in advance

what to grow, how much to plant, and how

to grow it. CSAs help to spread out risks,

since both producers and shareholders share

the good or bad crops. Shareholders sign a

contract acknowledging the yield risks. CSAs

reduce labor costs, because shareholders

(customers) help with production and

harvest. Customer help can be another

attractive feature of this marketing

system; many people living in urban

areas find working on a farm to

be a fun family activity. Many

customers enjoy hoeing weeds

and picking ripe produce.

Selling to the Retail Market

(Wholesaling)

Wholesale marketing is a marketing

strategy that can be profitable for both

large and small farms. Producers sell their

products directly to retailers rather than to

middlemen. Retail markets that buy produce

directly from the farm include supermarkets

and restaurants.

The Advantages

Producers can usually keep more of the

profits if they sell directly to a retailer rather

than going through a broker/middleman.

Producers have the potential to sell large

volumes of produce depending on the size

of the retailer and whether the retailer has

an independent store or a chain of stores.

Producers also have the opportunity to

develop and use their own packaging logo

or product identity. This helps customers

to recognize your product over your

competitors' and solidifies your relationship

with the retailer. Wholesaling offers good

opportunities for selling specialty crops

to supermarkets and other retail outlets.

Specialty crops, which are crops not

generally produced by large farms, therefore

represent a market opportunity for producers

on small farms.

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The Disadvantages

Supplying retailers has its disadvantages, such as transportation costs, grading standards, and, usually, some special handling requirements. Some special packaging may even be necessary. To please retailers, the product must look uniformly good. In selling wholesale, the producer depends on the retailer's ability to sell the product. Small farms may have to pool production to fill the large orders of some retail outlets. The prices you can charge are typically 50 percent or lower than the prices you might charge if you direct-marketed your products. When large quantities of a product are needed to meet the retailer's demand, producers usually only grow one or two crops. Such limited diversity creates both production and marketing risks.

Producer's Responsibility to Retailer

A producer should always strive to consistently produce a high-quality product. With most other marketing methods, usually just the producer's reputation is on the line. However, in selling to a retailer, the producer puts the retailer's reputation on the line. Retailers expect you to be reliable and on time. If you cannot comply with their needs, they will find someone else who can. This market is highly competitive.

Selling to Restaurants

Selling directly to a restaurant can be a good place to market your product. The result can be a reliable, consistent income for the season. Try forging a pleasant relationship with the chef or others who do the purchasing.

Storing your product and making frequent deliveries, if required, are two problems that selling to restaurants can pose. Be cautious: restaurants often start up and then fail. Request payment on delivery or within 10 days after delivery. This is not unreasonable and should help you to get paid in a timely fashion and to avoid absorbing a big loss if the restaurant closes down. Some form of product liability insurance may be a good idea in case a restaurant patron becomes ill and you get caught up in the lawsuit as the supplier.

Other Important Marketing Considerations

Successful marketing requires more than just taking your products to the marketplace. You have to attract customers first and then persuade them to make a purchase. Successful marketing depends a lot on how you present and price what you're selling.

Product Presentation

Packaging

Packaging is not practical or necessary in every marketing situation. At roadside stands packaging can be very basic. However, in markets where you are in direct competition with other producers, you will want to be more elaborate or creative with your packaging. The package should reflect the market for your product. If it is going to be sold in an upscale store or specialty shop or as a gourmet item, the package should show that this product is worth paying a higher price for. Product sold to restaurants usually doesn't need fancy packaging.

Packaging can do a lot for a product. It can extend the shelf life, protect during handling, provide the customer information about the product, and attract attention. At direct markets, produce is usually displayed

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in wooden baskets and transferred to paper bags/boxes at sale. This allows the producer to display the product in a rustic manner and to save in the cost of the packaging.

Try to have the farm logo or other identifying feature printed on all packaging materials leaving the farm (bags, boxes, labels, packages, etc.). This is a great way to advertise your product. Also, offering recipes and information tags with the package can help to sell it.

Displays

Bulk displays are useful for marketing some large types of produce. But don't build bulk displays of delicate products, such as tomatoes and peaches, that are easily bruised or otherwise damaged. Customers will mishandle the items. For visual appearance, do not pile bulk displays above 4 feet high. Keep displays consistent in height, overall size, and signage, and be sure your produce is free of rotten or insect-infested products. Some products can be prepackaged for the commuter who wants a quick stop and is not interested in picking through a bulk display.

In direct markets, attracting customers to your market is critical to the survival of your business. Creative signs and displays are proven methods of attracting customers. Unusual or specialty items as well as sales on items can attract customers. The only limit in this area is your imagination. Clearly mark or post the prices of your products; customers in a hurry are not going to bother to ask the cost of items.

Business Items

Pricing

Determining what to charge for your product is one of the most difficult and confusing tasks in a farm business. The price you receive not only has to cover the cost of producing and marketing the product but return a reasonable profit to you. A number of pricing formulas and strategies are available if you want to research the subject.

You need to look at several market considerations when you set the prices for your products. Competition is often the most important pricing consideration. While your competitors' prices should not dictate what you charge, unless you can convince customers that your product is worth more than others', you will have to price competitively.

Quality of product is an important factor in pricing. If you are going to charge a premium price for your product, its quality should justify the price. Specialty or unusual products offered where competition or quantity is limited can command higher prices. On the other hand, customers associate price with quality. If your prices are so low that customers perceive your farm business as producing inferior products, your business could suffer.

Sales and specials draw customers to shop at your business but do little to promote product quality.

The location of your business influences how you price. If you are convenient to your customers, you can charge more. If your location is inconvenient, customers will need to be rewarded with lower prices for the distance they must travel to you.

Supply and demand makes time of year a factor in pricing. Producers able to get the first sweet corn to the market are going to

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command premium prices. These prices will be a good deal higher than prices later in the season when everybody has corn for sale.

Customer acceptance is the ultimate test of your pricing. If customers complain about your prices or simply don't buy your products, you must reevaluate your pricing. Remember that product sales generate cash flow to cover your farm business expenses and a profit for your labors.

Know what it costs to produce and market your product so you can figure out the product's break-even price. If your cost of production is higher than the price you can reasonably ask for the product, quit producing it unless you think that you need it and can recover the income loss through other products. You are in business to make money.

Rules and Regulations

It is unfortunate that operating a farm business is not always as simple as producing a product and selling it. Depending on the production and marketing system you use, you need to be aware of several other aspects of operating a business.

Check with the county planning and zoning department for zoning laws and local covenants that may affect your farm business, as well as for required permits or licenses. You will need to learn the laws governing weights and measures and have the state Department of Agriculture inspect your scales for accuracy. The department can also inform you about labeling laws that may affect your products. Direct marketers need to be aware of limitations on putting up signs to advertise and to direct customers to their market. If you hire outside help, you need to know about relevant labor laws. If you sell prepared foods and valued-added products such as jellies or meats, you need to investigate county and state health department regulations that may apply.

Direct marketers are also expected to collect sales tax. The state will assist you in doing this. Your insurance company will also want to talk to you about liability insurance coverage for your business. If you intend to grow and market organic produce, you will have to obtain certification through the state if you want to market your produce as "Certified Organic." Maryland plans soon to have a Certified Organic program for livestock.

References

Coleman, Eliot. 1995. The New Organic Grower. White River Junction, VT: Chelsea Green Publishing Company.

Gibson, Eric. 1994. Sell What You Sow: A Guide to Successful Produce Marketing. Placerville, CA: New World Publishing.

Salatin, Joel. 1998. You Can Farm. Swoope, VA: Polyface, Inc.

Issued in furtherance of Cooperative Extension work, acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, University of Maryland, College Park, and local governments. Bruce Gardner, Director of Maryland Cooperative Extension, University of Maryland.

The University of Maryland is equal opportunity. The University's policies, programs, and activities are in conformance with pertinent Federal and State laws and regulations on nondiscrimination

regarding race, color, religion, age, national origin, gender, sexual orientation, marital or parental status, or disability. Inquiries regarding compliance with Title VI of the Civil Rights Act of 1964, as amended; Title IX of the Educational Amendments; Section 504 of the Rehabilitation Act of 1973; and the Americans With Disabilities Act of 1990; or related legal requirements should be directed to the Director of Human Resources Management, Office of the Dean, College of Agriculture and Natural Resources, Symons Hall, College Park, MD 20742.

Selling Your Farm Products

by

Terry E. Poole

Extension Agent, Agriculture Science

Reviewed by

Dale Johnson

Regional Farm Management Specialist

Maryland Cooperative Extension

Western Maryland Research and Education Center

Keedysville, MD

Dr. Richard Hartley

Extension Agent

West Virginia Cooperative Extension Service

Harrisville, WV