THE MARKETING PLAN Judy was aware that anyone reading the plan would expect to find detailed information as to how the Blacks planned to market their products. She needed to include how much they planned to sell, who their customers will be, how their products will be priced and how they will promote the business. This is where our “Informal Business Plan” comes in handy’ decided Judy. ‘As well, Stewart and need to get out and find out what other farm marketing operations are doing. We'll be quite snoopy, in fact .. ask questions, make notes, collect flyers, brochures and leaflets. Take advantage of farm tours. Find out what sells and what doesn’t. What appeals to us in other farm markets? What's a turn-off? We'll look at over-all appearance, colour, imaginative displays and plentiful easy-to-read signage.’ She and Stewart decided to go with several other members of their local Direct, Farm Marketing Association who were taking a bus to tour several on-farm. markets near Seattle in Washington State. Within two weeks, Judy felt she had accumulated enough information to tackle this section, With the help of the local association and the District Horticulturalist’s office staff, she had obtained a pretty good picture of the Direct Farm Marketing “industry”. Some of the material she had assembled came from the Conference they had gone to, Agricultural magazines, newsletters and journals, Statistics Canada publications and in conversations with the other people on the bus tour. She had asked questions at the farm markets they visited and also made a number of telephone calls to some of their favourite repeat customers, Sources she didn't tap but which may also be useful could include the local Chamber of Commerce, suppliers, B.C. Government and business and agriculture advisory services, University libraries and business resource centres. Judy felt she had also obtained a good overview of trends affecting the direct farm market business. She had information on. styles, varieties and consumer tastes market sales and growth direct farm market structure and size of operations market organization and pricing, delivery options new technology and production practices In her write-up, Judy pinpointed the trends that may affect Country Gourmet. She had also discussed some “political” restraints with other farm marketers and felt that some reference should be made to these. Aneighbour had mentioned to Judy that there were regulations regarding the size of an on-farm market. As well, there could be some local restrictions about on-street parking, and the use of pesticides on the farm. Judy knew by now that everything she needed to know about this could be obtained from her local B.CM.AEF. Office. A simple phone call, and all she needed to do was to call in and pick up a package of relevant information.Marketing Plan Example er Industry and Market Trends Example Major Trends 1. The Direct Farm Market industry is growing rapidly all over North America. This corresponds to trends towards specialty shops, boutiques and niche markets in the retail industry in general. 2. Three active Direct Farm Market Associations currently exist in British Columbia with a combined mailing list of over 600 member businesses. 3. Direct Farm Marketing operations are adding on-farm bakeries, on-farm entertainment (feeding animals, animal-petting areas, hay rides, etc) and value-added products such as fruit leathers, jams, jellies and related prod- ‘ucts. Farm tours from schools and seniors’ groups are increasing in number, 4. Direct Farm marketers compete with grocery stores for customer’s produce dollars and with other types of operations for customer's entertainment and tourism dollars. Political and Legal Restraints Example Constraint Response Regulations on signage A policy for farm signs on highways in can be extremely restrictive British Columbin has been developed. Contact local Direct Farm Marketing, Association for details. Municipal building ‘Our land base has been planned to allow regulations may limit the for future expansion. building size and the portion of ground that can be paved. Pesticide applicators must Our staff will be certified to use pesticides be certified. as appropriate. Federal and provincial We will include effective waste management environmental regulations _ facilities when we put up our building. apply to waste materials PREPARING & BUSINESS PLAN OIRECT FARW WARKETING EXAWFLEMarketing Plan continued. Competition Stewart and Judy knew only too well that they would be facing Competition for their customers’ business. One evening, they brainstormed all the possible competition they could think of, and made notes to do further research. Judy enlisted the help of their local librarian to obtain some statistical information. It took a couple of days to get the figures, but the table on page 19 is the result of the librarian’s work (which incidentally cost Judy nothing except the time to talk with the librarian)Marketing Plan Competition Example Example ec. Name of Size of Company Marketing Market. Describe Competitor (Sales in $) Method Share (%) Competitive Advantage Thrifty Foods 5,000,000 Grocery Store 95 Good quality Safeway & other well-established ‘good location grocery convenient hours | Produce stores 2,400,000 Produce Store 3 Good service, | competitive prices | excellent variety | Knickerbocker Farms 490,000 Farm Market 5 Good service | friendly 12 other 1,200,000 Farm Market 15 Good selection well-established PREPARING BUSINESS PLAN = DIRECT FARM WARKETING EXAWPLEMarketing Plan continued. Customer Analysis & Response Judy and Stewart were making progress on their Business Plan. The next two parts they were about to tackle were still part of the Marketing Plan. The head- ings were Customer Analysis and Response and Target and Future Sales. Stewart was surprised at the amount of time it was taking to put the Plan to- gether. But Judy had been talking to Rhonda Li, their accountant that morning, Rhonda had told her that a properly put-together Business Plan could take several weeks, even a couple of months to work out. “But she pointed out how much we would learn by going through the process,” Judy told Stewart. “And I must say Stewart, that’s true. There are so many things we are having to take a close look at that we never even thought about before.” “True is right,” Stewart concluded, “we have picked up a load of good ideas.” “And we've been made aware of pitfalls to avoid,” prompted Judy. “We need to come up with the reasons our customers come here and why they buy what they buy from us.” “Well, we already have a head start on that section,” said Stewart. “Remember that survey coupon the Direct Farm Marketing Produce Guide included last year?” “That's right! We took in about a hundred coupons as I recall, and turned them in to the Association for a draw at the Saanichton Agricultural Fair on the Labour Day weekend.” “Look in that pile of papers, Judy. There's a copy of last year’s Produce Guide in there somewhere, We can have a look at the survey coupon and see what ques tions it asked.” Judy was thankful for once that the dangerously tall pile of old newspapers hadn’t gone to the Recycling Depot. Rummaging through, she found the Pro- duce Guide and there on the back page was the Survey Coupon. It looked like the one on the following page. “This is great,” enthused Judy. “If we hadn't had this, we could have got on the phone to all those people who placed berry orders with us last year and done our own survey.” ‘The next morning Judy telephoned Stan Scott, the D.EM.A. president. He seemed quite pleased that someone was actually going to use the information. As it turned out, not too many members had thought to ask their customers to complete the coupons as Judy had. There were 234 coupons turned in and the Blacks accounted for 98 of those. “ls almost as good as having our own survey,” Judy said. She picked up the tabulation results of the survey from the association’ secretary that afternoon. ‘The report they put together is shown on page 22.Marketing Plan Customer Analysis and Response Survey Example Ca Form Example Enter to Win! A Beautifully-decorated Fresh Fruit and Vegetable Basket can be yours just for completing this survey coupon and handing it in at the on-farm market you visit next 1. How often do you buy fresh fruit or vegetables direct from the farm which grows them? () oncea year () two to five times (regularly during the growing season () this is the first time 2. Didyoubuy () fresh seasonal produce? () Other products such as jams, fruit leathers. 3. Why did you decide to visit an on-farm market instead of a retail grocery or produce store? More convenient (). Tosupport farmers Makes a change to visit a farm (). The price is better Product is fresher ()_ Tknow the grower 4. Inwhich of the following age groups are you? () 25-40 () 41-65 () 65+ ‘Thank you for participating. Please write in your name and your telephone number, All entries will be placed in the draw which will be held on Sep- tember 5, 1995 at the Saanichton Agricultural Fair at 5.30 p.m. It is not necessary to be present to win the prize, which is valued at $75.00. PREPARING H AUSINESS FLAW = DIRECT FaAW waRRETTNS exAPCE AMarketing Plan Customer Analysis and Response Example Example continued. e Customer Targets Barriers Strategies ‘Age 25-40 5% above repeat sales Seasonal, high quality grocery store price not convenient good selection and mix $25,000 sales limited parking special fun days 12% annual sales competition positive customer growth contact (castomer for life!) competitive prices Age 41-65 repeat sales well established prompt, friendly 5% above grocery local competition positive customer store price seasonally depressed contact, high quality $25,000 in sales prices good selection & mix 12% annual sales promotion & advertis- ing growth Age 65+ repeat sales seasonal, delivery, high quality, specialty 5% above grocery competition produce, co-operate with store prices $30,000 in sales 6% in annual sales growth other suppliers; local, fresh, consistent, great—= § Target & Future Sales Marketing Plan or ine par on target and Future Sates, stewart took thei project sales tgures : from the Businese Summary Section tothe Grade 12 Business Studies Class. He continued. also took along the Survey Results as tabulated for the Direct Farm Marketing delighted to have a real life project for his students. Using the basic projected sales, the class came up with a chart showing Sales Forecasts for the next three years, using three scenarios: Optimistic, Pessimistic and Most Likely. The Most Likely column featured the original projections while 20% was added to the “Optimistic” column and 20% was deducted for the “Pessimistic” column. It is shown on page 24 FREFARING H BUSINESS PLAW > DIRECT FRRW WARKETING EXAMPLEMarketing Plan Target and Future Sale Example Example Ca Sales Forecasts for Next Three Years Example Optimistic Pessimistic Most Likely On Year Year Year Year Year Year Year Year_—_Year Farm One Two Three One Two Three One Two Three 25-40" 31,000 34,000 38,000 20,000 21,000 22,000 25,000 28000 31,000 | 1-6 31,000 33,000 36,000 20,000 21,000 22,000 25,000 28,000 31,000 | 6 37,000 42,000 46,000 24,000 25,000 27,000 30,000 33,000 38,000, Sales/Restaurant 37,000 43,000 50,000 24,000 25,000 25,000 30,000 32,000 34,000 Total Sales 134,000 152,000 170,000 $5,000 92,000 96,000 110,000 121,000 134,000 “Refers to age range of customers.Marketing Plan continued... Pricing Stewart and Judy were amazed at the progress they were now making on their Business Plan. Outside help wasn’t costing as much as they had feared. Whenever they used outside help, they made certain to go over the results with the person who had helped them, ensuring that both Judy and Stewart understood what the figures represented and how they were arrived at ‘They felt they were ready now to tackle Pricing. This would involve a fair amount of work, because it was necessary for them to figure out their “Direct Costs” and. “Contribution Margin” for each item they produced and sold. For the purposes of the Plan, they divided their sales products into three sections: (a) Farm Market (fresh produce) sales; (b) Sales to the Restaurants they serviced; and (c) their value-added products. ‘The figures they needed to put together included: A list of prices they had charged. for each product over the past four years. In their case, this was from 1991 to 1994 inclusive. Then they needed a column which would show the average price they hhad achieved for each product during that four year period. "111 do that part,” volunteered Stewart. “It’s simple. Ijust add up the figures for each year and divide by four.” “Brilliant!” grinned Judy, a bit sarcastically. “And then you'll figure out the Direct Costs for each veggie crop we grow, as well as the Contribution Margin, will you?” “Heck, no! I’m not even sure how to work out the Direct Costs or what they mean by Contribution Margin,” was Stewart's response. “In all the bits of paper I collected from the Ministry of Agriculture, there were some in a series called “Planning for Profit”. I'm sure I put them in the Financial Section of our Informal Business Plan folder.” Judy thumbed through the looseleaf binder, which, by now, was quite plump with paper. “What's this?” she muttered, “Is this it?” Reading out loud, she said, “Contribu- tion Margin refers to what's left when Direct Expenses are subtracted from Direct, Income.” “So we would take the total amount of our sales of each product, subtract that part of our expenses which directly relates to the growing and preparation of the product for sale and that is the “Contribution Margin,” said Stewart. “Yes, And it goes on to say that the Contribution Margin goes toward paying the interest cost on a bank loan, the overhead costs of office maintenance, our legal and. accounting bills, repairs and maintenance to the building, all over overhead costs in fact, and towards a return on our investment.” Judy put down the paper and looked at Stewart. “We may understand it now, but it will still take a good bit of figuring to do it for each product,” she warned. “Wait!” said Stewart, “Look on the back of that paper. Isn’t that an example worked out for carrots?” Here's what they found: FREPARING BUSINESS FLAW — DIRECT FARM WAARETING EXAWPLEMarketing Plan Example er Contribution Margin Example Contribution Margin = Direct Income less Direct Expen: Direct Income Yield/Acre Price/lb. Income Topped Carrots 35,000 Ibs $48 $13,650 Direct Expenses Quantity Cost per Unit Expense Seeds 700,000 45 per 1,000 $312 Nutrients 300 Pest Control & LPM. eg 1 Spray of Gramoxone @ 2.2 litres/acte, @ $21.60/litre 2 Sprays of Cymbush @ .11 litres /acre @ $91 /litre, ete. 150 Fuel Costs 120 Machine Repairs & Maintenance 125 Contractor Labour (Weeding, harvest, washing, packing, grading) 45 hrs @ $8.50/hr 383 Irrigation Water 10 Irrigation Power 30 Wash & Grade 35,000 Ibs, 2b. 700 Packing, Bags and Cartons 35,000 10 Ib. 3,500 ‘Total Direct Expenses $5,630 Contribution Margin $8,020Marketing Plan continued... Pricing Historic Prices The Contribution Margin will contribute towards paying the interest costs, the overhead costs of office maintenance, legal and accounting expense, repair and maintenance of the building and overheads as well as provide a return on the farmer’s original investment, living expenses and loan repayment. ‘To Stewart's delight, there was also a hand-written note at the foot of the page indicating that the B.C.M.A.RF. Farm Management Branch does have direct expense information on a wide range of agricultural products. They even offer courses on this aspect of farm management. “Look,” said Stewart, “it says the ministry can even provide help in record- keeping and financial management.” “1 think we're going toneed that. V'l phone and find out what's available,” said Judy A.week passed before the Blacks were able to add their chart of Historic Prices showing Direct Expenses and Contribution Margins (shown on page 28) to their evolving Business Plan. They had contacted the Ministry of Agriculture in Abbotsford and found a willing helper who was able to give them a really good start in working out the information and who supplied them with the direct expenses associated with nearly all the products the Blacks are growing, What is more, he explained that pricing decisions should be based on the ability of the market to pay, not the cost of production. “That is what Molly Evans told us too,” affirmed Judy “but I am not clear why. Can you explain?” Target Prices ‘The reason for basing pricing on market demand is so that you get a reasonable return for your product and are able to provide a livelihood for yourselves. You don’t do your customers any favours by charging bottom line prices and then going out of business. Some products may have very strong demand and insuffi- cient supply. It is good business to charge a price that people are willing to pay. Some products may not be able to support a price higher than the cost of produc- tion in which case, knowing what your cost of production is, you are better able to assess whether they are still valuable enough to your product mix that you want to continue to produce them, FHEPARING BF BUSINESS PLAW = DIRECT FARM WARKETING EXAUPLEMarketing Plan Target Prices Example Target Prices Example Pricing 1996 1997 1998 Baby Vegetables farm market $2.00 $2.00 $250 restaurant 10.00 10.00 11.00 Gourmet Salad farm market 8.00 9.00 9.00 restaurant 6.00 7.00 7.00 Carrots (bunch) farm market 80 80 80 restaurant ‘50 50 50 Carrots Ib) farm market 45 45 45 (ewe) restaurant 19.00 20.00 20.00 Onions (bunch) farm market 50 50 50 restaurant 25 25 30 Onions (1b.) farm market 45 AS 50 (owt) restaurant 2000 20.00 21.00 Herbs (bunch) farmmarket 1.50 175 175 restaurant 80 1.00 100 | ce) farmmarket 2.35 2.35 2.50 restaurant 10 rr) 190 Raspberries (Ib) farmmarket 2.35 235 2.50 restaurant 1.80 1.80 190 Jams & Jellies (350 grams) 3.00 3.00 3.50 Fruit Leathers (15 grams) 25 25 0 Eggs (Dozen) 200 2.00 235 FREPAAING A BUSINESS PLAN — DIRECT FARM WARKETING EXAWPLEMarketing Plan continued... Promotion and Advertising Tewas a rainy Saturday afternoon when Stewart and Judy got to work on the Business Plan again. This time they were starting on the Section of Marketing. called Promotion and Advertising. Among the leaflets they had received from the Farm Management Branch was information on this very topic. They found out they would be expected to state ina fair amount of detail what advertising and promotion they planned to do for each product. “We can lump all our veggies and herbs together," decided Judy. “Then we'll do separate advertising and promos for the berry season.” “What have we done in the past?” said Stewart. “Well, we've advertised in the Produce Guide, in the Classified Section of the Times-Colonist under Groceries, and in the Sidney Review in a small display ad. And Isent a press release to the Times-Colonist just before strawberry season, but they must have thrown it out because it was never put in the paper.” ‘Okay,” Stewart was thinking hard now. “What about the schoo! tours we've had? That's a kind of promotion and advertising. The kids go home and tell their Mums to come and buy our stuf.” “Right enough,” agreed Judy. “And our signs - both outside the farm and the cone down at the intersection on Joe Hammiond’s fence - that’s more promotion.” “And don’t forget the ribbons for our veggies that we win at the Fair each year. What about the Strawberry Festival we ran last year and the word-of-mouth from customers to customers? We've built up a lot of good will for the future in the four years we've been doing this.” Working on a piece of notebook paper, the couple made a list ofall the methods of promotion they could think of and the target customers for each. “How much money should we budget each year?” “1 seem to recall that 3% of projected sales is the yardstick that’s commonly used.”said Judy. “That sounds reasonable,” said Stewart, doing some quick mental arithmetic. Some of the methods they considered were: + Paid display advertising, ‘+ paid classified advertising * posters around town ‘© direct mailing of flyers, radio or TV commercials increased off-farm signage ‘= advertising in the annual Produce Guide ‘+ school tours ‘seniors tours * special events + printed plastic bags for produce * business cards * recipe cardsMU «64 07 {he cooking show on cable television + promotional coupons * give prize money or a trophy for vegetables given out to each customer Marketing Plan stiheanquat Fait Fair as they leave the market continued... Actually it was an amusing exercise to work on. Stewart and Judy came up with some outrageous ideas which had them nearly rolling on the floor with laughter. By five o'clock, they were in a merry mood. Stewart looked out of the window. “Hey, it’s finally stopped raining, We've just about finished this section. Let’s go out for supper tonight.” “Allright, but let's just write it up - then it’s done,” said the ever-practical Judy. Here's what they came up with: FREPARING A -BUSINESS PLAW = DIRECT FARM WARKEING EXAUPLE™Marketing Plan Promotion and Advertising Example Example i | Method of Promotion Target Customer Year1 Year2 Year 3 Press Release-Special Events 25-65+yearolds —n/e n/c ajc Special Events Restaurant &25-65+ $400 $400 $300 Seniors Tours 50-65+ = nfo nef nfe Signage 25 - 65+ 500 300 250 Prizes - Fall Fair 25 - 65+ 100 100 100 Produce Guide 25 - 65+ 150 150 150 Local weekly newspaper 25 - 65+ 500 400 350 Discount Coupons 25 - 65+ 150 150 250 Business Cards 25-654 125 135 125 Sample Packs - Restaurant Restaurant 500 350 400 | Recipe Cards 25-40 300 300 100 Direct Mail - Flyer Restaurant and 25 - 65+ 250 250 250 Discount Coupon Package 25- 65+ 350 350 250 TOTAL $3125 $2,657 $2,525