G3-DM-MR-1-PRICING STRA#1BEby Bill and Mary Weaver
“The core group of customers who will pay the most for your locally grown produce are those who value local food; want to support the local economy; are looking for the health benefits of buying local; and value their relationship with you, the grower,” according to Dr. Tim Woods, who spoke recently to growers at the well-attended Illinois Growers Conference. These customers care about value, but are not primarily price shoppers.
“An extreme example of the price-premium consumers will put on local farm products would be the $10 a dozen price charged for free range eggs at a farmers market in the middle of New York City. These customers were not particularly sensitive to price. They really wanted their local market eggs to be free range!” stated Woods.
Not all consumers share the same passion about local. In other market venues where local or free range is not as highly valued, the producer may have difficulty getting an extra 10 to 15 cents a dozen above the standard supermarket price for eggs.
Still, with the popularity of local products, we see these products featured in more and more types of markets. Although many local supermarkets want to offer local produce, they don’t necessarily connect well with that core group of locavores, and don’t usually pay much more than commodity prices for locally grown items.
Farmers markets and CSAs are the places where local growers can connect most closely with their core group of customers who place an added value on their products, and who are less price-conscious.
Ways to Enhance Your Prices at Farmers Markets
Surprisingly, one way to enhance both sales and prices is with sampling, according to Dr. Woods. “We discovered, in a large research study of 3,500 farm market patrons in eight states, that when samples were offered, fully 55 percent of those customers ended up buying a fruit or vegetable they had not intended to purchase before they came to the market.”
This is an impressive increase in sales! “We also found,” Woods continued, “that customers were just as eager to sample, and then buy, familiar items such as different kinds of apples and strawberries, as they were unusual items they hadn’t been familiar with.”
The study clearly showed that offering samples can have a huge impact on sales, helping you to differentiate your product, and frequently making it possible for you to charge higher prices.
“The farm market is the best venue to offer samples,” Woods continued. “At the market, customers are looking to experience produce in a different way from in the grocery store. Customers also want to know more about you, and the superiority and uniqueness of your products. All this helps build loyalty in your relationship with your customers.”
Kentucky developed a certification for farm marketers offering fresh fruit and vegetable samples, to allay health department concerns. “We train people how to offer samples effectively and as safely as possible. They put together a wash station, learn how to protect the samples from flies and bugs, and how to protect utensils. Given the huge impact it has on sales, offering samples at farm markets is good for everybody.”
Tips on Maximizing Income at Farmers Markets
Here are some tips Woods offered.
1. Put the higher margin, highest value product in the easiest to reach location. If a pint of blueberries sells for $2.50, and a quart sells for $4, the smaller pack is much more profitable for the grower. So put the pints of blueberries toward the front of the display, where customers can reach them easily.
2. Use extremely clear signs with the name of the product and the price. “A lot of people aren’t comfortable asking the grower what the price of an item is.”
3. Doing random weight pricing, rather than pre-packaging, can pay. Have a certified scale available to weigh the amount of green beans, say, that the customer bags up. This saves you the time and expense of packaging, and consumers often like to bring their own shopping bags.
4. Supermarket produce managers have a saying that applies equally well to farm markets, emphasized Woods: “Stack it high, and watch it fly.” It has been shown that customers buy more readily where the product looks abundant and fresh, with clear pricing.
Selling to Chefs
Restaurants increasingly want to offer local items, with smaller restaurants typically paying higher prices than very large ones. “Before you go to talk to a chef,” Woods advised, “have some idea of what price your product can command. Don’t rely on the chef for all your marketing information. Have open communication about price.
“Be careful not to price yourself out of the market. A chef can’t afford to serve an $8 to $10 ‘local’ salad. In most cases, it will not sell.” Season-long relationships can be developed with restaurants, if you deliver quality and value. You can become a preferred supplier.
Produce Auctions as a Growing Market-How States Can Help
In the Kentucky region, according to Woods, there has been a large growth in produce auctions, established by Amish and Mennonite farmers looking for land who have seen auctions work well in their home state of Pennsylvania. Many other states have also seen a ‘blooming’ of local produce auctions.
The University of Kentucky Center for Crop Diversification is performing a valuable service for growers selling at auctions by publishing price reports on a weekly basis, communicating to commercial growers, for example, when the demand for cantaloupes is high, and when cantaloupes are selling for 10 cents apiece, and they had better look elsewhere to market their crop.
The week-to-week published price reports also help growers maker better informed decisions about what to grow. Growers wondering, “Should I get started with strawberries this year, and if I do, what prices can I expect?” can study the price reports and find some solid answers.
The most successful auctions target smaller wholesale buyers. Over 700 vendors were selling at the six active produce auctions in Kentucky in 2012.
Recognize Your Costs
An important tenet of good pricing is to recognize your costs-all of them- for producing the item.
Factor in also your costs for cold storage, delivery, and packaging, for example. This is a really important principle to understand. “If you don’t know your cost, you won’t recognize a good price. If your customers can’t pay you the price you need to cover all your costs and make a reasonable profit, you just can’t make it work,” Woods concluded.