by Sonja Heyck-Merlin
In the second of a three-part webinar series, Rose Wilson discussed how to assess the feasibility of a hemp-based business plan. The series’ sponsors are the UVM Northwest Crops and Soils Program, Northeast Extension Risk Management Education and SARE. Wilson, the former business manager for Harpoon Brewery, started her business, Rose Wilson Consulting LLC, in 2004. Her focus is on helping farmers and value-added producers with business planning, marketing and grant writing.
In this webinar, Wilson gave suggestions on how to test whether products and marketing channels are going to help producers achieve their personal and business goals.
According to Wilson, there is technically not a hemp-based product that isn’t currently available to consumers. She said, “For you getting into this game with a lot of other competition, the first thing you want to understand is what you are bringing to the market. What are you bringing that is new or how are you better than what is already available? Because otherwise, there is really not much of an opportunity to compete in the marketplace.”
Once a producer identifies what differentiates them from the current market, they must research the customers most likely to respond to that unique selling proposition. For example, a small-scale Vermont farm producing hemp body care products must choose how to distinguish themselves from 10 other farms with the same message. One way to accomplish this is to promote the message that because it’s a small-scale farm, the producer can pay better attention to the crop and harvest a higher CBD content strain with more therapeutic benefits.
“Think about what makes you special and how that’s going to resonate with the customer,” Wilson said. “The customer might not actually care that you’re from Vermont and that you’re on a family farm. But if you make your products more effective for them, that’s really going to resonate.”
Once a producer establishes an effective consumer message, they must quantify the market. The business plan should include how many products the producer intends to sell and what market is available to buy that volume. To obtain this information, producers need to research how many potential customers there are, what they are willing to pay and how frequently they will buy. “We can tie this back into the business plan and make sure that the amount of market supports the amount that you’re planning to produce and covers the cost of producing it,” Wilson said.
To gain a sense of potential customers and their buying habits, Wilson encouraged producers to communicate directly with these customers, referring to this as first-party research. Although industry data are available, Wilson said the growth trends in the broader hemp market do not reflect the trends specific to a business, its location and the actual people who will interact with the products. “Large trends can support a business plan but won’t ensure that you’re going to be successful,” Wilson said.
This direct communication marketing research may be difficult for producers looking to sell directly to consumers, such as at farmers markets. In this circumstance, Wilson recommended using retailers to extrapolate what the selling proposition at a farmers market might be. She said, “Retailers are great because they actually engage so much with consumers that they can tell you the trends of what is happening.”
If a producer has a larger budget for market research, Wilson said they may want to conduct paid customer surveying. These online tools allow a producer to obtain information about price points, which type of packaging is appealing and which products are intriguing. This type of market research may be more beneficial if a producer is trying to reach a broader geographic consumer base. Data available for purchase, such as SPINS and MINTEL, can also be used to predict and assess what might happen in a given marketplace.
“Ultimately, feasibility testing is to help you understand if there are enough customers who will purchase in enough frequency and volumes at a price point that supports your cost of production, your profitability and your desired scale of operation,” Wilson said.
If the identified market does not appear to support the associated costs of production, Wilson said it’s important to assess what variables could be changed, such as pricing and increasing efficiency. According to Wilson, recognizing and responding to these variables is a part of iterative business planning.
Once a producer has a feasible marketing plan, the next step is implementation. “Once you have the sense that you’ve got the customers and the business plan looks feasible, then what are you going to do to actually engage those customers? We want to generate those customers, retain them and we want to get them to buy, ideally in increasing frequency and volume,” said Wilson.
Producers must gather all their different marketing ideas and their costs and decide which ones will lead to the highest potential sales outcomes. This is referred to as a marketing matrix. In Wilson’s experience, this is where people tend to disassociate marketing from their business plan; they become focused on gathering likes rather than using marketing to support sales-driven income.
First, producers must have appealing packaging. She also said to focus on product placement, point of sale material and superior customer service. “Getting likes and social media engagement is secondary. That’s once you have customers and you’re trying to retain them or once you’re trying to bring customers into the fold,” she said.
Ultimately, the goal of creating a marketing matrix is to help the producer select which ideas are going to provide the best returns. The items selected from the matrix should have an achievable timeframe. Producers should also be able to measure their outcomes to determine whether the cost was worth it and if that marketing strategy should be repeated in the future.
People take a long time to change their buying habits, according to Wilson. They need to see an item five or six times before they decide to engage with a product. Then, it may take another five or six times before they decide to make a purchase.
“Marketing is a long, slow process. That’s why you want to celebrate the small successes along the way. Set mini-goals for yourself, and each little action item will lead to supporting your ability to achieve the bigger goal. Marketing is very iterative. You’re always trying to see what works and what didn’t, updating it and honing it in. What happens is marketing becomes a nicely fine-tuned engine rather than scattershot, trying all these different ideas,” Wilson said.