Direct marketing involves selling products directly to the consumer in order to allow the producer the possibility of receiving a higher price. This usually involves three critical steps:
- making a direct connection to consumers;
- determining the consumer wants or needs; and
- offering products that meet those needs.
Direct Marketing may take many forms and usually includes a combination of techniques, such as selling to farmers markets, door-to-door sales, Internet marketing, direct sale to restaurants or institutions, and so on.
From “Direct Marketing as a Value-Added Opportunity for Agriculture” publication # AE-8-01, by Ohio State University (Ellerman, McFeeters, & Fox), accessed online at: http://ohioline.osu.edu/ae-fact/0008.html 09/08.
The above chart helps to illustrate the difference in the various marketing channels producers have available to them when considering direct marketing. Direct marketing requires that producers change the normal marketing focus to the market they are selling into rather than the focus of producing a commodity.
Direct Marketing Options for Farmers is a 4-page publication from the University of Wisconsin Extension that helps outline characteristics of the agricultural markets for fruits, vegetables and specialty crops.
Before beginning to analyze which direct marketing channel you will be targeting for your food products, producers should completely understand their costs and their expenses associated with not only growing the food product (production), but also, the cost of marketing associated with each distribution channel.
It is also important to fit the market to your operation. For instance, do you have cold storage or the availability of a vehicle to handle produce deliveries? Is the size and the scale something you can handle with your labor capabilities? If not, can you find good help?
As you examine your operation, you will also need to examine your personal preferences. If you do not enjoy working directly with the public, make sure you have someone in your operation that does. Examine your human resources within your operation. Evaluate personal traits to see if they match the types of activities that are required with various market channels.
Have you examined your costs of production? Do you know exactly what it costs you to produce each and every individual crop? The costs invested in the product need to be known before you can set your price. To help determine the cost of production, a useful tool is an enterprise budgets. There are many tools available through Extension that help give direction in calculating your costs of production.
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Guide to Working with a Food Market Professional is a good publication to review if you are considering hiring a consultant or a professional in the food market.
ATTRA developed a good overview of selling into various products with their Market Gardening Start-Up Guide that can be downloaded in PDF or HTML versions. The guide examines various alternatives to use in market gardening and gives advantages and disadvantages to consider as well as good suggestions.
From “Direct Marketing as a Value-Added Opportunity for Agriculture” publication # AE-8-01, by Ohio State University (Ellerman, McFeeters, & Fox).
Resources and Links
Enterprise Budgeting provides links to information and tools to use to calculate your production costs.
The Iowa Produce Market Potential Calculator is a Leopold Center for Sustainable Agriculture tool that was designed to help users determine expanding market potential for produce.
Transaction Cost Case Studies for Six Iowa Food Producers examines the transactions costs for various types of Iowa food producers.