Transcript DEVELOPING A STRATEGIC MARKETING PLAN For Horticultural …
Strategic Planning for Your Farm Business
Wen-fei Uva Senior Extension Associate Department of Applied Economics and Management Cornell University Ithaca, NY 14853
What is Strategic Planning?
Strategic Planning is a fancy term for using LONG-TERM planning to stay competitive.
• • • Considering a new crop or new enterprise? Considering expansion?
Worrying about retail consolidation?
Your are already thinking STRATEGICALY!.
--
an
organized way
of looking at the competitiveness of your farm and the industry
Some Characteristics of Strategic Planning Are:
• • •
Looks at the “Big Picture” Leads to substantial changes Considers future environmental forces in the Industry
•
Anticipates the reactions of competitors
•
Looks at a longer time horizon
WHY STRATEGIC MARKET PLANNING IS NOW A “HOT TOPIC”
Globalization
Growing concentration in the retail sector
Changes in wholesaling
Depressed commodity prices
Depressed commodity prices
Workforce availability
Availability of pesticides (FQPA)
Changes in consumer attitudes Survival of producers is often at
RISK!
Benefits of Developing a Strategic Plan
•
It provides guidance to all managers in the business.
•
The PROCESS helps identify emerging threats and opportunities -- forward looking
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It can be the basis for allocating resources among various activities
•
It assists management to influence rather than merely responding to competitive forces
WHO Should be Involved in Strategic Planning?
• • • •
Can’t be You ALONE!
Initiated by the owner/operator/manager Hired managers Other members of the family involved with management The Process is just as IMPORTANT as the Product
Steps in Strategic Planning
Step 1. Define the Firm’s (Personal) Mission
• Mission Statement defined the purpose of the firm - “What are the business?”, “Why are you in this business?”, “What do you want the business to be?”
For profits
To provide employment for family members
Provide healthy food to the local community Suggest Goals & Help to Clarify Objectives
Mission Statement
• •
Say it in less than 50 words
“Our mission is to provide a unique and memorable experience with every visit to the farm”.
“It is our intent to support a modest level of living for two families and allow each partner suitable time off to enjoy family living, community activities, and hobbies”.
•
It is what your staff should turn to when faced with a difficult situation.
MARKET rather than PRODUCT focus
Steps in Strategic Planning
Step 2. Establish Objectives
• • Translate the mission into quantifiable and measurable terms Can be accomplished within a given time
Increase sales by 35% in the next 2 years
Reduce labor costs by 25% in the next 3 years
Expand production acres by 20% in the next 2 years Allow Progress Evaluation at Implementation
Steps in Strategic Planning
•
Step 3. Assess the External Environment
Uncertainties, threats, and opportunities beyond your control
Market trends
Consumer demands, demographic, lifestyles
Strong or weak dollars
Interest rates, inflation rate
Government policies and regulations
Labor markets
Ask what will affect your business?
4 Consumer Motivators in Today’s Market
Convenience
On-the-go foods, meal solutions, and functional packaging
Wellness
Fear about aging, declining health, and medical costs -- Products offer health benefits
Food Quality and Safety
Quality is the basic
Gratification
I am worth it
Observations of Trends from the “Big Guys”
“Natural”, “Organic”, “Wholesome & Healthy” Convenient products “Exotic” and “Ethnic” flavors Packaged well Grocery retailers continued to expand their produce department
Department Size
Share of Store Profits
Number of Items
Observations of Trends from the “Big Guys”
Changing Buying-Selling Paradigm
Continuous concentration of retail buying Fewer buyers, buying more from top (or preferred) suppliers, reducing “spot” buying, & more contracting Changing retail marketing practices Growing category management, & establishing performance guideline with suppliers Partnership & alliances initiated by suppliers
Competition
(useful as a tool for analysis and learning) •
The competitive landscape
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Provides an overview of product competitors, their strengths and weaknesses (unfilled niches)
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Positions each competitor’s product against new product (learn what customers do or don’t want)
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Offers marketing ideas C A D Performance B
Steps in Strategic Planning
Step 4. Assess the Firm’s Strength and Weaknesses (Look Internally)
•
Assess resources within your control
What are the abilities and limitations of the manager?
What skills and ability do the employees have?
How modern and efficient is the physical facility?
How is the soil?
How close are you to the market?
What can you do better than your competitors?
Steps in Strategic Planning
• • •
Step 5. Identify Opportunity and Threats
Based on information from Step 3 and Step 4 Difficulties in one industry segment can present opportunities in another.
Concerns on cholesterol & fat Concerns on the environment Concerns on food safety Tight labor market
How can you
CONTROL
take advantage or avoid it?
Step 4 and Step 5 are the SWOT Analysis
Steps in Strategic Planning
Step 6. Develop Alternative Strategies Product-Market Growth Matrix Products Present Products or Services Markets Present Customers Market Penetration New Products or Services Product Development New Customers Market Development Diversification
Target market: a group of customers (people or firms) at whom the company aims its marketing effort.
Promotion Target Market Products Place Price
The target market consists of the individuals or businesses that you identify as the MOST DESIRABLE CUSTOMERS
- Not whoever is now buying or will buy your products
Determining a target market can help identify a COMPETITIVE ADVANTAGE for the firm in the market.
Choice of target market will determine your marketing strategy not vice versa
Porter’s 4 Generic Business Strategies SOURCE OF COMPETITIVE ADVANTAGE Lower Cost Differentiation Broad Target 1. Cost Leadership 2. Differentiation Narrow Target 3. Cost Focus 4. Differentiation Focus
Porter’s 4 Generic Business Strategies Source of Competitive Advantages Lower Cost Differentiation Broad Target 1. Cost Leadership 2. Differentiation Narrow Target 3. Cost Focus 4. Differentiation Focus
Cost leadership strategy
-
requires serious commitment to reducing expenses that, in turn, lowers the price in a relatively broad array of market segments
Porter’s 4 Generic Business Strategies Source of Competitive Advantages Lower Cost Differentiation Broad Target 1. Cost Leadership 2. Differentiation Narrow Target 3. Cost Focus 4. Differentiation Focus
Differentiation strategy
- requires
uniqueness or significant points of differences in product offerings
Porter’s 4 Generic Business Strategies Source of Competitive Advantages Lower Cost Differentiation Broad Target Narrow Target 1. Cost Leadership 2. Differentiation 3. Cost Focus 4. Differentiation Focus
Cost-focus strategy
- involves controlling expenses and, in turn, lowering prices in a narrow range of market segments
Porter’s 4 Generic Business Strategies Source of Competitive Advantages Lower Cost Differentiation Broad Target Narrow Target 1. Cost Leadership 2. Differentiation 3. Cost Focus 4. Differentiation Focus
Differentiation focus strategy-
utilizes significant points of difference to one or a few market segments
A fifth generic strategy is sometimes appears in some treatments:
Best-cost provider
- giving customers more value for the money by combining an emphasis on low cost with an emphasis on upscale differentiation
Examples of Some Alternative Strategies
•
Become a cost leader
Become More Efficient Reduce input use holding price and product quality
Exploit quality differences to increase revenue more than costs (size, color, taste, variety, etc.)
• •
Integrate (or build alliance) horizontally
Farm more units, add enterprises Integrate (or build alliance) vertically
Move higher or lower into the distribution channel (add storage, packing facility)
Examples of Some Alternative Strategies
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Identify New Markets
Another commodity, other enterprises, new buyers Diversification • •
Add Services --
Delivery, unloading, etc.
Reduce Risks --
crop insurance, hedging, forward contracting -- Except for crop insurance, not often available for many commodities (ie. horticultural crops)
Factors Guiding Strategies and Tactics: Product, Price, Promotion, Place, (also Process, People, & Presentation/Packaging) Promotion Target Market Products Place Price
PRODUCT STRATEGY
Description of Products/Services
The products and services offered by most agricultural businesses are GENERIC
It is a challenge to DIFFERENTIATE agricultural products, but it is the ONLY way to enhance product prices
Sell BENEFITS not just products
Sell the Sizzle!
Ask - Would you buy this product/service?
Why or Why not?
One of the most important aspects of marketing is to give your customers a reason to buy your products
(Quality is a necessary, but not a sufficient condition for success!)
The following questions can help to position your products/services!
What are your products and services?
What are their benefits?
How do they differ from competitors’ products and services?
PRICE STRATEGY
Pricing Questions
•
What are your costs?
Costs and Revenue
Price (Revenue) Contribution Variable Costs Break-even Fixed Costs (cost items that vary with production ) Profit (cost items that do not vary with production)
Pricing Questions
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What are your costs ?
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How much do your competitors charge?
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How much will the customer pay?
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If you slash prices (below competition), could you maintain profitability?
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What image do you want to convey?
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Does your product have qualitative value for which price may be raised?
Some aspects of Qualitative Value
Unique Value
- If consumers believe the product offers values that cannot be found in other products, they are willing to pay more
Substitute Awareness
- If consumers are aware of close substitutes, they will be sensitive to price changes
Difficult Comparisons If they have difficulty comparing prices, prices will be less important, within reasonable limits
Total Expenditure Relative to
Income Most people won’t agonize over a 10% increase in the price of a bag of apples, but the same people might over a 10% increase in the price of a car.
Don’t assume that price is the only reason people buy!
PLACE OR DISTRIBUTION STRATEGY
Select Place/Distribution Strategies Depend on the target market’s needs, and where you have a competitive edge - local, regional, national, or international
• •
Channels of distribution Wholesale channels
– – –
through a wholesaler, terminal markets through a retailer, food service through a processor
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marketing cooperatives
Direct-to-consumer channels
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Home-based shopping: e-commerce, mail order
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Store-based shopping: roadside stand, farmers’ mkts
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CSA, U-pick Businesses
PROMOTION STRATEGY
Ask What is the Role of Promotion in Your Marketing Strategy?
To provide information about products To stimulate demand To differentiate products and/or to build a brand image
To remind current customers about product benefits
To counter competitors To respond to negative news, or to take advantage of positive news
To smooth out seasonal demand fluctuations.
• • • •
Five Promotion Tools Advertising
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Select medium will reach the target audience Select medium is appropriate for the message conveyed Sales Promotion Activities
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Coupons, in-store displays, trade shows, samples, in store demonstrations, and contests.
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To supplement and coordinate efforts in the advertising and personal selling efforts.
Public Relations
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Publicity is uses non-paid communication presented by
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the media.
A broad effort to influence public’s attitudes toward the firm or it’s products. - Create an image.
Sales Personnel & Direct Marketing
Processes B usinesses need to develop orderly, efficient processes to take care of customers, e. g. U-pick operations need to design a systematic way to handle customers- parking, containers, assigning rows or areas to pick, and handling the cash register.
People personnel expenses represent the largest category of cash expenses. Effective Human resource management is extremely important for attaining profitability.
Especially important for businesses with a service component
Presentation This could be considered as the “ PACKAGING ” of a business. Customers often form opinions of a company and its service on the basis of the presentations.
• • •
Implementation Budgeting Action Plan:
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Who is responsible?
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What tasks are they responsible for?
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When the tasks are to be completed? Monitor, Evaluate, and Revise the Plan
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Periodically Review Goals & Objectives vs. Progress
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Any unidentified opportunities or threats?
Correcting the plan’s weaknesses
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Successful Strategic Plans
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Add value to the operations (Services, Expertise)
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Differentiate the operations from competition (by Name) Sell a valued product not just a commodity (a valued supplier vs. a potato grower, experiential farming vs. a bag of apple)
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Meet customers needs and wants (at different levels)
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Bottom line: A successful agri-business as you define it.