Direct marketing to consumers is gaining traction with farm businesses as a way to diversify income streams and capture a larger percentage of the consumer dollar. While a majority of farm products are marketed through a system involving several middlemen, direct marketing maintains the farmer’s connection to the customer, allowing them to develop a unique relationship, tailor their product offerings, and keep money closer to the farm and local community.
The value of food marketed directly to consumers in the U.S. totals $11.8 billion, according to the 2017 Census of Agriculture. These sales represent just 3% of the total value of agricultural products sold in this country. Clearly direct marketing is still an uncommon business model in agriculture – success requires not only farming know-how, but an entrepreneurial mindset and a fair bit of homework.
Regardless of what you plan to sell, developing a marketing plan can help you determine the best way to go about it. Conducting market research is an important step in the planning process. Understanding your target customer, their likes and dislikes, when and how they want to purchase products, and how much they’re willing to pay can help you develop the most effective strategy for selling to them. For more information on marketing plans, check out these Extension resources: Developing Your Farm’s Marketing Plan, Market Research: Surveying Customers to Determine Their Needs and Risk, Liability, and Insurance for Direct Marketers.
Know Your Price and Your Costs
Another equally important component of creating a marketing plan is to know your cost of production. It will do you no good to participate in direct marketing if you are selling your product below your break-even price. If you find that your target market values your product at a lower cost than what you need to receive for your time and inputs then you will have to consider not entering that market or reducing your input costs enough to achieve profitability.
You may also have to consider the economic cost of your chosen product offering. Questions to ask yourself include:
- Is participating in this market the best use of my time and resources?
- Can I make as much or more by marketing this product differently?
- Is spending my time producing and selling this product taking my attention away from another product that could net a greater return?
- Does entering this market require purchasing additional equipment thereby increasing my cost of production?
- Will purchasing additional equipment rob my bottom line enough to make the venture not worth my participation?
Find additional information on budgeting in Crop Budgets for Direct Marketers.
Understand Rules & Regulations
As with most businesses, regulations and licensing requirements will likely impact your direct marketing venture. The Wisconsin Local Food Marketing Guide can help prepare you for success in navigating the state, local, and federal regulatory systems relevant to your chosen product or marketing strategy. The guide also provides examples of farmers and entrepreneurs throughout the state who have found success in direct marketing unique. The Wisconsin Food Safety & Health website is another helpful resource designed to help meet the knowledge and training needs of Wisconsin food entrepreneurs.