Direct Marketing of
Agricultural Products
Direct marketing is a strategy farmers
can use to sell their products directly
to the end customer. Farmers' markets,
roadside markets, subscription marketing,
pick-your-own, and community-supported
agriculture are common types of direct
marketing. Direct marketing is essential
to the profitability of small-farm
business ventures.
Advantages of Direct
Marketing
Direct marketing has
several benefits
over selling through a
wholesale market. Farmers can
potentially make higher profits
because there is no middleman.
Direct marketing saves costs
in packaging, handling, and
transportation. Because the
transaction is directly between
you and the customer, you
receive your money right away. You
do not have to wait for a middleman to
send you a check.
$elling
Your Farm Products
Fact Sheet 804
Direct marketing works well for owners of
small farms because it promotes a diversity
of production and reduces the pressure
to produce in high volumes. You are free
to grow what you want and to decide on
quantity. You have the opportunity to set
your price within a marketable range.
Disadvantages of Direct Marketing
Direct marketing has a downside.
The volume of product you sell through
direct marketing is often lower than what
you would sell through other marketing
methods. However, the higher prices you
typically receive should compensate for
the reduced volume. In some cases, direct
marketing requires more of your time than
other methods do: you need to be present at
the market selling your product.
Required Skills
Respect for customers, imagination and
creativity, and attention to product quality
control are three essential elements of
successful marketing. If you want to succeed
at selling your product, you will need
"people skills"-you'll be dealing directly
with your customers. While people are not
always pleasant, you are always expected to
be courteous.
As a salesperson your challenge is
persuading customers to buy your product
rather than a competitor's. Put yourself in
the position of the customer and ask: "Why
should I buy your product over someone
else's?" Differentiate your product from
the competition's. Develop your own logo;
offer recipes; use attractive, eye-catching
displays; develop an inventory of unique or
specialty products; or grow your produce in
a unique way, such as "certified organic,"
"all natural," or "grown the old-fashioned
way with no genetically modified seed or
chemicals." Or go retro or "back to the
future" by raising all heirloom produce
(varieties from the past)-anything that will
make people want to visit your market site.
Convincing people that they should buy
your product is only a part of the challenge,
however. You need to keep your buyers as
customers. Repeat customers are essential to
the long-term success of your business. The
reality is that not everyone has the skills to
be a direct marketer.
Types of Direct Marketing
Farmers' Markets
One of the fastest growing methods of
direct marketing agricultural produce are
farmers' markets. They are located within a
short drive of most locations in Maryland.
They are popular with both the producer
and the public. Preparation for the producer
can be as simple as picking the produce in
the morning, loading it into the pickup
truck, and driving to your assigned spot at
the farmers' market. The produce is sold
out of the back of your truck. Many direct
marketers in farmers' markets spruce up their
spot with signs, displays, and decorative
touches designed to attract customers. These
additional touches don't have to be time-
consuming or elaborate to be effective.
Farmers' markets have several benefits.
They are ideal for new producers because
start-up costs are low and only simple
marketing skills are needed. One of the best
features about farmers' markets is the face-to-
face contact between producer and customer.
This permits the producer to promote the
product and to receive customer feedback.
Farmers' markets have all the
general drawbacks associated with
direct marketing. In addition,
bad weather can be a problem.
Producers can waste time sitting
at a farmers' market in the rain,
waiting for customers who never
show up. The producer's level
of comfort with being outside in
various types of weather is a factor
to consider.
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Other factors to consider are your time
and your marketing skills. A producer may
spend much time sitting at the market
at the expense of performing other farm
duties. Producers at the market are in direct
competition with each other. Marketing
skills are needed to sell items common to
other sellers in the marketplace, such as
tomatoes and sweet corn, and to receive
a good price for them. For example, to
differentiate your produce from others' you
may want to produce tomatoes that you
can market as "the best-tasting tomatoes in
the county because of a unique, secret-
formula fertilizer and pesticide-free
growing environment."
Introducing new or specialty products and
persuading customers not only to buy them
but also to pay high prices for them can be
a challenge. The primary goal of marketers
in a farmers' market is to develop successful
strategies to attract customers.
Another challenge of farmers' markets is
their regulations and policies. One of the most
common policies is that you can sell only
what you produce. If you cannot accept this
rule or other rules set by market management,
a farmers' market is not for you.
Roadside Markets
Roadside markets are fixtures of the
summer landscape along many highways.
On tourist routes, roadside markets flourish.
For instance, roadside markets appear
almost every quarter of a mile along Route
50 as you leave Ocean City, Md. They can
be successful places for large and small
producers to market their products. As
with farmers' markets, roadside stands are
a convenient place for the public to buy
locally grown produce. The key to successful
roadside marketing is attracting repeat
customers. They in turn will spread the word
about your wonderful stand.
As you do with a farmers' market, you
need to attract people to your site. Road
signs and catchy displays are needed to get
people to stop. Customers could be traveling
60 mph down the road.
The benefits of roadside markets are:
producers can save costs associated with
transportation, packaging, and middlemen;
the produce is marketed near where it is
produced and displayed in bulk or with
minimal packaging; and usually no direct
competitor is sitting beside you.
Roadside markets have disadvantages
compared to farmers' markers. In order to
be successful, you must be available to your
customers on a regular basis. You need to
pay the overhead costs of buildings, utilities,
repairs, parking, and taxes. There are zoning
issues to consider and more planning is
involved. You will also need to maintain a
parking area for your customers. Because
of all of these factors, selling at a roadside
market requires more planning ahead than
selling at a farmers' market.
Location is the key to successful roadside
marketing. The stand needs to be convenient
and easy to find. It should be located near
well-traveled roads so that repeat customers
stop by regularly and new customers can
easily find you. You'll need enough parking
to have room for the heaviest likely crowd,
with easy and safe access between the
parking area and the highway. The facilities
and buildings are one of the first things
people notice, so their appearance
is important. Falling-down sheds and
barns, rusted and abandoned equipment,
poorly maintained fences covered by scrub
trees, and weed-infested crop fields don't
present a good first impression to your
customers. Stands can be pole buildings,
renovated barns, tents, pickup trucks, or a
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small
table. It's
important
to put the best
face possible on your
stand. Make it attractive,
keep it neat and clean, and display your
products creatively.
Subscription Marketing
Some producers use subscription
marketing, a relatively little known method
of selling products that has become popular
with some producers. Under this system,
customers meet with the producer before
the growing season to prepay for a specified
assortment of produce. At harvest, the
producer packages up the customer's order
and delivers it to a drop site or customers
may pick their own products at the farm.
The farmer keeps a record of the products
purchased, but money is not exchanged
during the season. At the end of the season
the producer and customer settle up any
balance that may exist.
The advantage of subscription marketing
is that before the season the producer knows
what to produce and how much. The crop
is sold before it is put in the ground. Pre-
payment supplies the producer with funds in
advance to grow the crops and operate the
farm business.
The drawbacks, however, can be major.
This system requires that the subscription
marketer have strong people skills because
interaction with customers has potential
for conflict. For example, in farmers'
markets and roadside markets, if there is a
dispute over product quality, availability, or
selection, an unsatisfied customer will simply
leave and go to another farmer. However, in
a subscription market,
the customer has
already paid in advance
for a specific quality,
availability, and selection of
produce. Customers will expect
their produce to be of good quality
and available when you told them it would
be. For this reason, subscription marketing
requires a higher level of customer service
than most other marketing options and is
therefore not for everyone. Also, the time
required for filling customer orders and
needs limits the number of customers you
can have in your "club." This limits your
production and income.
Pick-Your-Own Marketing (PYO)
In pick-your-own marketing, customers
come to the farm and harvest their own
produce. PYO has been a successful method
of marketing for both large and small
farmers.
The biggest advantage of PYO marketing
is the reduction in harvesting costs.
Transportation, packaging, handling, and
storage are other areas where costs are saved.
PYOs, therefore, are less expensive to get
started than other types of direct marketing
operations. Typically, customers buy more
produce at a PYO than they do when
shopping at roadside or farmers' markets or
through subscription.
Although it appears easy to plant your
crop and have people come and pay
to harvest it, if it were so easy, as the
saying goes, everyone would be doing it.
Actually, PYO marketing has a number of
disadvantages. By the very nature of PYO,
the producer allows the public to come
onto the farm and roam around. Some
producers are uncomfortable with this, so
PYO marketing is not a good method for
them. The producer has to accept the fact
that customers will damage plants and
produce and selectively pick the crop. Bad
weather discourages customers, which poses
a problem in areas with limited harvest
periods such as Maryland. People do not like
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to pick crops when it is too cold, too hot, or
too rainy.
During the season PYO operations require
long hours: you need to meet the schedules
of a wide range of customers. Besides offering
adequate parking, you need to provide
lanes into the farm and onto field sites.
There are labor costs for hiring cashiers and
the "people movers" needed for directing
or leading customers to picking fields and
keeping customers out of other areas. The
prices you receive at PYO operations are
often less than prices received under other
marketing methods. In addition, insurance
companies often increase their liability
premiums for farms that become PYOs.
Community Supported Agriculture (CSA)
CSA marketing is a relatively new and fast-
growing direct marketing venture. In this
system, members buy shares of the farm's
harvest and also accept some of the risks. As
the crop matures, it is harvested and divided
up among the shareholders. Shareholders
get a fresh supply of produce and support
local agriculture. This is known as urban-
rural linkage.
Shareholders have input into what
is grown and pay fees in advance. This
guarantees the producer a market for
everything grown; the crop is sold before it
is planted. The advanced payment creates
working capital for the farm operation.
CSAs allow better preseason planning,
since the producer will know in advance
what to grow, how much to plant, and how
to grow it. CSAs help to spread out risks,
since both producers and shareholders share
the good or bad crops. Shareholders sign a
contract acknowledging the yield risks. CSAs
reduce labor costs, because shareholders
(customers) help with production and
harvest. Customer help can be another
attractive feature of this marketing
system; many people living in urban
areas find working on a farm to
be a fun family activity. Many
customers enjoy hoeing weeds
and picking ripe produce.
Selling to the Retail Market
(Wholesaling)
Wholesale marketing is a marketing
strategy that can be profitable for both
large and small farms. Producers sell their
products directly to retailers rather than to
middlemen. Retail markets that buy produce
directly from the farm include supermarkets
and restaurants.
The Advantages
Producers can usually keep more of the
profits if they sell directly to a retailer rather
than going through a broker/middleman.
Producers have the potential to sell large
volumes of produce depending on the size
of the retailer and whether the retailer has
an independent store or a chain of stores.
Producers also have the opportunity to
develop and use their own packaging logo
or product identity. This helps customers
to recognize your product over your
competitors' and solidifies your relationship
with the retailer. Wholesaling offers good
opportunities for selling specialty crops
to supermarkets and other retail outlets.
Specialty crops, which are crops not
generally produced by large farms, therefore
represent a market opportunity for producers
on small farms.
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The Disadvantages
Supplying retailers has its disadvantages, such astransportation costs, grading standards, and, usually, some specialhandling requirements. Some special packaging may even benecessary. To please retailers, the product must look uniformlygood. In selling wholesale, the producer depends on the retailer'sability to sell the product. Small farms may have to poolproduction to fill the large orders of some retail outlets. Theprices you can charge are typically 50 percent or lower than theprices you might charge if you direct-marketed your products. Whenlarge quantities of a product are needed to meet the retailer'sdemand, producers usually only grow one or two crops. Such limiteddiversity creates both production and marketing risks.
Producer's Responsibility to Retailer
A producer should always strive to consistently produce ahigh-quality product. With most other marketing methods, usuallyjust the producer's reputation is on the line. However, in sellingto a retailer, the producer puts the retailer's reputation on theline. Retailers expect you to be reliable and on time. If youcannot comply with their needs, they will find someone else whocan. This market is highly competitive.
Selling to Restaurants
Selling directly to a restaurant can be a good place to marketyour product. The result can be a reliable, consistent income forthe season. Try forging a pleasant relationship with the chef orothers who do the purchasing.
Storing your product and making frequent deliveries, ifrequired, are two problems that selling to restaurants can pose. Becautious: restaurants often start up and then fail. Request paymenton delivery or within 10 days after delivery. This is notunreasonable and should help you to get paid in a timely fashionand to avoid absorbing a big loss if the restaurant closes down.Some form of product liability insurance may be a good idea in casea restaurant patron becomes ill and you get caught up in thelawsuit as the supplier.
Other Important Marketing Considerations
Successful marketing requires more than just taking yourproducts to the marketplace. You have to attract customers firstand then persuade them to make a purchase. Successful marketingdepends a lot on how you present and price what you're selling.
Product Presentation
Packaging
Packaging is not practical or necessary in every marketingsituation. At roadside stands packaging can be very basic. However,in markets where you are in direct competition with otherproducers, you will want to be more elaborate or creative with yourpackaging. The package should reflect the market for your product.If it is going to be sold in an upscale store or specialty shop oras a gourmet item, the package should show that this product isworth paying a higher price for. Product sold to restaurantsusually doesn't need fancy packaging.
Packaging can do a lot for a product. It can extend the shelflife, protect during handling, provide the customer informationabout the product, and attract attention. At direct markets,produce is usually displayed
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in wooden baskets and transferred to paper bags/boxes at sale.This allows the producer to display the product in a rustic mannerand to save in the cost of the packaging.
Try to have the farm logo or other identifying feature printedon all packaging materials leaving the farm (bags, boxes, labels,packages, etc.). This is a great way to advertise your product.Also, offering recipes and information tags with the package canhelp to sell it.
Displays
Bulk displays are useful for marketing some large types ofproduce. But don't build bulk displays of delicate products, suchas tomatoes and peaches, that are easily bruised or otherwisedamaged. Customers will mishandle the items. For visual appearance,do not pile bulk displays above 4 feet high. Keep displaysconsistent in height, overall size, and signage, and be sure yourproduce is free of rotten or insect-infested products. Someproducts can be prepackaged for the commuter who wants a quick stopand is not interested in picking through a bulk display.
In direct markets, attracting customers to your market iscritical to the survival of your business. Creative signs anddisplays are proven methods of attracting customers. Unusual orspecialty items as well as sales on items can attract customers.The only limit in this area is your imagination. Clearly mark orpost the prices of your products; customers in a hurry are notgoing to bother to ask the cost of items.
Business Items
Pricing
Determining what to charge for your product is one of the mostdifficult and confusing tasks in a farm business. The price youreceive not only has to cover the cost of producing and marketingthe product but return a reasonable profit to you. A number ofpricing formulas and strategies are available if you want toresearch the subject.
You need to look at several market considerations when you setthe prices for your products. Competition is often the mostimportant pricing consideration. While your competitors' pricesshould not dictate what you charge, unless you can convincecustomers that your product is worth more than others', you willhave to price competitively.
Quality of product is an important factor in pricing. If you aregoing to charge a premium price for your product, its qualityshould justify the price. Specialty or unusual products offeredwhere competition or quantity is limited can command higher prices.On the other hand, customers associate price with quality. If yourprices are so low that customers perceive your farm business asproducing inferior products, your business could suffer.
Sales and specials draw customers to shop at your business butdo little to promote product quality.
The location of your business influences how you price. If youare convenient to your customers, you can charge more. If yourlocation is inconvenient, customers will need to be rewarded withlower prices for the distance they must travel to you.
Supply and demand makes time of year a factor in pricing.Producers able to get the first sweet corn to the market are goingto
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command premium prices. These prices will be a good deal higherthan prices later in the season when everybody has corn forsale.
Customer acceptance is the ultimate test of your pricing. Ifcustomers complain about your prices or simply don't buy yourproducts, you must reevaluate your pricing. Remember that productsales generate cash flow to cover your farm business expenses and aprofit for your labors.
Know what it costs to produce and market your product so you canfigure out the product's break-even price. If your cost ofproduction is higher than the price you can reasonably ask for theproduct, quit producing it unless you think that you need it andcan recover the income loss through other products. You are inbusiness to make money.
Rules and Regulations
It is unfortunate that operating a farm business is not alwaysas simple as producing a product and selling it. Depending on theproduction and marketing system you use, you need to be aware ofseveral other aspects of operating a business.
Check with the county planning and zoning department for zoninglaws and local covenants that may affect your farm business, aswell as for required permits or licenses. You will need to learnthe laws governing weights and measures and have the stateDepartment of Agriculture inspect your scales for accuracy. Thedepartment can also inform you about labeling laws that may affectyour products. Direct marketers need to be aware of limitations onputting up signs to advertise and to direct customers to theirmarket. If you hire outside help, you need to know about relevantlabor laws. If you sell prepared foods and valued-added productssuch as jellies or meats, you need to investigate county and statehealth department regulations that may apply.
Direct marketers are also expected to collect sales tax. Thestate will assist you in doing this. Your insurance company willalso want to talk to you about liability insurance coverage foryour business. If you intend to grow and market organic produce,you will have to obtain certification through the state if you wantto market your produce as "Certified Organic." Maryland plans soonto have a Certified Organic program for livestock.
References
Coleman, Eliot. 1995. The New Organic Grower. White RiverJunction, VT: Chelsea Green Publishing Company.
Gibson, Eric. 1994. Sell What You Sow: A Guide to SuccessfulProduce Marketing. Placerville, CA: New World Publishing.
Salatin, Joel. 1998. You Can Farm. Swoope, VA: Polyface,Inc.
Issued in furtherance of Cooperative Extension work, acts of May8 and June 30, 1914, in cooperation with the U.S. Department ofa*griculture, University of Maryland, College Park, and localgovernments. Bruce Gardner, Director of Maryland CooperativeExtension, University of Maryland.
The University of Maryland is equal opportunity. TheUniversity's policies, programs, and activities are in conformancewith pertinent Federal and State laws and regulations onnondiscrimination
regarding race, color, religion, age, national origin, gender,sexual orientation, marital or parental status, or disability.Inquiries regarding compliance with Title VI of the Civil RightsAct of 1964, as amended; Title IX of the Educational Amendments;Section 504 of the Rehabilitation Act of 1973; and the AmericansWith Disabilities Act of 1990; or related legal requirements shouldbe directed to the Director of Human Resources Management, Officeof the Dean, College of Agriculture and Natural Resources, SymonsHall, College Park, MD 20742.
Selling Your Farm Products
by
Terry E. Poole
Extension Agent, Agriculture Science
Reviewed by
Dale Johnson
Regional Farm Management Specialist
Maryland Cooperative Extension
Western Maryland Research and Education Center
Keedysville, MD
Dr. Richard Hartley
Extension Agent
West Virginia Cooperative Extension Service
Harrisville, WV
