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Marketing Value Added Products

Designing and implementing effective strategies for value-added marketing depends on significant effort. The tasks getting farm products to a consumer offer multiple opportunities to grow a business.

Updated:

March 20, 2019

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Adding value takes countless forms.

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The many tasks of getting farm products to the ultimate consumer offer multiple opportunities to grow a business. These opportunities are only limited by our imagination. However, the risks associated with change can be overwhelming. Understanding ourselves, our business, our customers, and our potential customers can reduce risk increasing the probability of success. However, this is not a once-and-done process. The process of researching, writing and updating a business plan addressing risks and opportunities is a continuous task.

While a farmer may not necessarily be enthusiastic about business planning, developing a formal business plan can be fulfilling, and is credited with building the confidence of many business management teams. Plans may be incomplete or stale, but planning does give the chance to be better prepared for whatever future comes. Plans may best be considered as projections of a future based on information available right now. As information and conditions change, future projections can be expected to differ from the plan. Strategic planning is cyclical when it is at its potential best. Strategic planning is interactive and evolving. Fortunately, this recommended planning process gives every opportunity to improve.

According to Webster's dictionary, value added refers to a service or 'product whose value has been increased especially by special manufacturing, marketing, or processing.' The attractions of this value-added concept as a significant business management strategy are plentiful. A look at USDA, ERS statistics shows evidence for this attraction. In 2017 the total value of U.S. food presented to the consumer was roughly $1 billion. Of this the U.S. farmer received a little over 12% of each consumer food dollar. A value-added enterprise may increase the amount of each consumer dollar a business is able to capture.

Designing and implementing effective strategies for value-added marketing depends on significant effort. This work often includes:

Inventory of available resources accompanied by a market value of these resources.
Identification of personal and business goals, and the objectives designed to achieve them.
Recognizing the metrics useful for evaluating the project.
Assessment of potential market channels describing sales volume, price risk, lifestyle preferences, channel specific costs, and marketing channel combinations.
Segmentation of the market place describing the first-best-ideal customer in target market(s).

All too often progress is impeded when we do not give sufficient attention to these critical tasks. Our time, money and talents will be better spent with marketing strategies if we first complete this preparatory work.

As we explore a value-added future many opportunities to expand revenue, develop staff, and utilize resources while striving for economic viability are likely to surface. One key to long term value-added agriculture economic viability revolves around consistently providing to the market place what consumers are seeking. This suggests value added business management teams may benefit from understanding consumer behavior as deeply as reasonable.

This understanding is critical as farms utilizing a value-added enterprise typically move closer to specific consumer groups, and individual consumers, more heavily than farms using commodity marketing. An example of consumer insight important to a value-added farm marketer is a delighted customer does not seek another source. A recent study found over 60% of people who change brands or stores were 'satisfied' with their previous choice. People who say they are satisfied are just not dissatisfied. A satisfied customer is still willing to listen to what the competition has to offer. A value-added farm business may want to provide processes and experiences that develop delighted customers.

Strategies

Strategies for value-added marketing success center on four inter-related principles. An appreciation of these principles and an understanding on how they impact your business may be useful.

Market penetration

More of what we are doing.
Ex. We market our fruit juices at a roadside stand as well as several farmers' markets.

Market development

New applications of what we are doing.
Ex. Our fruit juices are now fruit purees and fermented 'ciders'.

Diversification

New products and/or markets based on what we are doing.
Ex. We are developing vegetable juice recipes to utilize more of our production potential.

Product development

New products.
Ex. This is our second season pilot marketing soil amendments that may enhance juice yield.

Not every value-added business will delve into the full extent of all available marketing strategies. However, a solid background in the above academic strategy types is expected to be of value when fleshing out a meaningful marketing plan. The Agricultural Marketing Resource Center reminds us 'one needs to mine all of the internal and external human-, financial- and market-driven data that is relevant to your project's success or failure.'

Often time, passion or energy is a limiting factor when planning for a business future. As our value-added vision becomes clearer, these resources must be considered along with our finances, skills, equipment and facilities. The attraction of additional consumer dollars being captured through value-added enterprises is nearly irresistible especially when we believe the consumer decides what is needed.

Marketing is the sole business function that generates revenue directly. The probability of success moving through a value-added market channel is enhanced when adequate attention is given to the complexity of effective marketing.