Marketing Pecans 101: Agricultural products impacted by unique constraints

Marketing Pecans 101: Agricultural products impacted by unique constraints

Last month I introduced readers to the concept of target markets and discussed some of the pros and cons associated with each market segment. This month I will provide readers with a discussion of the 4 “P’s” of the marketing mix: product, price, place (physical distribution) and promotion, and their counterpart the 4 “C’s”: customer, cost, convenience, and communication. Before going any further there are 2 constraints that are unique to agricultural products that must be addressed as they have a significant impact on a grower’s ability to develop and implement effective marketing strategies.

First, growers must understand that pecans are an agricultural commodity with established grades and markets, which means that growers are effectively price takers as no single grower is large enough to impact market prices. Given this lack of market power, one begins to understand that the price offered by each market segment is ultimately determined by that segment’s needs and the constraints that they face. Consequently, the price that growers receive is based on the law of supply and demand, which unfortunately means that your cost of production is irrelevant to the market pricing system.

The second aspect of the pecan industry that many growers are probably not aware of is that demand for pecans is relatively elastic which means that small changes in price may result in larger than expected changes in demand from some market segments. In an attempt to help pecan growers counteract these economic principles this article seeks to educate growers on the balance that must be achieved in order for them to market their pecans more effectively.

Marketing Mix

In the marketing literature, the 4 P’s or marketing mix refers to the set of marketing tools that a firm uses to pursue its marketing objectives in the target market (McCarthy 1960). Each aspect of the marketing mix is equally important and no one area can be considered in isolation due to its impact on the other parts (Jain, 2000). When looking at the 4 P’s, one quickly realizes that they represent the sellers’ perspective and fail to consider the most important uncontrollable element of any marketing program; the customer. To address this shortcoming, Lauternborn (1990) introduced the concept of the 4 C’s in order to better represent the buyer’s perspective. The 4 C’s are the customer with their wants and needs, the cost as it is perceived by the customer, convenience and communication. Effective marketing plans create a balance between these two competing perspectives in order to create win-win relationships. The following diagram illustrates the balance between the buyer’s and seller’s perspectives. Marketing strategies that do not consider this balance or fail to address it adequately result in too much emphasis on one side or the other and generally result in less return to the grower.

Product vs. Customer

Most growers do an excellent job of producing pecans. As growers, we have a pretty good idea about what it takes to produce a quality pecan. We also know that pecans vary greatly in terms of taste and many of us have our favorite varieties that we keep for our personal consumption. With that in mind, I recently spoke to an extremely health conscious extended family member in upstate New York and asked her about what kinds of nuts she consumes in an attempt to learn more about my customers.

Needless to say, I was appalled to learn that neither she nor her friends consume pecans. When asked why they don’t eat pecans she told me that the pecans offered by local retailers are generally very dark in color and have no flavor. I found her perceptions interesting because we currently produce a number of varieties that are known for their superior flavor and beautiful color. Consequently, if we are to change perceptions such as these we need to develop a better understanding of who our customers are so that we can customize our offerings to better serve specific market segments. To better understand who one’s customers are and what their needs are we must begin by asking the following questions.

• What does the customer want from the product (taste, health benefits, etc)?
• How and where will the customer purchase and use it?
• What does the customer want it to look like (size and color)?
• How and by whom will it ultimately be consumed?

The lesson learned is that we need to learn more about our customers in order to tailor our offerings to specific market segments. By following this approach some growers may find that they need to plant a portion of their orchards to varieties that possess the characteristics desired by their customers in order to increase profitability.

Price vs. Cost

The relationship between price and cost is perhaps the most difficult for growers to accept and manage. We all know that the price of many agricultural products can vary greatly at the local level and it is difficult to compete with individuals who have little or nothing in the pecans that they sell. Unfortunately, consumers do not care what it costs you to produce a marketable crop. What they do care about is what it costs them to satisfy a particular need or desire. As a result, the price that you receive is almost irrelevant when one considers the additional costs that the customer incurs in order to do business with you. Some of the additional costs incurred by the customer include the cost of buying your pecans, driving to your location, the time invested and the cost of competing alternatives. Growers that want to better understand how buyers perceive their pricing strategy must begin by asking:

• What value does the buyer place on my pecans compared to other alternatives?
• Are there established price points for each market segment in my area?
• Is the customer price sensitive? Will a small decrease in price gain me market share? Or will a small increase be indiscernible, and so gain me extra profit margin?
• What discounts should I offer to trade customers, or to other specific segments of my market?
• How will my price compare with my competitors?
• What can I do to enhance the customers’ shopping experience and reduce the perceived cost of buying my pecans?

Place vs. Convenience

Traditional marketing textbooks view “place” from the perspective of the firm’s physical location. This perspective is especially important to growers because it ultimately determines who the grower can effectively market their crop to as well as impacting the marketing strategy that they must adopt. Growers that target individual consumers need to be concerned with the amount of time and effort that the consumer must expend in order to do business with them as well as how the customer will view their shopping experience.Factors such as the appearance of your facilities, signage, and perceptions of safety also play an important role in determining how convenient the consumer perceives your facility to be.

Growers whose facilities are located in areas that consumers view as inconvenient will need to take steps to make their facility a destination location. The most effective means of making this transition is accomplished by offering other products or services that the consumer desires in order to make their facility seem more convenient to the customer. Additional offerings desired by the consumer may include straw, pumpkins or mums among others. Ultimately, growers must ask themselves:

• How is my facility viewed by customers?
• Where do buyers look when they want to buy pecans?
• If they look in a store, what kind? Do they shop online?
• How can I access the right distribution channels?
• Do I need to call on potential customers, attend trade fairs or take my business online?
• What do my competitors do, and what can I learn from them in order to differentiate my operation?

Promotion vs. Communication

When most people think of promotions they typically think of advertising. The problem with this approach is that the flow of communication only goes one way. As a result, the effectiveness of the advertisement cannot be assessed until much later when it may too late to rectify any problems. Other problems associated with this approach include cost, availability and the difficulty associated with reaching your specific target market at the local level. Alternatively, communication with your customer is based on the two-way flow of information which enables the customer to communicate directly with the grower on an as-needed basis. Growers that wish to communicate with their customers may want to consider utilizing low-cost venues such as email, Facebook, and Twitter among others. Growers that want to communicate with their customers and not just advertise to them need to consider:

• Where and when can I get across my marketing messages to my target market?
• Can I reach my audience by advertising in the press, on the radio, or on billboards?
• When is the best time to promote?
• How do my competitors do their promotions and how does that influence my choice of promotional activity?

In the end, an effective marketing program can be as complex or as simple as the grower wishes it to be. However, it must be noted that the most effective marketing programs are those that reach the intended audience with the appropriate message, are timely, easily implemented and are cost effective.