Business Planning: Section 5, The Marketing Plan

Business Planning: Section 5, The Marketing Plan

Marketing always seem intimidating to the uninitiated. What is it?  Do you need a degree from Harvard? The easiest way to describe to people what marketing is will be to use the old Marketing 101 saying...

“If the circus is coming to town and you paint a sign saying “Circus Coming to the Fairground Saturday,” that’s advertising.
If you put the sign on the back of an elephant and walk him into town, that’s promotion.
If the elephant walks through the mayor’s flowerbed, that’s publicity.
If you can get the mayor to laugh about it, that’s public relations.
And if you planned the elephant walk, that’s marketing.”


It is not that hard once you make a plan.

In this section, you'll learn some essential pieces of the Marketing Plan that should be included in your Business Plan. The Marketing Plan should include:

A. Products Description

This is where you decide what to make, why you think this should be made, when you can sell it, who to sell it to, and how you convince the people that you think will buy it to actually buy it.

You may make only one product, but it better allow cash flow and make an income. Depending on your income needs, you will need a mix of cash flow and income products to make this enterprise work. To understand what that means:

Cash Flow Products: These are products that you make that pay the bills every day. They are also the staples. In vegetables, these are the tomatoes, and sweet corn. For dairy, these are generally those fresh pasteurized products, things like, cheese curd, cottage cheese, fluid milk, etc. 

For people who make raw aged products, this will be products that come out of the cave earlier.  For example, Gouda is generally aged 60-90 days and sold. This may be your cash flow cheese, especially in the beginning of a season or the business. 

It is normal for these products to go by the wayside later in business. It is important to make sure those cheeses that replace the cash flow cheese provide income in a timely manner to pay those bills. 

Some places use meat, vegetable, eggs, and other farm products that they either raise or buy to re-sell as the cash flow products. How much you subsidize the income products will depend on how solvent the existing farm enterprises are today. If you are having problems paying bills now, spending money on inventory is not a wise thing to do.

Income Products: These may be the same as cash flow products, especially in the beginning or they may be the ones that actually make you and your business. For dairy, these are generally those cheeses that hang around, yogurt, etc. While cash flow products like curds make on average $7 per pound in the Northeast market, the income cheeses wholesale for $12 per pound or more in the Northeast market.

Some fresh cheeses, like fresh Mozzarella, are in the income cheese category.  That is if you price it accordingly. These cheeses are a pain to make or take time hanging out in inventory.

In general, these products are ones that will make income, with time. They are often the brands associated with your business and will be the ones that pay for the specific goal of your enterprise (taxes, on-farm income for family member, living expenses).


B. Features/ Benefits

 

What is so great about your product? For customers, flavor and perceived benefit are what they are looking for. Sure it could be about saving some obscure breed of goat, but if it tastes like compost, will they buy it again?

This is where you will talk about why the animal that is contributing the milk to your product makes the taste so outstanding. Also talk about the traditional recipe, natural CLA's, the vegetation the animals are grazing (the terroir),etc. To find more information, see the Heritage Dairy Breed Overview section. Awards, articles about your products, and other promotional pieces may be attached here.

 

C. Life Cycle/Seasonality

 

You may milk your animals seasonally, but their products may be available year-round. List in grid format the products, production season, and sales season. Banks will be particularly interested in when this stuff is going to be sold to see if you will have the income year-round to pay debt.

Variety (or product) will be the cheeses (Creole Cream Cheese, Monterey Jack and Pineapple Cheese), or products (yogurt and cloth bound cheddar).

Variety

Production Season

Available to Purchase

     
     

 


D. The Market Analysis

Customer Analysis

Who is going to eat your product?  This is not the list of stores, farmers markets, and restaurants. This is describing those people who will be buying it from those places. You will need to identify:

  • Where you got this information (Chambers of Commerce generally do wonderful studies of their towns and regions)
  • Who the people are.  Are they “high-end”, “highly educated”, “foodies”, etc.  Define those words as you identify those people. What is their income range, race and/or ethnicity, etc.
  • Estimated percentage of population that is the target audience. 

Then identify where your target customer will find your product. This will be where you list those stores, farmers markets, and restaurants that sell your product. If you have already brought product to those buyers, identify the buyer (chef) and their interest in your product. If you have emails that show the buyers’ glowing admiration of your products, attach them at the end of the plan. For some people, writing the market analysis is hard to do. Agriculture Business Specialists at extension offices and in counties, colleges, etc. will often be more than happy to help you with this aspect of the business plan.

 

E. Competitive Analysis

National

Yes, you did cover some of this in your Pre-Business Planning section and earlier in your business plan. The purpose of this section is to summarize your competitors. For example, if you are making Quark (a traditional, German lactic cheese), you will note that Vermont Butter and Cheese also makes this product. You will want to include the sizes of their packaging and the local retail price point for their product (and if possible their wholesale price). Be thorough.

Regional

You will be breaking down all of your proposed products and identifying anyone within your community and region that is selling the proposed product. If you are planning to make a washed curd cheese like Gouda, note the other cheeses of similar style and taste if you cannot find anyone with that particular cheese.  This is especially important if this is a popular brand.

Start by identifying the product, and describe what that product is (see the Business Plan template for a sample). You’ll also want to share you unique take on that product (beeswaxing Gouda, clotted cream from milking Devon cattle).

The next step is to be very thorough in describing the competitor’s (or multiple competitors' products). Use words like:

  • industrial instead of factory farm, industrial pollution, or other strong words,
  • cooperative instead of big conglomerate,
  • bland, sour, bitter instead of “tastes like crap”
  • wrapped in plastic, vacuum packed, etc.
  • imported – this is interesting because some labels that are perceived as local are actually only wrapped locally and are in fact imported. Find out the facts before committing anything to paper.

Be sure to describe how the competitor’s products are presented. If there are breeds that make up the pool of milk (Holstein or Jersey for example) and/or any Eco-labels that they use – be sure to share these! Be polite at all times. 

A local college student or the person that helped identify the demographics above can be helpful in developing this section of the plan. Also have family members scour farmers markets, Local Harvest, regional marketing web sites, and other marketing vehicles for lists of people that make dairy products that are even remotely similar to what you plan to make.

 

F. Market Potential

 Current Trade Area
Break it out into Year One, Two, Three, Four and Five. You need to say what you will sell, where you will sell, percent as wholesale, and percent as retail. If you distribute, say that. If you will have a distributor, say that. 

Market Size and Trends
Copy and paste this from the previous section. This is just the specific size of the marketplace.  Nationally, locally, etc. Cheese and dairy publications have this information. Cut and paste with proper notation of the source.

 Sales Volume Potential (Current and Growth)

Wholesale Accounts
For this section you will include:

  • List current sales, if any. Note the percentage of sales goal. For example, if current sales are for 4128 lbs of cheese annually, then you are at 21% of production goal of 20,000 lbs of cheese annually. 
  • Note the number of additional accounts added and in what time frame. For example, you plan to add 2-10 new accounts a week. 
  • Your reorder goals (number of accounts that order a second time – or even better more than a second time). This is as a percentage.
  • Seasonality of certain sales regions (example, resorts in the summer or winter, wineries, summer, etc.)
  • Note specific products that you will wholesale.
  • Note sales teams and distributors, including exclusive marketing arrangements with those people and in what regions. Try not to do exclusive sales agreements unless you are sure they will pay you.

Retail Sales
Are you going to do retail sales?  If yes, how?  Farmers Markets?  Retail Store?  If Farmers Markets are an option, identify the season, traffic, number of other cheese/dairy vendors, if it is producer only, market management, etc. BE REALISTIC about the sales potential of your targeted Farmers Market. Out of respect and as a smart marketer, try to offer complimentary products if there are other dairy vendors. If a market is small and there are already three other vendors, do you really need to sit there and make $80? Farmers Markets can be profitable and can be used to sell excess cheeses that are wholesales. They can also help introduce your product(s) into a new market area. In this section, outline and identify your goals and sales expectations for each market.

Farm Stores. Location, location, location. Do your homework. Visit other farm stores and see if this is right for you. Be clear about boundaries for customers and understand that people will come at all hours, regardless of posted hours. Make sure you are tidy, have adequate insurance, and are into people before you invite them to your home. Your local extension agent should be able to help you identify local requirements for a farm-based store.

Also in this section you will want to note time spent on retail sales, who will do them, cost(s) associated with this, and percentage of proposed sales from each of these proposed marketing ideas.  With that time factor, go back to the Pre-Business Planning section on time and review those worksheets. Review the How Do I Sell this Stuff? worksheet for additional information.


G . Production Potential

 

Based on herd goals established by _____________________source of milk:

______ number of cows/goats/sheep at ____# (pounds) of milk produced/day for ____ days in the proposed lactation = _____________ lbs milk produced total.  (see the worksheet on breed averages if you do not have herd data)

With most cheeses at between 9-16% yield (average 12%), maximum production of cheese based on maximum milk produced on the farm is: ___________ pounds of cheese.

 

Based on capacity of existing ______ gal. vat with cheese processed _____#  days/ week:

____ gal vat * 8.6# of milk = _____# batch * ___ batches/week=_________# milk/wk

_________# milk/wk * 12% = _________# cheese

________# cheese * _______ weeks/yr you plan to process  = __________ # cheese per year.

(# = pound)

 

H. Marketing Strategies

This is how you will accomplish what you plan to do and how you will implement your marketing ideas. You will discuss things like:

  • Who will distribute product, how that relationship will happen, pay schedules with each of them (maybe how you will deal with them when they ignore their contract and don't pay), etc.
  • Who will do sales? Some distributors only distribute. You may have to do sales. Sales are the calls, the product sample drop offs, the distribution of fliers, and endless follow-ups.
  • Product sampling, rules, amounts, etc. How often. Who pays for them? Are they a write-off?
  • Rules for those requests for donations of products. They may be handy (strategically) in the beginning, but when is enough really enough?
  • How will you break down regions? How often will they be serviced?
  • Print ad work. Who does it? Where will it go? How will you evaluate success? (always evaluate success)
  • How will products be presented to stores, restaurants, etc.?  Do you have case lots? How big? Suggested retail prices? 
  • How will you evaluate stores to determine if they are handling you product the way you want it to be handled?
  • Demonstrations. How often? Who does them? Are they product taste tests, in store cheese making demo (fresh mozz goes a long way in store because of the visual effect), etc.? 
  • List websites, blogs, etc.

Be realistic. Consider time, budget, and how it fits your product and the customer base that you are trying to sell to.