A Secret Price Strategy For Farmers

Posted by David on January 11, 2012 under Tools to Increase Farm Sales | Be the First to Comment

 

Who determines what your farm products are worth? Whether you sell produce, pork beef, chicken, herbs, grains, or any other farm product; someone attaches a price to it.

In my last post I asked the question “Who sets the price for your farm products?”

 

 

 

1. Ultimately the consumer decides what they will pay. There isn’t much you can do about supply and demand. People only have so much money and other statements that focus on the customers ability, or willingness, to pay your asking price.

2. I set my prices. I know what I have to have to make a profit and even though it may reduce the amount of potential customers I can market my farm products to, I have to be in control of my prices. People can come up with the money to buy what they really want to buy. There are many factors to consider other than price.

I want to look at the second statement today. “I set my prices”

This mindset is where you study the true cost of producing your product and getting it to the marketplace. Don’t forget the cost of getting your product into the consumer’s hands. In farming this can be a huge cost.

Once you figure out what your cost is, then you look at what similar products cost in the market you’ll be focusing on.

This is where it can get tricky. Let’s use eggs as an example. You might look at a discount grocery chain and find they sell a dozen for 99 cents. But on the other hand you might check at higher end shops or even your local farmer’s market and find them going for three bucks per dozen.

Why the huge price gap?

Is it because the cost of production is less?

For the discount grocery the answer is yes! Add to that eggs are considered a competitive price item at most stores. That means they are checking prices at all the competitors and keeping their prices very close to what others are selling at that week.

The big boys know that if their eggs are significantly higher than the other stores in the area many people assume everything in the store is higher. Same for bread, milk, butter and a few other core items.

The bottom line is they try to keep these items as low as possible because the other side of the coin is if they are as low, or lower, than the competitors, folks assume they have good prices on other products. They also know if they can get you in the store to buy cheap eggs you’ll probably grab a few other items strategically placed throughout the store.

My point is pricing is a science.

 If pricing is a science for the big boys it should be a very important component of your farm business.

Don’t assume lower prices are always the best option.

For eggs I keep mine down in the middle of the price range at around two bucks. I use eggs much like the grocery stores. Draw new customers in with eggs and introduce them to other products such as pork, beef and chicken.

I blogged about this here.

On the other hand I have created a few specialty products.

What do I mean by specialty products?

Create products that are higher quality, different, exclusive etc.

For us at Spring Hill Farms the first product we came up with were holiday hams. I’ll never forget being at a relatives home for Christmas one year and seeing the price tag on the famous name brand ham we were eating. I about fell over! It was $77.00.

I remember thinking “this thing isn’t half as good as our hams.” The next year we introduced hams for Thanksgiving and Christmas as a test and sold out in a week!

Since then I quietly introduced a ham that was only for the affluent. These hams are very limited and we have never advertised them publicly.

The pigs are raised on a special diet, they are a special cross breed of pig and we also package them in a way that says “this is one of a kind.” Along with that they are cured and smoked in a special way. We charge a premium for them and sell out every year.

I deliver these hams every year to a few of the “mansions on the hill” around central Ohio. I have even carried a few to the top of high rise buildings for the CEO’s of large companies.

I posted on Facebook – Price may in the eye of the beholder, but it is in control of the provider

We had some lively discussion about the idea but this is what I was referring to. Look for ways to produce a product that commands a high price.

You’ll always have to factor in price points for the market you’re going after. But don’t forget there are plenty of families who have made food a higher priority than the commodity junk you’ll find down at the local discount grocer.

Those are the people you’re trying to reach.

If you are constantly trying to be the lowest or as low as everyone else pretty soon you may find yourself tempted to cut cost on the production end by short cutting quality.

When that happens my friend you are getting dangerously close to being just another commodity farmer. History shows us that the mindset of “faster, fatter, bigger, cheaper” is what got us into the mess farming is in today.

Until next time…

Get my latest ebook The Secrets of Selling Your Farm Products Revealed Learn how to position your products so price isn’t an issue.