23: Assessing Your Market Potential
23: Assessing Your Market Potential
Market Analysis
What is my Target Market?
It is unwise to start a farm without considering your customers and what they want. While the “if I build it, they will come” approach may have been feasible a few years ago, in many places the local food marketplace has become very competitive as larger companies have moved in, requiring farmers to be very clear and thoughtful about their marketing.
A target market is a well-defined group of customers. Markets can be found within any broad category: consumers, businesses, industries, institutions, etc, and then narrowed down to specific sub-groups of these categories. Consumers, for instance, can be characterized by demographics, geography, lifestyle, values, leisure, or occupation. Your target market might be “health-conscious exercise enthusiasts interested in nutrient-dense foods,” or “busy families with young children who seek convenient ways to get good food into their kids.” Don’t cop out and say that your target customer is anyone who will buy your product!
Begin market planning by clearly identifying this target market. Note that this may or may not be the market you are working with now. The idea here is to think creatively about your product to determine what set of customers are going to give your business the cash flow, profit and growth it needs.
Start with a big piece of paper. Across the top write a brief description of your product as currently conceived.
Next write your answers to the following four key questions:
- Who will buy my product?
- Why will they buy my product?
- What will they pay for my product?
- Where do they expect to find this product?
When you are finished, step back and consider what you have learned. Write:
- A brief, focused description of your target market
- An assessment of which aspects of your business need to change in order to attract this market
- A list of what is involved with making needed changes
Product Development
What am I going to market?
Now that you have a clearer idea of WHO your market is and what they want, how does your product meet their needs? Remember that products are continually fine-tuned as you better understand the needs of your customers and the mechanics of your business. The challenge is to think about your product from the perspective of your target market. In order to best reach this target market, you may need to change your packaging, pricing, or market channel. Next, answer the following set of questions.
Research questions:
- What is my product?
- What is the best method to package and present my product?
- What need does my product fill?
When you have finished answering the research questions, take a second piece of paper and summarize your answers into:
- A creative, market-informed description of your product
- A concept of how you will make your product meet the needs of your end consumers and channel customers while being competitively priced and profitable.
Market Positioning
How does my product satisfy the needs of my market better than my competition?
Market positioning is the way you communicate precisely the place your product holds in the marketplace. How you position your product in the mind of your customers determines how the product is perceived. Positioning is a strategic component of marketing. It ties together information about your product, your market, your competition and your industry. It is the answer to the very basic question: What business am I in? “The what’s for dinner business?” “The family vacation business?” Or you can distinguish yourself on the basis of the needs you fill, the services you provide, the distribution channel you use, the pricing strategy you employ. Think about your product from the perspective of your customer and that of your competition. Note that buying usually comes down to a decision of choice: your task is to figure out how to make the customer choose YOUR product.
When your research is complete, take a third piece of paper and summarize your findings into a position statement of 50 words or less that answers two questions:
- What business am I in?
- Why will my customers want my product rather than that of my competition?
Market Connection
How will the market know I have what they need?
Making connections with your target market lets the customer know you have the product they need. Unless you are a direct marketer, these connections are made with the assistance of intermediaries: businesses that warehouse, transport and sell your product to those direct consumer contacts and the businesses that represent your product to that system. These businesses are the marketing channels that move products from the point of production to the final buyer. Some, such as wholesalers and retailers, buy and resell the product, others, such as independent warehouses and transportation companies provide distribution services for a fee. Others, such as brokers, present the product in the marketplace for a commission.
Channel businesses are a key component of your marketing strategy. How a channel business warehouses and distributes products, how it targets consumers and how it features and merchandises goods all define its particular set of needs and resulting buying criteria. To be an effective marketer, producers need to identify and understand the differences among channel markets and market their products accordingly. No single marketing program works for all markets.
Research questions:
- What distribution channels are best suited to my product, my customers & my business?
- What are channel costs/benefits?
- What will it take to sustain market/channel connections?
When your research is complete prepare a strategic response to these questions:
- What will it cost to reach each potential market segment?
- Where can my business reach the best market at the least cost?
- Which market and channel options should I develop now?
This fact sheet was developed as part of Market Planning for Value Added Products by UNH Cooperative Extension in cooperation with NY Coalition for Sustaining Agriculture. It has since been edited slightly by the Cornell Small Farms Program.
The Small Farms Program website has manuals and guides on direct marketing, CSAs, Food Hubs as well as marketing specific products such as organic, value-added, and whole sale. SFP also offers a 6-week online course for beginning farmers just starting to explore their potential markets:
Small Farms Program
http://smallfarms.cornell.edu/resources/marketing/
Small Farms Online Course: BF 102: Exploring Markets and Profits
https://cornell-small-farms-program.teachable.com/p/bf-102-exploring-markets-and-profits
