Even before a crop or animal goes in the field, a best practice for farmers is to be aware of the markets available for that product. They need to know someone will buy what they produce. As a word of warning about what not to do, one particular farmer called Extension to ask where he could sell a very large number of bushels of a specialty crop just after harvesting it. Fortunately for him, through the relationships extension has, the crop was able to be sold. Let that be a lesson that selling your product is just as important as producing it. In order to do that it is important to understand who is going to buy your product, what they need from a product, and the prices that they are willing to pay.
First and foremost, it’s important to have a working relationship with current buyers and to develop working relationships with potential buyers. Especially in the local food supply chain, relationships are important because it’s a smaller community of companies and individuals. Speaking from an economic impact perspective, the local economy does better when their more connections between businesses and individuals in the community.
A good working relationship with your buyer could mean including them in your production planning process. As an example, community-supported agriculture relies on the communication between farmers and customers. In particular, decisions on what to produce for the season are often the result of suggestions by the customers. Improved collaboration is mutually beneficial in other ways too. In wholesale and other indirect sales channels, a buyer might need to meet certain regulatory standards, which affects their decision on where to buy products. For example, produce distributors often require Good Agricultural Practices (GAP) Certification. Having knowledge of their needs would help you develop your business so that you can sell to produce distributors.
Finally, having a good relationship with your buyers allows them to understand your cost structure and to understand theirs. Moving forward you’ll be able to enter into agreements that are profitable and competitive.
Marketing’s Four P’s: First Steps for New Entrepreneurs – Purdue Extension (EC-730)
This publication introduces the four P’s of marketing and includes worksheets that will help you determine the most effective marketing mix for your business.
Industry Analysis: The Five Forces – Purdue Extension (EC-722)
This publication describes five forces that influence an industry. The publication includes a set of application questions that will help you evaluate the structure of the industry you are in or are considering entering. The more you understand about the strength of each force, the better able you will be to respond. The five forces are: bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes, and rivalry among competitors.