Guide: How to Price your Farm Products
New Farms and generational Farms alike often question how to price their products to sell, while increasing profits. Many Farms get into a race to the bottom, believing they need to price low to sell more product. However, our most successful Farmers build product value and maintain strong Buyer relationships. That enables them to command premium prices and attractive margins, the key to building a healthy business.
This guide lays out the steps taken by Independent Farmers to price their products for profit, while maintaining a happy customer base:
1. Create an Attractive Farm Brand
To grow an operation that is a staple in your local community, your Farm (products and visuals) must stand out to Buyers. Farm branding encompasses the look, feel and values of your business. Creating a strong Brand in your community that builds trust with current and potential Buyers.
To maintain a professional, stand-out image, your Farm should have a recognizable logo that encompasses your products or values. This will allow Buyers to easily recognize your business in-person (Farm markets, store, stand, vehicles) or online (web, mobile, social, email). With branded packaging (e.g. a logo on your Subscription boxes), anyone who sees your products will know where they come from, and remember your Farm.
If your Farm stands out in your community through recognizable branding, high-quality products and strong values, you will attract Buyers willing to pay a premium for your products. Position your Farm within the community so local customers recognize your Brand, and know how to shop your products (website and QR code).
You may go to markets, hold on-Farm events or partner with other local businesses. Inviting Buyers on your Farm will allow them to know you personally, understand your values and see your commitment to raising sustainable products. This will encourage Buyers to try your products and trust you as an important part of the community.
2. Build Value Around your Farm Products
To build value around your Farm products, you must show Buyers why your products are better than those at a local grocer. Educate your customers on the practices of sustainably raised goods versus commodity alternatives. If Buyers understand the difference between locally, sustainably raised protein, dairy or produce and factory-farmed goods, they will see the value in paying more for your products.
Many Farmers share their day-to-day lives on the Farm through social media or email newsletters. Sharing your daily chores, family activities and commitment to the Farm allows your customer base to form a personal connection with your Farm. 9 out of 10 Buyers want to support a local “family-owned” business. Sharing your goals and values with customers helps them ‘buy in’ to your vision for the Farm. When you build a relationship with Buyers, they cherish your products more, making them more willing to pay a premium.
3. Evaluate your Cost to Produce
Once you have built value around your product and built a strong relationship with Buyers, you must evaluate your cost to grow and harvest your products. If you cannot cover operating costs on the backend, your business will quickly run into the ground. Some Farms must hire extra Farm-hands as their business scales. This is a cost that must be considered as part of your production costs.
Other costs include inputs, processing, equipment, maintenance, labor and taxes. It is best to evaluate your operating costs periodically to ensure you are pricing your products to make a healthy profit after covering all your expenses. Implement delivery fees, to cover the underlying costs of providing convenient fulfillment options for Buyers. (Note, Amazon charges $9.95 for grocery delivery, it is not free).
4. Offer Convenient Purchasing
We live in an e-Commerce era. Buyers make purchases anytime, anywhere, and are willing to pay for convenience. Make your products available through various channels and offer fulfillments that make purchasing easy for Buyers, and they will pay top-dollar.
In-Person
92% of Buyers prefer to shop locally to support local producers. Position your Farm within the community so they know where to find your products. Your Farm can partner with other local businesses to build trust with each customer base, while expanding your reach. Some Farms partner with local bakeries to provide fresh fruits for pastries, bringing business for the bakery and their Farm.
Successful Farms take advantage of the ‘Local Loop’ in their town, where community members frequent on a regular basis. These areas include schools, churches, or other local businesses (e.g. gyms, coffee shops). Hand out flyers or set up pick-up locations in these areas to attract Buyers and offer convenient pick-ups.
Direct delivery to your Buyers’ doorsteps offers further convenience, and 8 out of 10 Buyers are willing to pay a $5+ fee for the luxury. Your Farm can determine what zip codes are available for delivery, then offer services once a week, every two weeks, or once a month. Once neighbors see your branded Farm vehicles and boxes consistently in their neighborhood, they will be inclined to find you online to shop. If they know their friends trust your products, they are more likely to trust them, too.
You do not want to miss out on a purchase because you do not accept your Buyers’ preferred payment method. You need the capability to accept cash, check, credit cards and mobile payments, especially in-person.
At Markets, you need to have a system that supports various payment options and connects all sales (online and in-person) in one account for organization. Using a Point-of-Sale (POS) system that supports sell-by-weight and syncs to your inventory for digital payments is crucial to offer convenience to your business, and your Buyers.
Online
Buyers will spend more for products they can access online, from the comfort of their home. Convenience is a luxury most people will pay extra to enjoy, and having a simple shopping experience across a variety of platforms will encourage Buyers to choose your Farm over a grocer. Link your store on your social media profiles to make it simple for Buyers to find your products.
Your online store should display product photos, inventory, costs and fulfillment options. Buyers want clarity when shopping, to easily understand what is offered from your business. Give Buyers multiple purchase options, such as pre-ordering a turkey ahead of Thanksgiving to guarantee their meal, or placing a deposit on a whole pig to secure their order.
This will build the Fear-of-Missing-Out (FOMO) around high-demand products, helping Buyers have peace-of-mind about securing your goods and obtaining cash flow for the Farm ahead of harvest.
Email marketing will ensure Buyers are up-to-date on Farm news, and that they are consistently receiving communication about new products and offers. If your Farm is not top-of-mind, you must assume someone else is marketing to your Buyers. People are always buying food, so you have to build loyalty to ensure you are their first choice. If your Buyers have a relationship with your Farm, know your story and have convenient access to your products, they will spend more money with you.
Conclusion
Your Farm will miss out on healthy profits if you price your products too low. Evaluate your costs to produce and operate your Farm, and then analyze how much Buyers in your area are willing to pay for sustainable products. Start with a higher price, before lowering it. If a few Buyers are not complaining, then your prices are too low.
If it is convenient to shop your products, Buyers trust you and see the value in what you offer, customers will pay a premium for your goods. Do not compare your product prices to those offered at a grocery store, instead consider how much you must price your products to maintain healthy margins (and a viable income).
Barn2Door offers software for Independent Farmers to create and promote their brand, sell online and in-person, and save time managing their business. If you’re curious to learn more, watch this 5-minute video.