Know your place — the second P aka

Know your place - the second P (aka ‘Distribution’) Jo Hunt LFA 1. 24 and 1. 25

Your marketing mix – the 5 P’s Product ¡ Place (i. e. Distribution) ¡ Price ¡ Promotion ¡ People ¡

Place… ¡ ¡ ¡ 1: where do ‘my’ customers already/ want to shop? 2: how do different ‘places’ present the produce? What’s the service like? How does shopping there make you feel? 3 : how much of the distribution do I want to do myself? 4: which places charge what price? 5: how much of the price do I get to keep as a result?

For starters…. ¡ Where do YOU buy your fresh food and why? l l Financial – ¡ do you always shop at the lowest cost place? ¡ Are there hidden costs of buying from different places for you? Perceptual – ¡ Do you like the location? ¡ Do you like the service? ¡ How does it make you feel?

1: where do ‘my’ customers already/ want to shop? LFA 1. 24

¡ How can you find out where your customers want to shop; if they’ll buy your product, and how much they will pay for it?

¡ Select your top 3 to 5 places … l l For your customers

15 local routes to your customer…. ¡ ¡ ¡ ¡ Farmers markets Farm shops Gate sales Local retailer National small retailer network Supermarket Local processor Co-op contract ¡ ¡ ¡ ¡ Box scheme Community Supported Agriculture Mail order Internet site Restaurants Hotels School contract

2: how do different ‘places’ present the produce? What’s the service like? How does shopping there make you feel? LFA 1. 24

Four ‘places’ that sell local food ¡ ¡ Black Isle Farm Shop Rosemarkie Butchers Sutor Creek REAL market stall

3: how much of the distribution do I want to do myself? LFA 1. 25

What is a supply chain?

Supply chains farmers market, local shop and local group retailer product producer wholesaler retailer Second distributor retailer consumer

Draw up the supply chain for… ¡ Wester Ross salmon selling: l l l At a show On the web At a supermarket

Why sell direct to consumer? ¡

Why get someone else to sell for you? …. . ¡ ¡ ¡ ¡ Location Access Variety Small quantities Customer service Promotion Final pricing decisions Customer focus

Which supply chain suits local fresh food? Short supply chain Industrial products Long supply chain Services Tangible goods More control required Larger purchases/ fewer customers Bulky, perishable products Less control required Smaller purchases/ lots of customers Cheaper, standard, non-perishable Consumer products

Will you get others to sell for you? Risk ¡ Who will set price – you or retailer? ¡ Do consumers pay for - service or raw product? ¡ Who controls how much shelf space you get?

List for your 3 to 5 selected outlets ¡ Tasks you will do yourself? l l l l l Produce Grade Package Label Sell Dispatch Deliver Invoice/ cash Keep in touch ¡ Tasks you will pay others to do? l l l l l Produce Grade Package Label Sell Dispatch Deliver Invoice/ cash Keep in touch

4: which places charge what price? LFA 1. 25

¡ rank all 15 from highest consumer price to lowest?

15 local routes to your customer…. ¡ ¡ ¡ ¡ Farmers markets Farm shops Gate sales Local retailer National small retailer network Supermarket Local processor Co-op contract ¡ ¡ ¡ ¡ Box scheme Community Supported Agriculture Mail order Internet site Restaurants Hotels School contract

4 very different pricing strategies? ¡ ¡ ‘Benchmark’ ‘Costs plus’ ‘It’s made already’ (aka ‘dumping’) ‘Fairtrade’

Carrots (via a supermarkets…)

Seasonal veg (via a community growing project)

…. cheese and year round veg (via CSA membership)?

¡ ¡ Which ones are most profit sensitive (most likely to be affected by outside cost changes)? Which ones are most likely to be price sensitive (customers stop buying if you change the price)?

5: how much of the price do I get to keep? LFA 1. 25

Gross margin = sales (price x volume) – transaction costs (what you pay to others to sell your product + additional production costs)

% age return on selling veg…. Farmers market Sales (Price x volume) - Wholesaler margin - Retailer margin - Promotion costs - Premises costs - wastage - Additional production costs Your gross margin Local retail Retail chain

Which sales routes will you use? ¡ Short l l ¡ Who will do the work? What volume can you achieve Long l l What %age margin will you get What volume can you achieve

You are in control…. You choose which outlets to use You plan the volume of sales each year You choose how much time you spend with customers You choose how much control you have over price, customers and their sales reaction And you have to live off what’s left… the profit.

Quick review… Are you confident to have a go at: l l Assessing 4 or 5 potential local outlets Selecting the outlets you will use Describing the roles you will play and those you will pay others to do Estimating the %age return you will get