People, promos, pricing: marketing factors

What are the best tools for assessing consumer interest in a new food product?

Klein: When you’re starting off small, there’s nothing cheaper than just making some of the stuff and getting the label and trying it. It’s cheaper than focus groups, surveys, research. That’s on a small scale.

Carlson: Sampling and direct marketing to people you meet yourself.

Economy: In-store sampling — defining your target consumers and getting their feedback in an actual store setting. I say ‘define customers’ because our product could be hated by 95 out of 100 people, but they aren’t our target group — the five are.

Samuelson: In-store sampling and instinct.

Gullekson: Snoop around and find out what people want and aren’t able to find. There are a lot of food products people want that corporate food companies won’t touch because they’re too low in volume. But a small food company can fill that need and make a profit.

Jager: Going directly to the customer. We worked with Jim Cahill (a marketing consultant) and did a number of in-store interviews with customers and sent out surveys. Focus groups helped us formulate our Oriental (soup mix). Japanese families, for example, told us our products were too westernized, too hearty, too much rice. They like a delicate, more watery soup.

What’s your experience with outside marketing help, such as consultants or market studies?

Klein: In the specialty arena, not very good — nobody knows about it.

Economy: When we’ve used people extremely familiar with the industry, our experience has been positive.

Jager: I would recommend working with a consultant.

Samuelson: We are lucky to have a marketing consultant who has helped us stay on track.

Carlson: Most (consultants) are too big and want too much money for a small starting company.

Gullekson: A marketing plan should be tailored to a client’s needs. A consultant could do a plan that could take you somewhere you don’t want to be.

Do you consider it best to develop and market one product at a time or to offer a variety?

Carlson: One or two at a time.

Samuelson: (One at a time) ... product development is time consuming and expensive.

Economy: I believe it’s best to start with one product but offer a variety of flavors. It’s complicated enough to get your brand identified, but you need variety to interest retailers, distributors and consumers. It also helps establish more shelf territory. The more you have, the better your sales. Four times the shelf space could mean more than four times the business.

Jager: When you go to a distributor, they’re looking for a line. That’s why we came up with four. What’s strong in one region may not be in another. Our onion flavor, for example, sells well in the South but is not as strong in other regions.

Klein: It’s difficult to come into the market with one product unless it’s an extraordinary thing .… You probably want three or four varieties to show you’re a legitimate company.

Gullekson: New products need to be introduced carefully, after a lot of thought and research. We’re trying to add one new product per year. If you rush it, you’ll end up making mistakes or putting your resources down a dead-end road.

Do you have a Web site and has it helped?

Samuelson: Yes.

Gullekson: Yes, we’ve gained national exposure from our Web site and people are finding our products.

Carlson: Yes, for about six years; it’s basically a tool for additional sales.

Klein: Yes, it has helped some. More than anything, it has helped us sharpen our marketing focus and product presentation, rather than just selling a ton of stuff.

Jager: The Internet is faltering a little, but I don’t think it’s dead. It’s realigning. We just reinstated a Web site and the focus will be individual sales. We can make more money going direct to the consumers than in the mass market.

Economy: In our case, it’s not possible for a consumer to understand all our products’ benefits by just reading the label. (The Web site) provides more information ... including what stores are carrying the product.

How did you determine price?

Carlson: At first, just by the price of milk.

Klein: To make the kind of margins you need with a specialty product, you have to sell it for three times the cost of production. Otherwise, it’s not worth it.

Samuelson: We researched products like ours and factored in our costs. Some products we like didn’t make the cut because they are just too expensive to produce and re-sell.

Jager: You bring everything to bear — raw ingredients, packaging, labor, what it costs to deal with a distributor or broker and the cost of money. So if you can run a net profit of 6 to 10 percent, that’s covering all the bases. You have to reach a certain sales volume, too, and figure out what the break-even volume is.

Economy: Price is based on the competitive situation, interviews with retailers and establishing sufficient profit margins to cover sales and marketing expenses. Often people will make the mistake of looking at initial costs to determine price. They need to understand that as volume goes up, expenses go down. You have to weigh in the disadvantages of setting a price too high … be prepared up front to break even or even lose money if it helps you be more competitive. Down the road you’ll make money.

Gullekson: I suggest comparative pricing, keeping your final end result at a reasonable price yet profitable. And not being too greedy.

What have been your best advertising and publicity tools?

Carlson: Local newspaper articles about the product.

Gullekson: Doing a booth at festivals — like Barnesville’s “Potato Days.”

Samuelson: We’ve had a lot of local press as well as national — the best tools were the ones we didn’t have to pay for.

Economy: We spent a lot of time and money on the product packaging, so it’s a nice sales point. Articles in Ag Innovation News and trade magazines have helped. We haven’t advertised in major ways. Sometimes stores and co-ops have newsletters that we advertise in, but in-store demos have generally been the best advertising.

Klein: The products themselves … word of mouth.

Jager: I think I’m still looking for them.

In your view, is it better to target a niche market (gourmet, organic, regional, etc.) or tap into the mass market?

Samuelson: Target a niche market.

Carlson: Niche market, for small companies knowing their specialty product.

Gullekson: Anybody who thinks they can produce a cookie or anything else cheaper than Keebler is crazy. You have to find something unique, different — that there’s a demand for.

Jager: Mass marketing is so expensive and that was part of our problem, not realizing the exorbitant cost. We’re switching to specialty markets and we keep getting letters from individuals who want to buy direct, by the case. You charge what would be going to the store, after the distributor. I’m making more and I don’t have all the associated costs of in-store demos, coupons, paying a broker.

Klein: I don’t know how anybody starting up can go into a mass market. If it’s food, I would say it’s virtually impossible because grocery stores want slotting fees — your rent for the space — that will cost tens of thousands of dollars right off the top. Your margins are going to be very small. If you’re ready to make a million products a year, you probably have enough money already.

Economy: Niche market is the only way to go. Your consumers are more in touch with you and you’re not competing against major brands. There are no slotting fees and price is not the driver.

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October 2001* AURI AG INNOVATION NEWS