How do producers go about finding markets for their products?  This age old question often defines the difference between producers that are successful and those who fail. 

To be successful in marketing and business there are a few tenets that producers should consider: 

•  Do you have a unique selling proposition?  Is this market underserved?  Do you have a competitive or comparative advantage?  Which of these things can your product be:  Better than; Cheaper than; or Different than?
•  Know the territory is a standard adage in marketing. Many farmers make the assumption “the market is there-and I have the best product and everyone will want to buy my product.”  You owe it to yourself and many times to your banker to prove that statement.  The trap in that statement is the assumption that marketing is all about the product.  Everyone should recognize that many of the most successful marketing businesses succeed with inferior product.  How?  The possibilities for being better include: competitive positioning, packaging, pricing, delivery, margins, service, labeling, customer relations, organization/management, ease of transaction, brand, market share, availability.  These are just a few of the other marketing aspects you “win with.”  Product is only a small portion of the value proposition in a competitive marketplace. 
•  Some times we hear producers make the assumption that the food industry is an $800 billion dollar business, and it certainly is possible that their product is so wonderful that it can capture a small percentage of that market.  We have heard producers make the assumption that they can capture 1/1000 percent of the food market, so therefore they can easily be a $8 million dollar company.  While the arithmetic is sound, it is intellectually offensive.  You will likely have to elbow someone out of that 1/1000 percent.  You’ve got to earn whatever share you will get, so don't assume it is there just for the taking.
• Isolate your specific opportunity and anchor your claims with solid, third party observations.  Letter of interest from customers can be validation.  Successful test marketing is always good. Actual transactions trump surveys every time in validating your idea.  Go sell something and see how that works.
• Can you make a business case for your product or idea? Ask yourself if this is a: Fad market?  Growth market?  Is there extraordinary competition? Will you have any revenue diversity? Can you execute a good business model? Will your actual business structure make sense?  Test this out on people as if you were asking them to invest in you and your idea.  Learn from this so that your explanation of the business case makes sense, not only to you, but to anyone.
• Good marketers have a sound knowledge of their competition.  Producers who say “I have no competition,” are a disaster waiting to happen.  Most customer needs are already being met by someone and some product.  Therefore, your product must replace the other firm's product. What are you going to replace in the marketplace?  In his Web site, Paul Lopez says “We insist that the business plans we seriously review feature a competitive matrix, i.e., a comparison by relevant features of their product vs. all other logical purchase alternatives. If it isn’t as clear as a bell that any fully informed prospective purchaser would be crazy not to seriously consider purchasing the product in question, one knows, at least, that he is looking at a me-too offering with all of the risks that that entails.”  http://www.nationalconsortium.org/story5.html
• One trap is assuming you have a comparative advantage and no one knows you are there.  The marketplace is more transparent than ever before in terms of costs, pricing and even production methods. Competitors know more about the margins in other segments, the price they pay for their inputs and the prices they receive for their product than ever before.  The real problem is that most people do not know enough about the value of the product they are producing to know whether their product is under priced or over priced relative to others.  Producers have to be learning more and more about the comparative advantage of their products all the time.
• Just don't let the ego get in the way.  Let the market tell you what it wants to do.  Listen carefully to the market signals.  Great marketers are great listeners…to their customers and to the market in general.  If you become arrogant and believe you know more than the market itself, you will get your head handed to you.  Never become convinced that you know it all or even enough.  Maintain a healthy paranoia because it is extremely likely that you should be afraid of the competition, even when you aren’t.
• Successful marketers are tenacious. One of our favorite motivational speakers says that “It's a dog-eat-dog world out there...for forty hours a week. But when you get out to fifty, there aren’t as many dogs. And when you get out to sixty or more, it's downright lonely!"  There is no attack more likely to succeed than one executed when the enemy is asleep, or having their second drink.  Almost everything is stacked against entrepreneurs. They even the odds with, among other things, sustained, superior effort.  http://www.nationalconsortium.org/story5.htmlhttp
• What is your business model?  How will you actually make money in this business?  You have to explain this carefully to yourself, your banker and your accountant.  This will define the measures you manage to.  Small businesses can differentiate themselves at the business model level.  Do you make money on buying inputs very cheap?  Do you make money by being the most efficient producer?  Do you make money by being able to deliver cheaper than the competition?  How do you make money compared to the competition?  Remember that perception is reality, and value is created in distribution and via marketing, not in production.
• Have a sound knowledge of the financial dynamics of your business.  Farmers don't need an accounting degree, but they need to focus on key results areas, such as: gross margins, return on investment, monthly fixed costs, sales/employee.  Get help in setting up your cost accounting.  You have to plan which business measures you will manage too.  Without these measures, you cannot know if you are succeeding.  Cash flow and new customers are not sufficient measures of short or long term success.
• Have a true understanding of your cash flow. Ask any gathering of entrepreneurs whether they understand that cash is life and there will be nods all around. Then ask them whether they also understand that lack of cash is DEATH and the blood drains out of their faces. The best entrepreneurs equate cash with blood, and part with it only when it stands to directly further their objectives. http://www.nationalconsortium.org/story5.html
• Emphasize working capital.  Put together enough working capital to sustain this business through the thin, early days and beyond.  Put the business on an accrual accounting basis so you are constantly measuring your financial ratios.  These are the true measures of growth in a business.  Don’t do this for the bank or for the IRS…do it for yourself.
• Your business is a reflection of you. True entrepreneurs take things personally. When they succeed, they know that they deserved to. When they fail, they know that it was their fault. They don’t make excuses for past shortcomings. They describe them as lessons learned. They don’t look for places to pin blame. When they first smell failure, they fight like alley cats to turn things around, because they see their performance, however good or bad, as a reflection of themselves. 
• Execute.  It has been said that if you don’t know where you're going, any road will get you there. Entrepreneurs don’t love planning. Nobody loves planning! Planning is a powerful tool, however, and the best entrepreneurs reduce their pursuit of their strategic objectives down to action plans with detailed budgets, people responsibilities and deadlines, and they monitor the assault on a real-time basis. http://www.nationalconsortium.org/story5.html
• Anticipate what will happen.  It will.   Although you can't see the future and anticipate everything that will happen, you need to have a fallback plan.  By far, the majority of small business startups fail and do so in the first three years.  This cold fact could be a good reminder on your office wall right next to the frame with your first dollar earned.
• Get your mental focus right. Peter Drucker is the dean of all business guru's and his suggestion is to replace the word achievement with the word contribution.  His reasoning is simply by focusing on contribution rather than achievement you keep your focus on where it should be…your customers, family, employees, shareholders and industry.
• Passion.  If you don't have fire in your belly-you will not be successful in your company.  If passion is not there, it is not possible for firms to survive the hard times that will happen.
  
  
  

What's New
Commodities & Products
The following pages were updated: agritourism, biodiesel, branded/certified beef, commodity poultry, eggs, ethanol, floriculture, game birds, natural beef, pumpkins, wind energy, meat goats and Midwestern wine.

The following new materials were added:  a business profile on Summerset Winery, a commodity profile on deer ranching, a commodity profile on cuphea, a commodity profile on fiber goats, a commodity profile on dairy goats and a commodity profile on Egyptian wheat.

Business Development
New Content Files

•  How to Use Grants - Written
•  Idea Assessment / Business Development Process - Written
•  Product Marketing Terms - Written
•  PDF Files Converted into HTML (Not all converted as of yet)
•  Preparing for Market Development  - Revised
•  Marketing Targets - Revised
•  What is an Entrepreneur - Revised
•  Commodity Marketing Terms - Revised
•  Farm Analysis Terms - Revised
•  Good Communication Can Solve Problems - Revised
•  Using Group Conflict to Improve Projects - Revised
•  Conducting Marketing Research - Revised
•  Marketing Research Tools - Revised
•  Where to Find Information on Doing Marketing and Business Studies - Revised
•  Understanding Consumers - Revised
•  How to Approach Buyers - Revised
•  Marketing on the Internet - Revised
•  Using Trade Shows for Product Promotion - Revised
•  Choosing a Distributor for Your Product -- Written

Links

• Total Articles Listed on Site: 185
• Total Links: 2,863
• Getting Prepared: 559
• Starting a Business: 575
• Operating a Business: 1,431
• Strategy & Analysis: 120
• Stakeholder Issues: 117
• Business Workbench: 61
• Links Added since last Update: 272

Sections Added

• Business Workbench

• Support and Consulting Services
• Authors

Research
The following research articles were added:

•  Business Organization and Coordination in Marketing Specialty Hogs: A Comparative Analysis of Two Firms from IA
• The U.S. Ethanol Industry: Where Will it be Located in the Future?
  
  

Business Profile
The Summerset Inn and Winery is located in Indianola, Iowa, near Des Moines. It is owned by Ron and Linda Mark, who have been producing wine since 1981. The business is mainly family run, with the assistance of some outside help. The winery employs about seven full-time employees, which includes drivers who ship supplies, marketing directors, retailer shop assistants, two sellers and equipment cleaners. As well as growing grapes, producing wine, and running the bed and breakfast inn, Ron Mark arranges tours through his winery and vineyard, holds parties and tours Italian wineries similar to his own.
 

Motivation
Ron’s wine producing business began as a hobby. He spent five years in Italy, where he learned a lot about wines. He started the winery in 1997 in a garage and the bottles of wine produced were sold out of the basement. When he started the business he was working for the Federal Aviation Services and the wine production was a part-time job that he did in his spare time. After conducting marketing research, Mark determined his target group is middle-aged Midwestern women. His research led him to the knowledge that 80 percent of middle-aged women prefer to drink sweet wine, while the other 20 percent like dry wine. This is the reason why Ron is currently producing more sweet wines than dry.

Business Development
When Ron Mark started his wine producing business, he was the first in the region. He started with twelve acres of land to cultivate. He held seminars for young wine producers and taught them how to grow grapes. Ron currently has 260 different grape growers that sell to him. Ron grows half of the grapes that he turns into wine and buys the other half from other grape growers. Before purchasing the grapes from other growers, the sugar, pH levels, and other things are tested to insure the quality of the fruit.  Ron has no official contracts with the grape producers. He will buy grapes from them only if the test results are good. At the moment eight different types of grapes are being grown. They are ready for harvest at different times of the year so production can be constant and spread out. The production process takes eight months.  On average 100,000 bottles of wine are produced by Summerset each year. In the last year the gross sales of the company reached one million dollars.

Market Access
When Ron Mark started his business he did not know how to attract people to his winery and inn. He began arranging parties for different holidays, weddings and jazz festivals to attract people. During the summer months the bands play outside the building for the visitors to see and hear.

Ron uses several marketing venues.  The most popular and important form of marketing from Ron’s point of view is word of mouth. The vineyard has a web-site that presents his entire business and other information such as which bands are going to be playing during upcoming months. Occasionally he uses the radio during popular listening hours to advertise his winery with commercials. He often prepares leaflets and puts them in hotels around Des Moines so that tourists will know that they can spend their time in the area at his facility.

Critical Steps
When Ron started his business one of his primary needs was to have a business plan. It took him a lot of time to learn how to prepare his plan in a way that allowed him to apply for government assistance. The assistance he was aiming to receive was made for people developing alternative businesses for Iowa not including corn and soybean production. One of the eligibility conditions that had to be met included having employees working for him. Ron succeeded in receiving the government assistance that he applied for.

Another critical marketing test for Ron has been to prove to wine consumers that Iowa wines can compete in quality, taste and ambiance of other regions.  The major competition for Summerset Winery has been to meet the test and competition from Californian wine. California is one of the leaders in the United States market for wine production. With the exceptional quality and prices of Ron’s wine products he succeeded in becoming a leader of Iowa wine production. For more than six years, he has been able to sell the wine he has produced all year long.

Unexpected Problems
One of Ron’s main problems was convincing the government that he was only a farmer and not an industrial company. The property tax assessments in Iowa are much less for farmland than commercial and industrial property.   In fact, companies often pay more than three times more in property taxes than do farmers. He succeeded in having his land assessed as agricultural property instead of commercial or industrial, providing him significant savings.

Success or Failure
The inn and winery business has been very successful for Ron and his family. When the business was started Ron did not expect things to turn out as they did. Each year the number of visitors and the amount of wine produced has grown rapidly.

Industry/ Market Changes
Ron’s current endeavor is to start a restaurant inside of the inn. Now all the parties are catered. The restaurant that he intends to open will serve Italian dishes. This will combine delicious food and home produced wine.

Lessons Learned
One of the most important lessons that Ron learned was the understanding that in order to achieve his goals he must be motivated and work hard. The slogan that he follows is “Learn how to make money from nothing.”




Research Article
Business Organization and Coordination in Marketing Specialty Hogs: A Comparative Analysis of Two Firms from IA
Introduction
Markets for specialty, or niche, agricultural products have grown considerably in recent years. Organic produce is perhaps the most prominent example, but markets for so-called “natural foods,” and for foods with a regional appellation, have also expanded a great deal (Dimitri and Greene, 2002; Grannis and Thilmany, 2002). In contrast to other dimensions of the ongoing evolution of agricultural markets, the growth of specialty production is not the result of technical advances and improved agricultural productivity but rather is the result of product differentiation based largely on the use of retro technologies. There has been considerable research on the welfare effects and organizational changes resulting from technical change and the increasing industrialization of agriculture. Much less has been said about the consequences of agricultural “deindustrialization.” We take a step in this direction by comparing the activities of two Iowa pork niche-marketing firms. We focus in particular on the organizational and coordination challenges associated with specialty-market production. The purpose of our analysis is mostly descriptive; however, we also provide normative analysis, indicating where there seem to be opportunities for improved coordination.

We frame our comparison around generic coordination topics. These include planning and logistics, quality assurance, process verication, business organization, and profit sharing. Hog production systems are inherently uncertain (particularly so in “natural” production systems), so arrangements must be made to accommodate unforeseen events to efficiently manage the animals from farm to consumer. Developing a reputation for quality requires consistent production of the set of attributes

desired by end consumers, and consistency requires some kind of process for quality assurance. Additionally, specialty markets typically involve provision of one or more “credence” attributes, in which case process verication is important. Finally, business organization and profit sharing are somewhat related but also separate in that many forms of profit sharing can be implemented within a given organizational structure.

Although not the only possible taxonomy of coordination issues facing specialty producers, this set of topics represents a convenient grouping of issues for comparison across the firms we study.

To read the full paper, available on the AgMRC Web site, visit http://www.agmrc.org/NR/rdonlyres/0D9B7914-3CB9-43CA-9C24-DF9FCEDCF399/0/marketingspecialtyhogs.pdf.


AgMRC Highlight: Deer Ranching
The United States share in the global market place continues to grow as more venison availability is stimulating more aggressive marketing.  Some traditional crop and livestock producers are turning to deer farming as an excellent way to start a new enterprise that diversifies their existing operation in a lower-input and more environmentally sound manner.  Deer farming also is an expandable enterprise that can be transitioned into with moderate land and capital investments, and species that fit individual interests and business aims.

Additionally, many deer-farm businesses combine some sort of farming operation, and a tourism component that may incorporate leisure activities or educational activities for school groups and other interested parties.  This may include an educational outreach program for family, church or school groups; an associated trout pond for fishing or an aquaculture fish production system; bed and breakfast lodging; and in some cases, contract hunting of deer or game birds in a preserve setting.  As with all other agritourism operations, the emphasis is on a quality experience in a clean and well-organized environment. Venison, deer meat, is the primary product produced by most deer farmer/ranchers.  In the United States, the venison market currently is in a developmental stage. 

The main market is “white-table-cloth restaurants” and processed sausage.  Venison also is sold at supermarkets as well as at individual farm outlets.  There are several large venison companies in the United States as well as numerous smaller companies.

Deer farming or ranching operations tend to involve all or a few product areas.  Farmers usually concentrate on a primary cost-effective production area and consider others a source of value-added co-products.  The Food and Agriculture Organization of the United Nations, divides deer farming products into two categories: those that are taken from deer while alive, e.g., velvet, musk and milk; and those removed from the deer after slaughter, e.g., venison, skins, tails, pizzles, sinews, glands, tusks, hearts, livers, tongues and kidneys.  Many of these items (milk, gland, tongue) are far more important to European and Asian consumers than they are to the North American market.

Velvet production involves selected stags from purchased or bred stock and center on the seasonal harvest of the soft velvet-stage immature antler.  These animals are maintained as a velvet-production herd.  Usually in these operations, stags judged as poor potential producers and not selected for the velvet herd are culled, then finished following a velvet harvest.  These animals usually are processed for meat sale; however, the timing of this cull and finish does not coincide with the chilled-venison trade, so the animals may end up in another market, perhaps developed out of necessity by the producer, for example as value-added products (sausage, jerky) or smoke-cured special cuts for sale at farmers’ markets or through specialty food outlets.

The velvet antler, a traditional Asian medicinal and nutritional supplement, is increasingly viewed in North America as a nutraceutical. 

In Wisconsin, the Wisconsin Department of Agriculture has noted that ever-increasing consumer demand for all types of health products and nutritional supplements are a primary driving force behind increased demand for velvet, and this in turn has promoted increased and broader venison marketing efforts and greater consumer acceptance.

Many deer farming/ranching operations include related alternative livestock or agri-tourism components.  Most “deer farms” also include, or started as, elk farms; and the deer farm, especially if it is a breeding-oriented operation, may include a multi-species mix of some combination of elk, red, white-tail and fallow dear, and may include reindeer (actually a long-domesticated dwarf caribou), sika, rusa, or other exotic species.  For example, according to the Wisconsin Department of Agriculture’s 2002 records, 372 farms in that state produced an estimated 17,777 red deer, fallow deer and elk. 

The North American Deer Farming Association (NADeFA®) is the primary industry group that represents deer farmers and ranchers.  NADeFA®'s demographics are a reflection of the industry and its agricultural value.  The organization states that they represent the owners of over 75,000 cervid livestock; and NADeFA® members represent more than $US111-million in livestock value.  The organization’s ownership data shows the following species mix: axis, 9.2 percent; fallow, 23.7 percent;  red stag (red deer), 30.4 percent; sika, 21.1 percent; whitetail, 26.9 percent;  wapiti (elk), 4.6 percent and other species, 3 percent..

Business Development
Since deer naturally consume less fodder than cattle, and feed in a manner that is less damaging to pastures, deer farming can be up to three times as profitable as traditional livestock production.  Good pasture and quality hay or other supplemental feeds are important for successful deer farming.  Corn and commercial deer pellets are often added to hay to provide energy in winter and to add weight to pre-butcher stags.  Deer pellets can be used to assure the animals are getting the proper nutritional elements required for good health and fitness.  Deer have rapid maturation rates and can reproduce for up to 20 years.  Feeding pellets or corn on a regular basis establishes a routine where the owner interacts with the animals.  This may be quite important if the operation is centered around producing breeding stock or antler velvet tissue rather than meat production.

Profile written by Dan Burden, AgMRC specialist, Iowa State University, djburden@iastate.edu.