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Marketing Natural Meats: Targeting Consumer Segments in Your Marketing Plan Dawn Thilmany National SARE March 2008 Collaborators: Wendy Umberger and Amanda Ziehl Ag and Resource Economics, Colorado State University
Previous Literature Successful products are commonly created with the demands of the target consumer in mind during all stages of product development (Hill et al., 2004; Rowles, 2000). Consumer interest in beef with production assurances, such as quality and local designations McGarry-Wolf and Thulin, 2000; Lusk and Fox, 2002 Sunding (2003) focus on publicly-oriented characteristics nutritional content, purity, and freshness; “free-range”, “organic” & “locally-produced” Civic agriculture issues
Colorado Homestead Ranches 5 ranches started selling freezer beef in 1997 Product attributes: local, naturally grazed beef, no feedlot antibiotics or hormones Began selling processed meats in year 2000 Participate in two farmers markets
Colorado Homestead Ranches Started with freezer beef, then moved into farmers markets, then retail Opened Homestead Market in May 2002 Value added products Sell products to restaurants New meat processing facility Complements past wild game processing Increasing pressure for higher volume sales
Background Information Goal: return $1400/head ($2.00/lb. per carcass) CHR producers contribute sweat equity (they are not paid for their mgmt. labor contribution 5 years ago, began paying hourly labor for retail and sales effort Future goal: pay each producer for contributed labor as market and sales expand Market analysis to determine smartest sales growth strategy
Market Analysis: Identifying Competitors CHR owners identified 3 specific areas of competition for their products: 1. Generic, unbranded beef marketed through large-scale supermarkets 2. Branded beef products, with some combination of genetic, quality, production practice or production location claims. 3. Direct market beef sales, such as purchasing directly from producers, farmers markets, mail order, etc.
Market Analysis: Determining Influencing Factors Factor analysis was run to determine the top four factors influencing consumer purchases of natural, regionally-produced beef 1. Concern about production practices 2. Willingness to pay 3. Meat attributes (premium brand, fresh product, pre-seasoned) 4. What motivates willingness to pay more for local, natural products.
Factor Analysis: A Summary One: 14%, Personal Needs Dominate No “public good” interests except BSE, convenient shopping & low willingness to pay Two: 60%, Public-Minded, Civic Motivation High loadings on all alternative production attributes, Shopping at health food and farmers markets Three: 20%, High-End Market Highest WTP, secondary shopping, natural purchases suggest low price sensitivity Four: 6%, Public Health Concerns Uniquely concerned about health-related production attributes and testing, less WTP
Market Analysis: Consumer Segmentation Cluster analysis was used to create 5 consumer groups: 1. High-income professional quality seekers (13%) 2. Health conscious urban parents (13%) 3. Moderate consumers (30%) 4. Empathetic Value Seekers (22%) 5. Price conscious singles (22%)
Market Analysis: Cluster Demographics The sample is primarily female (over 70%), but the High Income Professional Quality Seekers are significantly more male. The High Income Professional Quality Seekers and Health Conscious Urban Parents are significantly younger than the sample average. On average, all clusters except the Price Conscious Singles fall within the income category of $40,000–59,900.
Market Analysis: Product Positioning In addition to identifying potential customers, one must simultaneously consider the appropriate product position for the company’s beef products. Affects production choices, labeling, claims Consumers were asked to rate how important different production practices and meat characteristics were to them.
Market Analysis: Pricing The last analysis needed to develop a marketing plan relates to pricing. Divided by clusters and product line. Consideration must be given to competitors prices. Must also assure a price that covers costs. Consumers were asked their max WTP for natural, local beef products.
Target Consumers Quality Seekers and Health and Natural Consumers (13% each) willing to pay a premium for natural, local beef. Quality Seekers’ expect quality Health/Natural Consumers are more altruistic Ranked production attributes such as “no antibiotics,” “no hormones,” and “humane treatment,” significantly higher Significantly lower percentage of their premium due to personal benefits
Future Target Consumers Empathetic Value Seekers (22.6%) Not willing to pay a premium price Value production processes more than any other segment, but less capacity to pay CHR has still garnered some of their business Lower price points on some meat cuts (roasts, ground beef) that otherwise do not sell as quickly, Overall, these results indicate the continuing role for production claims as product differentiation criteria.
Market Analysis: Implications Consistency was found amongst consumers across places: from US to Colorado to the Western slope of Colorado. CHR established themselves as a premier beef producer and marketer, as well as a loyal community citizen and steward. Appropriate targeting is essential as they grow Attract new customers through word of mouth, promotion and retention of loyal customer base
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