Pushing the pencil high tunnel economics 11 22 2010

Pushing the financial pencil: - Karl Foord - 12/3/2010

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Pushing the financial pencil with high tunnels

Statewide High Tunnel Conference

Mankato - 12/3/2010

Karl Foord

The most important aspect The most important aspect

of any crop is the ability to market it for a profit after considering the added costs when using a high tunnel

Every area has different pricing pressures.


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Flow of this talk Price, margins,

profitability Customer issues

Perceptions, behavior, total experience

Seller buyer perspective


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Price, margins, profitability

First of season products price premium = higher

margins greater profitability

Maintain price premium Monitor labor efficiency


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What Are We Really Selling?

“Revlon sells chemicals Women buy glamour”

Fruits and vegetables Flowers


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What Are People Really Buying? Health, Taste The experience of the

market itself Support of local growers What are your customers

really wanting?


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Exchange

Something of value for an amount of satisfaction

The perceived value > the price

Largely behavioral not mathematical

Usually an emotional trigger Buy and justify


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WIN - WIN Exchange

PRICING DECISION CHART

Price Range

Va

ria

ble

Co

sts

Direct Costs Materials

Profitable Enterprise

Total Costs LOSE - WIN Exchange

Fix

ed

Co

sts

Overhead Salaries, Etc…

COMPANY VIEW Our Asking

Price

Pricing Goal ($)

Profit

Our Costs - Our Goals

No Exchange


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Satisfy a Want

Perceived Value > Price

Convenience

Philosophical Match - Ecological

Health Benefits

Quality - Reputation - Dependability

Selection - Uniqueness

Confidence: no frustrations, headaches

Reference Prices

Context - Urgency


WIN - WIN Exchange

Price Range

FunctionalityLow Perceived Value

Focus of Marketing Efforts

Emotional Benefit

Perception Factors

Customer Value

Determination

CUSTOMER VIEW

WIN - LOSE Exchange

Line of Perceived Value


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Satisfy a Want

Perceived Value > Price

Convenience

Philosophical Match - Ecological

Health Benefits

Quality - Reputation - Dependability

Selection - Uniqueness

Confidence: no frustrations, headaches

Reference Prices

Context - Urgency

Pricing Goal ($)

Profit

WIN - LOSE Exchange

WIN - WIN Exchange

Our Asking Price

No Exchange

Perception Factors

Focus of Marketing Efforts


Our Costs - Our Goals

Profitable Enterprise

Customer Value

Determination

CUSTOMER VIEW

Line of Perceived Value

Total Costs

COMPANY VIEW

Overhead Salaries, Etc…

Direct Costs Materials

Va

ria

ble

Co

sts

Statewide High Tunnel Conference 12 2010, Karl Foord

Low Perceived Value

Fix

ed

Co

sts

LOSE - WIN Exchange

Emotional Benefit

Functionality


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Customer Perception Key customer perception

factors How buyer uses product &

impact of attributes on value Value varies among buyers -

all will not use it in the same way


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Perception management Manage customer perception Proactively to influence the

gap between price paid and value received


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Improving customer experience

5 Sense your market Taste, touch, smell,

sight, sound Do you provide

recipes? Sensory extrapolation


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Customer overview

Understand key customer perception factors for your products

Consider impact of emotion on the total customer experience


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Pricing Issues

Capture the early premium Understand the true

impact of price reductions Vary your crop mix with an

eye to margins and profitability


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High Tunnel Revenue

0

500

1,000

1,500

2,000

2,500

3,000

1 2 3 4 5 6 7 8 9 1 1 1

Weeks of the Season Beginning July 1

Do

llars

Determinate Revenue

Indeterminate Revenue


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1 2 3 4 1 2 3 4 1 2 3 4

Hold Price

$3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00

Yield - 14 lbs./plt

373 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $13,428 $1,306Drop Price

$3.00 $3.00 $3.00 $3.00 $2.75 $2.75 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50

Yield - 14 lbs./plt

373 $1,119 $1,119 $1,119 $1,119 $1,026 $1,026 $933 $933 $933 $933 $933 $933 $12,123 ($1,306)

Revenue from Drop Strategy

Statewide High Tunnel Conference 12 3 2010 - Karl Foord

Price changes through the Tomato Season

Price Strategy

Season Revenue

Totals

Revenue Difference (Hold vs.

Drop)

July August September

Weeks Weeks Weeks

Revenue from Hold Strategy


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Item Tomatoes Cut FlowersMini Bell Peppers

Cucumber

Number of plants

320 1350 630 384

Total crop produced

0 2,700 25,200 11,520

Unit size Pound 10 stems each each

Price/unit $3.00 $3.50 $0.40 $1.00

Gross income $0 $9,450 $10,080 $11,520

Income/foot ² $0.00 $4.92 $5.25 $6.00

Season 7/10-10/5 6/25-9/15 6/30-9/15 7/10-9/15

High Tunnel Crop Mix

96' x 20' high tunnel


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Go to spreadsheets


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Author and Reference Karl Foord Ph.D. MBA Regional Educator, Horticulture [email protected] (651) 480 7723 High Tunnel Production Manual

Pushing the pencil high tunnel economics 11 22 2010

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Transcript of Pushing the pencil high tunnel economics 11 22 2010