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Developing a Cooperative Marketing Plan
Kentucky Center for Agriculture & Rural Development (KCARD)
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What is a Cooperative?
Simple Definitions:
“An enterprise or organization owned by and operated for the benefit of those using its services” (Merriam-Webster Dictionary)
“A cooperative is a business owned and controlled by the people that it services.” (Larry Snell, former Ex. Director, KCARD)
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Co-ops Today by the Numbers
More than 400,000 cooperatives in the US
Serve more than 130.5 million members
Nation's 100 largest co-ops, representing agriculture, finance, housing, energy, and hardware sectors reported over $226 billion in sales in 2012
(Source: National Cooperative Bank)
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Kentucky Co-ops: Hopkinsville Elevator
Established in 1968 with 180 members
6 locations with over 2300 members from surrounding 34 counties
Agri-Chem, HEC Crop Insurance, and Commonwealth Agri-Energy
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Kentucky Co-ops: Lexington Farmers Market
Established in 1975
75+ members
Members pay annual dues, booth space rental per marketing day, gate fees per marketing day
Multiple locations
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Kentucky Co-ops: Kentucky Organic Farm & Feed
Established in 2009
Organic Feed Mill Located in Guthrie, KY
18 Members who are Organic Dairy Producers
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Kentucky Co-ops: Central KY Growers Association
Established in 1998, Georgetown, KY
Vegetable marketing cooperative
Cabbage, cucumbers, fall décor, green peppers, pumpkins
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Economic Principles of Cooperatives
User-Owned: The people who own and finance the co-op are those who use it
User-Controlled: The people who use the co-op control it via “One Member-One Vote” on major organization decisions and electing board of directors
User-Benefited: The sole purpose of the cooperative is to provide and distribute benefits to members on the basis of their use of the services of the cooperative. (Operation (Service) at Cost, Patronage Refunds, Improved Pricing, Market Access to Goods and Services otherwise not available)
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Cooperative Principles
Voluntary and Open Membership
Democratic Member Control
Member Economic Participation
Autonomy and Independence
Education, Training, and Information
Cooperation among Cooperatives
Concern for Community
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Cooperative Business Structure
Cooperative
Control - Members elect board.
Capital - Members provide equity.
Liability - Liability is limited to their investment.
Earnings - Profits are shared by members based on patronage; limited by law (8% in KY)
Taxes - Income taxed either as corporate income or as member income.
Life - Perpetual existence.
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Cooperative Benefits
Cooperatives exist to meet their members needs. Focus is on service not investment.
Cooperatives are owned and controlled by their members. Increased local control keeps the co-op in the community.
Earnings return to members. Co-ops keep money in the community. Benefits reflected with: patronage refunds, better prices, services otherwise unavailable, access to markets, and assures sources of supplied
Benefits reflected with: patronage refunds, better prices, services otherwise unavailable, access to markets, and assures sources of supplied
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Disadvantages of Cooperatives
Access to capital
Cost of member and public education
Investment in democratic process
Limit in scope of operations
Co-ops are only as good as their members ask them to be.
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Elements of a Marketing Plan
Market Research & Analysis Development of Marketing Goals Identification of Target Market Marketing Mix (4 P's of Marketing) Product Price Promotion Place Evaluation Methods
Price
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Market Research & Analysis
Identify Trends
What are the trends that are impacting your business? Examples could include local food movement; product differentiations; food safety
Understand the Market
Demographics
Recent Developments
Customer Feedback
Sources of Information
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Market Research & Analysis
Competitor Analysis
Identify Key Competitors
Profile Competitors based upon Key Characteristics (Product Mix, Price, Location, Reputation, etc)
Analyze Yourself—SWOT Analysis
Strengths of your business
Weaknesses of your operations
Opportunities presented by the market
Threats presented to your business by the market
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Marketing Goals
Set specific goals that can be measured
Goals may include measures for:
Sales
Number of Customers
Customer Retention
Sales per Transaction
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Target Customers
Identify Target Customer Groups
Needs that your business can fulfill
Ability to purchase
Willingness to purchase
Retail and Wholesale Customers
Key Demographics
Psychographic Analysis
What do they value?
How do they make decisions?
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Products & Services
Key Features of the Product/Service
Benefits Offered: How does the customer benefit from the product?
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Market Positioning
Value Proposition: What are you offering to your customer?
Competitive Advantage: Why should customers buy from you instead of your competition?
Reputation in the Marketplace: How is your business viewed in the market?
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Pricing
Critical Part of Marketing that is both an Art and a Science
Pricing Must Be Consistent with Marketing Efforts
Key Considerations in Pricing
Cost of Production
Customers' Values and Willingness/Ability to Pay
Competition
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Pricing Strategies
Competitive Pricing
Cost-Based or Margin-Based Pricing
Premium or Willingness-to-Pay Pricing
Loss Leader Pricing
Penetration Pricing
Volume Pricing
Bundle Pricing
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Distribution (Place)
Identify Marketing Channel and Distribution Requirements In-house or Third Party Transportation Wholesale Marketing Channels Grocery Restaurant Institutions Direct Marketing Channels Farmers Market On-Farm Store CSA Internet/Mail Order
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Sales & Promotion Strategies
Develop Promotion Strategies based upon target customers, goals, and expected sales
Dedicated Sales Representative
Promotion tactics include:
Website/Social Media
Radio or Print Advertising
Signs
Events
Printed Materials
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Evaluation Methods
“You Cannot Manage What You Do Not Measure”
“You Are Not Given the Opportunity to Grow If You Are Not Evaluated”
Dashboard for Business
Financial Benchmarks
Key Performance Measures
Sales Forecast 3-5 years Broken down by Product Line
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Financial Benchmarks
Profitability Ratios
Profit Margin (Net Income/Sales)
Gross Margin (Gross Profit/Sales)
Return on Equity (Net Income/Total Equity)
Liquidity Ratios
Current Ratio (Current Assets/Current Liabilities)
Working Capital (Current Assets-Current Liabilities
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Financial Benchmarks
Operating Efficiency Ratios
Labor to Sales Ratio (Total Personnel Expenses/Sales)
Operating Expenses to Sales (Operating Expenses/Sales)
Inventory Turnover (COGS/Inventory)
Debt and Risk Ratios
Debt to Asset Ratio (Total Liabilities/Total Assets)
Debt Service Coverage ((Net Income + Depreciation + Interest)/Loan Payments)
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Performance Measures
Designed for Your Business and Beyond Sales and Expenses
Measure Performance for Specific Areas of Business
Examples include:
Sales per transaction
# of transactions
Labor cost per unit
# units produced per hour
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Closing
Any Questions?
Thanks!