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Marketing local products:
Short and long distribution channels

[ Summary ]

Section I
Marketing local products via short distribution channels

 

Chapter 5
Placing products on the market

 


 


5.4 Project approach

 

Initial human and economic
objectives of the project


A project is the result of the determination and effort of an individual or group. Therefore the criterion for success is not only motivation but also the independence acquired by farmers or craft workers in bringing their project to a successful conclusion after the consultants have done their job.

The project approach should include product tests and test marketing, as described earlier. Such testing may lead to a change in the business approach.

A formal market survey takes place downstream of the tests. It allows the feasibility and profitability of a major investment to be defined in advance in order to avoid making unnecessary mistakes later.

The market survey is not “scientific”. It is a technique to examine all of the marketing parameters and use check lists to record results, study them and adapt initiatives in line with their conclusions.

Improving initiatives calls for an objective evaluation of the results and it is vital to record data. Useful indicators include: patronage (the number of customers should be noted every day); earnings for each product (cash register data should be studied); qualitative observation of customers (persons working at the sales counter should note customer observations for the half-day or the whole day, as well as their own observations about the products and the sales results); and a customer file should be kept, recording information about items such as repeat business.


    Example:
    Market survey carried out with a view to setting up a shop selling farmhouse products in town

    The aim of the survey was to determine the advisability, for a group of farmers, to invest in a project for a town shop to sell a wide range of ordinary consumer goods (vegetables, fruit, eggs, delicatessen meats, pork, rabbit, duck, chicken, cheese and fresh dairy products, plus complementary items such as jam, honey, wine and fruit juice). The planned investment was considerable, since it involved hiring shop premises, fitting them out and recruiting a sales assistant.

    The market survey revealed the following information:

    • 15,000 inhabitants in the catchment area, with not much to attract shoppers because there were few other shops in the street. It could be expected to capture between 3% and 5% of the theoretical market. The population was mainly young, with an average to high income (data obtained from the Chamber of Commerce). This pointed to a potential turnover of between 150,000 and 450,000 euros per year.

    • The use of a qualitative and quantitative approach that included in-depth interviews and a questionnaire sent to a representative sample of potential buyers made it possible to pinpoint customer expectations and find out what they thought of the product range the farmers’ group was proposing to sell.

    • The point of sale was indeed set up, at a cost of 106,000 euros. Turnover gradually increased, reaching 230,000 euros a year after two years. However, a local disruption (public works at the end of the road where the shop was situated, preventing cars from parking nearby) caused earnings to fall back to below 153,000 euros.

This example shows that although a market survey avoids gross errors, it is not a particularly precise technique. A market survey does not take into account the motivation and the ability of the project promoters to adapt, a fundamental factor that can make an uncertain project viable or, on the contrary, lead to the failure of a project that starts out in an ideal context.

 

Project approach

 

Continually monitoring the market
in order to reorient the project


Without innovation, customers become weary of the finest product, even from their usual point of sale. Each product has its own life cycle, which means that producers must update their products in some way.

Knowledge of the market depends on continual monitoring. This means periodically re-analysing demand and potential target groups in order to be able to put together a suitable product offering at any time. It is particularly useful to formally monitor the market every two to three years or whenever a product, shop, or service reaches a plateau, in terms of either turnover or patronage, or when a problem arises (e.g. a decline in patronage).

Unlike in the case of a preliminary study prior to investing in a project, a supplementary source of information is available for monitoring the market in the form of business indicators: earnings for each product; patronage; margins for each product; percentage of unsold articles; suggestion box; customer comments; sales trends; competition; customer loyalty; and team motivation.

Certain producers practise informal permanent monitoring. This means that they remain continually alert to their customers, observe what their market competitors are doing and make use of their holidays, whether at home or abroad, to visit places that are likely to provide them with new ideas.

 

Product life-cycle


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European
Commission

Agriculture
Directorate-General