Leigh Caldwell’s book the Psychology of Price has some great ideas to figure out your prices and marketing strategies. The example he provides about a new tea product and where he sells it was thought provoking. For example, he mentions that if he sells the tea in the grocery aisle, folks will only be willing to pay a similar price to other tea products, but if he sells it next to other tea and coffee products in a coffee shop, he can get a higher price. He also covers overhead costs and that it is difficult to factor those costs in if you don’t have a solid number of how many products you will sell. At Stone Coop Farm, we do a crop plan in January, factor in potential losses (due to weather or pests), and then consider how things have grown in the past. This gives us a good estimate of how many pounds we will produce for the whole year and we can use that to determine an overhead cost per pound. We should also break this down by crop, but right now we are using the average per pound as a guide.
Last week, in my blog on Sales and Pricing Strategies, I shared how we determine our Production Costs. Once we have our Production Costs and Overhead Costs we can determine our Target Price.
We also consider a few other things to determine our final price.
And lastly we do a reality check. This method of looking at actual costs, overhead, profit, etc. tells us a story about whether this crop is profitable or not. Over the years we have reduced the number of items we have grown so we can focus most of our efforts on our most profitable crops. We tried to grow everything our first year and learned the hard way that we couldn’t grow them all in a profitable manner.
Our customer feedback is also super crucial to our product mix and we have annual planning meetings with our wholesale accounts, chefs and also send our customers a survey each year to see what they would like us to change or grow. All this information is incredibly helpful for our planning process.
Did You Know that Survey Monkey is a simple online survey tool and if you have less than 10 questions it is free? It also allows you to save past surveys for easy updates.
Recommended Viewing and Listening: Enjoy a unique version of "Thunderstruck" by some down home country boys - Steve'n, Seagulls.