Marketing Natural Meats: Targeting Consumer

Segments in Your Marketing Plan

Dawn Thilmany

National SARE

March 2008Collaborators: 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 supermarkets2. 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.

Primary Location for Meat Purchases

Supermarket89.3%

Internet/Mail0.1%Health and Natural

Food Store2.1%

Meat Shop6.2%

Producer1.9%

Farmers Market0.4%

Secondary Meat Location

Supermarket16.6%

Health and Natural Food Store

16.4%

Meat Shop47.0%

Farmers Market9.7%

Producer4.7%

Internet/Mail5.5%

Market Analysis: Determining Influencing Factors

• Factor analysis was run to determine the top four factors influencing consumer purchases of natural, regionally-produced beef1. Concern about production practices2. Willingness to pay3. 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.

Respondents who Had Purchased Natural Beef Previously,by Cluster, Colorado N=412

0%

10%

20%

30%

40%

50%

60%

70%

High-Income Professional Quality Seeker

Health Conscious Urban Parent

Moderate Consumer

Empathetic Value Seeker

Price Conscious Singles

Average of Full Sample

Share who Make Some Meat Purchases at…. by Cluster, Colorado N=412

0%

5%

10%

15%

20%

25%

30%

35%

40%

Health/Natural FoodsStore

Retail Meat Shop Farmers Market Direct from Producer Internet and Mail Order

High-Income Professional Quality SeekerHealth Conscious Urban ParentModerate ConsumerEmpathetic Value SeekerPrice Conscious SinglesAverage of Full Sample

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.

Importance of Beef Production Practices, by Cluster, Colorado N=412

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

No Antibiotics No GrowthHormones

Natural Organic Grassfed

Imp

ort

ance

of

Att

rib

ute

, 1-5

wit

h 5

bei

ng

mo

st im

po

rtan

t

High-Income ProfessionalQuality SeekerHealth Conscious UrbanParentModerate Consumer

Empathetic Value Seeker

Price Conscious Singles

Average of Full Sample

Importance of Production Practicesby Cluster, Colorado N=412

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

StreamPreservation

Protection ofEndangered

Species

HumaneTreatment

Tracibility fromFarm to

Consumer

County ofOrigin Labeling

BSE Tested

Imp

ort

ance

of

Att

rib

ute

s, 1

-5 w

ith

5 b

ein

g m

ost

Imp

ort

ant High-Income

Professional QualitySeekerHealth ConsciousUrban Parent

Moderate Consumer

Empathetic ValueSeeker

Price ConsciousSingles

Average of Full Sample

Desirability of Meat Attributes by Cluster, Colorado N=412

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

CertifiedOrganic

Good Value NutritionalValue

Percent Lean Fresh (notfrozen)

Imp

ort

ance

of

Att

rib

ute

s, 1

-5 w

ith

5 b

ein

g m

ost

imp

ort

ant

High-IncomeProfessional QualitySeekerHealth ConsciousUrban Parent

Moderate Consumer

Empathetic ValueSeeker

Price ConsciousSingles

Average of FullSample

Desirability of Attributes When Purchasing Beefby Cluster, Colorado N =412

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Aged ≥ 14Days

Boneless PremiumBrand

Ready toHeat

Size ofPackage

Pre-seasoned

Impo

rtan

ce o

f Att

ribu

tes

(1-5

, 5 B

eing

Mos

t Im

port

ant)

High-IncomeProfessional QualitySeekerHealth ConsciousUrban Parent

Moderate Consumer

Empathetic ValueSeeker

Price ConsciousSingles

Average of FullSample

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.

Maximum Willingness to Pay for Natural, Local Beef Products by Cluster, Colorado N=412

0

1

2

3

4

5

6

Max. WTP for Ground Beef Max WTP for Ribeye Steak Max. WTP for Stroganoff Max. WTP for Chili Verde

Max

imu

m W

illn

gn

ess

to P

ay (

1-11

, by

pre

miu

m in

crem

ents

)

High-Income Professional Quality Seeker

Health Conscious Urban Parent

Moderate Consumer

Empathetic Value Seeker

Price Conscious Singles

Average of Full Sample

Natural Ground Beef Market Share as a Function of Premium Price Front Range Returns

(Bootstrap T= 500; Sample N= 263)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$2.29 $2.79 $3.29 $3.79 $4.29 $4.79 $5.29

Price (conventional =$2.29)

Mar

ket S

hare

(pro

port

ion)

Low 1 pct

Low 5 pct

mean

High 95 pct

High 99 pct

Median

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