How to identify and take advantage of organic market opportunities?

This section provides the marketing techniques for starting an organic business. It explains how to plan a business, how to set up a marketing strategy and how to implement it with appropriate techniques.

Brain storming: The 5 P’s

Make a group brainstorming session with the participants, asking what their challenges regarding the 5 P’s are and how to overcome them:

Product
Place
Price
Packaging
Promotion

How to identify market opportunities?

Business does not just happen! Rather, it is a result of different important decisions that are taken on a path leading to the development of a business, where the first step relates to the identification of a concrete opportunity.

In practice, the identification of a new market opportunity may be driven by a specific demand from the side of a buyer for a new product. However, in the context of a new market—which especially is the case of organic domestic markets in African countries—actors must be more proactive in gathering the needed information that allows them to judge if there is a new business that they could get involved in. In practice, this implies the following steps and tools all aiming to derive sound conclusions based on the information obtained:

a. Marketing concept development

In the process of identifying a market opportunity, most important is to clarify how a specific business idea might generate tangible benefits to a specific group of consumers. In terms of ’marketing thinking’, this comes down to the development of a sound ’marketing concept’, which relates the value that is perceived by a specific target group of consumers with the costs that occur when providing a specific good. For producers it becomes interesting as soon as the value consumers attribute to a specific good is considerably higher than the costs providing it. This is the case for many organic producers, but of course needs to be analysed individually, for example in the process of conversion to organic farming.

In methodological terms, a marketing concept is defined by 5 P’s, which all relate to how consumers perceive and value a specific good. All these P’s – relating to product, packaging, price, place and promotion – must be defined such that they make complete sense to a clearly defined consumer segment and generate optimal profit. In practice this means, for instance, that high quality must go hand in hand with a high price (even if production costs of such a product may be much lower); or that these products should be sold mainly through the supermarket, which many times stands for high quality and image.

Product - An innovative, high quality product is the basis forsuccess in an organic business.

Place - The place where a product is sold is of great relevance to make sure that those consumers who are targeted get to know the product and have access to it for purchasing. It is important to make sure that the product is easily found in the store and shelf where it logically should be placed.

Price - Each product involves production and marketing costs. However, the product price is much more than ’just’ covering these costs: it is to visualize the value this product has for the consumer. Therefore, the price is an important asset to help consumers understand the value of a product and should be determined based on knowing how much consumers are willing to pay for this product.

Packaging - The packaging is many times the first thing a consumer notices about a product. The packaging must not only be appealing but communicate in an optimal way what the product is offering, making complete sense to the consumer. In this sense, the packaging with its label must establish a clear hierarchy of what attributes are most important and visualize these correspondingly.

Promotion - There are so many products out there, that consumers don’t have the time to search for products and get informed about them. That is why promotion is so important, to help present a product to the target consumers in the right way: in the right time, in the right place and with the best way to make the consumer understand the valuable attributes it is offering to him. It is important to come across clearly with 1 or 2 messages that help consumers understand why this product is beneficial to them.

Since the main challenge for sound marketing concept development lies in a good understanding of potential consumers and the market, marketing concept development must go hand in hand with qualitative research, which help access and analyse relevant information.

b. Rapid market appraisal

Doing a rapid market assessment for agricultural products is an efficient way to obtain information about any sector and commodities that have market potential, for example organic products. It aims to rapidly access information that is useful to identify and analyse market opportunities. The sources of information that will be approached may vary, including the following potential sources:

Available statistics
Revision of websites
Visits to outlets: supermarkets, street markets, small retail shops
Face to face interaction with processors, traders, retailers, consumers
Buying and testing of different products

All information obtained will serve the same purpose: to assess existing and potentially new market opportunities. Altogether the rapid market appraisal should enable users to:

Identify market outlets for specific products and understand how these products are marketed
Understand how different products compete with each other
Detect deficiencies in the marketing concepts of existing products
Develop a hypothesis of how to better position existing or new products

Exercise: Rapid market appraisal

Let the participants select a product they agree to analyse together and do an exercise of going through the steps of rapid market appraisal. Make sure that the participants thoroughly understand the methodological approach of the rapid market appraisal before starting. Take notes on a flipchart during the session and discuss the final results.

c. Focus group research

This research tool relates to a systematic interaction with a group of 8 to 12 consumers with the idea of understanding consumer perceptions and to validate certain ideas. In the context of identifying market opportunities, focus group research is ideal to understand consumers’ purchasing behaviour and confront the invited consumers to marketing concept ideas and adapt them if they are not optimal from the consumer point of view.

The key for the successful use of focus group research is the optimal involvement of a group of consumers that represent the consumer segment that should be targeted (e.g. upper-class supermarket shoppers, middle class shoppers buying on the street market etc.). Optimal research results imply a well-planned session that breaks the interaction down into different relevant topics, as suggested in the following box.

Possible structure for Focus group research

1. Introduction

Presentation of facilitating person and objective of the meeting
Participants should present themselves by saying their name

2. Understanding general perceptions related to specific market opportunities

Use of a specific product
Advantages and disadvantages of a specific product versus competing products
Purchase behaviour related to a specific product

3. Understanding specific ideas related to the 5 P’s of marketing concept

Product: ’What are the important product attributes? (taste, colour, texture, etc.)
Packaging: ‘What type of packaging would you like to see? (plastic, glass, etc.)
Place: ‘Where would you like to buy this product?’
Price: ‘How much would you pay for this product?’
Promotion: ‘Any ideas how this product could be promoted?’

4. Conclusions and final words

Summary of the marketing concept that can be concluded
Give away a gift and encourage further feedback in the future

Focus Group:

Set up a focus group for the assessment of the reasons why consumers buy organic products. Invite about six consumers for a 2 hour meeting. A facilitator with the capacity to guide the discussion should be chosen for the meeting. The facilitator should have an assistant, who will help to organise and take notes on a flipchart during the session. Present the organic product or products at the start of the meeting and initiate the discussion. Possible questions during a meeting:

Do you purchase and/or consume a product of this type?
Why do you buy it?
What are its benefits in relation to alternative products?
When and how often do you buy it?

How to plan the implementation of market opportunities?

Before starting a business, most actors went through a process of carefully thinking about taking a decision to move ahead with the implementation of a market opportunity. In this sense, they already have developed some sort of a business plan, at least in their head. When they think about the market or markets to sell, they have clear ’target markets’ in mind that imply what has to be grown, when, and in what quantities, etc. In this sense, a clear idea prevails about why and how a specific product is valuable to the group of consumers that is targeted. Similar to the process of identifying market opportunities, also their setting in place may involve the explicit use of tools that ensure quality work in this domain:

a. SWOT Analysis

A SWOT analysis evaluates the overall Strengths, Weaknesses, Opportunities and Threats of a business. Strengths and weaknesses are about where the business is now compared with its competitors, opportunities and threats are about where the business is going. This means opportunities are attractive areas for action where the business is likely to have some advantages or make special contributions. Threats are critical trends or specific disturbances in the environment that could lead to stagnation, decline or demise of the business or a part of it. The SWOT analysis allows identification and visualization of market opportunities and gaps, which should be considered when marketing activities are planned.

SWOT Analysis:

Build groups of 3 participants and let them make a SWOT analysis of a business they select (for example, a new organic product they would like introduce on the market or a whole farm as a business).

b. Business plan

A business plan presents all aspects of a new business in a simple, comprehensive way. In this sense, it involves much of the information obtained and assessed through the different tools presented up until now: marketing concept development, rapid market appraisal, focus group research and SWOT analysis. When put onto paper, a business plan is a strategic document that describes all aspects of the development of a market opportunity:

It states a set of business goals and the plan how to reach them.
It clearly defines all relevant business activities and how they relate to each other.
It specifies responsibilities among actors directly and indirectly involved in the business.
It shows examples of how to make a business profitable by planning costs, income creation and marketing for a business.
It includes projections of how different scenarios might influence expected profitability.
It shows the steps necessary to implement operations and define the roles partners should play.

A business plan can have different proposes:

It serves as a planning and decision-making tool, providing a clear concept and proof to a business before starting it.
It serves to persuade new actors to get involved, particularly new financial partners.
It serves to better manage unexpected forces because you have given them consideration during a well-thought-out plan.

All in all, when planning a new venture, such as an organic business, or when an existing business is to assume major change, business planning is essential.

Group work:

Create groups of 4-5 participants and distribute a simplified version of a business plan to each group, corresponding to the level of the participants. Let each group work out a plan of a business they select and have them present the results of their work at the end and discuss the results with all participants.

Structure of a business plan

Executive summary [1 page]

This section summarizes concisely the different aspects of a business plan.

Sources of information: The different sections of the business plan.

Name and brief description of the product [1-2 paragraphs]

This section gives the name of the product and a brief description of it. It also explains which consumers will be targeted and why the product is valuable for them.

Sources of information: Discussions and agreements among those involved in the business, and use of the market research tool such as focus groups (see 5.1).

Description of the commercial potential of the product [1-2 pages]

This section provides a detailed description of the market in which the product will be positioned and how it will compete against its competitors. Prior qualitative or quantitative research must be used (1) to indicate why the product provides value for its target consumers (i.e. discussion of purchase factors) and (2) to estimate the size of the potential market.

Sources of information: Qualitative and quantitative market studies.

Description of the production process and its advantages [1-2 pages]

This section describes all the stages of the production process up to consumption, as well as all the actors who will participate in the business along the market chain. The information reveals how the process takes advantage of synergies along the market chain and how the process is complemented by other activities that keep costs down. At all points in this review the product must be compared with its competitors.

Sources of information: In-depth interviews, Focus groups (see above) and SWOT-analysis (see above).

Description of the advantages created for society [1-2 pages]

This section is not part of an ordinary business plan. However, it is included here to make explicit the justification for public sector support. The section should include a qualitative description and explanation of how the business will benefit society (for example, by alleviating poverty, fostering rural development, conserving biodiversity, etc.).

Sources of information: Impact assessment, in-depth interviews with key stakeholders.

Description of actors involved and of their roles [1-2 pages]

This section presents the actors who will participate in the business (i.e. business partners), emphasizing the specific role of each one and the skills they have. It must also indicate how the actors will work as a team, keeping interaction costs as low as possible.

Sources of information: Discussions among promoters.

Evaluation of critical factors [1-2 pages]

This section reflects on critical factors that may stimulate or jeopardize business success. These factors may be internal (under the control of those involved in the business) or external (outside their control). The reader must understand the degree of uncertainty associated with these factors, how they interrelate and how the business partners might influence each one.

Sources of information: SWOT-analysis, in-depth interviews.

Profitability estimates based on different scenarios [2-3 pages]

This section considers the economic side of the business. When the exact size of the market is uncertain, three reasonable scenarios might be considered. If the business plan is simple, expected profitability levels can be derived from income and cost estimates. If considerable initial investments are needed to start up the business, an expected cash flow stream must be derived from estimated annual income and expenditures, making visible the capital needs at the different stages of the business. For more information please consult literature such as the source of this box and literature mentioned there.

Sources of information: Quantitative market study, in-depth interviews, cost calculations.

Investment plan and promotion strategy [1-2 pages]

This section tells the reader how much financial capital the business requires and specifies investment needs, including those for product promotion. If strategic partnerships are established as part of the marketing strategy, these will be described in detail here. If the product creates benefits for the public (see Section 5), this section must also explain how R&D organisations or the government will support the business and its promotion activities.

Sources of information: Previous sections of the business plan, discussions among promoters.

c. Marketing Plan

In a first part, the marketing plan contains detailed information about the market situation and outlines concrete marketing activities to achieve concretely defined objectives mentioned in the document.
In the second part, it contains a detailed overview of the planned marketing activities relating them to resources required for their implementation, the schedule of implementation and persons responsible for each planned action.

Since marketing objectives must be evaluated (re-assessed) and regularly adapted, also the marketing plan must be revised and updated from time to time. Changes often occur when outside factors, or things out of our control such as a flood or other disaster takes a business in a new direction or when marketing objectives have not been achieved within a defined time frame.

Structure of the Marketing Plan

Part I Strategic information related to a specific market opportunity:

Type of customers - Who are buyers of the products; consumers, traders, wholesalers, retailers? Are they local, national or export-oriented? What are their requirements (e.g. in terms of quality and quantities)?
Competitors - Who else if offering similar products like you are offering? What are their strengths and weaknesses? Which of their weaknesses can we turn into our strengths?
Suppliers - Who will supply us with the materials we need? Do they have the right quality and quantity we need?
Other stakeholder and key actors in the chain - Who are the other groups or persons that have an interest in our business, for example, NGOs that may support us? support the implementation of this plan?
Human resources - Do we have the people to manage and support the implementation of this plan?
Financial resources - Where shall we get the money we need for our business? Is it bank loans, loans from the government with a reduced interest rate, money from private investors or any other funders?
Raw materials - Can we produce all the raw materials we need? How can we increase the amount of raw materials? Who else can supply us in case we need more raw materials?

Part II Operation information related to a specific market opportunity:

Target markets - number and location of places that are targeted
Sales target sale of amount x of product y during period z?
Product specifications - definition of exact products that are to be sold, in what form and with what services?
Promotion - what is exactly planned in terms of activities related to promotion, and when?
Distribution - how will the logistics be defined and managed? Who is responsible for what?
Pricing - what are the prices that consumers and the different market chain actors obtain, ensuring that everyone is benefiting?

How to be successful in organic exports

This checklist may be used as a tool for planning or evaluating organic businesses.

Procedure:

Analyse the check points
Rate them 1-5 (1=not implemented, 5=top implemented)
Formulate individual critical success factors and actions.

Let the participants select 3-4 export products they would like to discuss.

Build groups and let each group go through the checklist. Let them present their results and discuss them.