by Karl Foord. Presented at the 2012 MN Statewide High Tunnel Conference

1. Pushing the financial
pencil with high
tunnels
Statewide High Tunnel Conference
Brainerd-The Lodge
February 7&8,2012
Prepared by Karl Foord/Presented By
Prof.Ward Nefstead
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12/3/2010

2. The most important aspect
 The most important aspect of
any crop is the ability to market
it for a profit after considering
the added costs when using a
high tunnel
 Every area has different pricing
pressures.
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3. Flow of this talk
 Price, margins, profitability
 Customer issues
 Perceptions, behavior,
total experience
 Seller buyer perspective
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4. Price, margins, profitability
 First of season products
 price premium = higher
margins
 greater profitability
 Maintain price premium
 Monitor labor efficiency
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5. What Are We Really Selling?
“Revlon sells chemicals
Women buy glamour”
 Fruits and vegetables
 Flowers
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6. What Are People Really
Buying?
 Health, Taste
 The experience of the market
itself
 Support of local growers
 What are your customers really
wanting?
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7. Exchange
 Something of value for an
amount of satisfaction
 The perceived value > the
price
 Largely behavioral not
mathematical
 Usually an emotional trigger
Buy and justify
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 12/3/2010

8. PRICING DECISION CHART
COMPANY VIEW
Our Asking
Price
Our Costs - Our Goals
Pricing
Goal No
($) Exchange
Profit WIN - WIN
Profitable Enterprise
Exchange Price
Range
Total Costs LOSE - WIN
Exchange
Fixed Costs
Overhead Salaries, Etc…
Variable Costs
Direct Costs Materials
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9. PRICING DECISION CHART
Customer CUSTOMER VIEW
Value Satisfy a Want
Determination
Perceived Value > Price
WIN - LOSE
Line of Perceived Value
Exchange
Price
WIN - WIN
Range
Exchange Focus of Marketing Efforts
Perception Factors
Convenience
Philosophical Match - Ecological
Emotional Health Benefits
Benefit Quality - Reputation - Dependability
Selection - Uniqueness
Confidence: no frustrations, headaches
Reference Prices
Context - Urgency
Functionality
Low Perceived Value
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10. PRICING DECISION CHART
COMPANY VIEW Customer CUSTOMER VIEW
Our Asking
Value Satisfy a Want
Price
Our Costs - Our Goals Determination
Pricing Perceived Value > Price
Goal No WIN - LOSE
($) Line of Perceived Value
Exchange Exchange
Profit
Profitable Enterprise WIN - WIN Exchange Focus of Marketing Efforts
Total Costs LOSE - WIN Perception Factors
Exchange
Fixed Costs
Convenience
Philosophical Match - Ecological
Overhead Salaries, Etc…
Emotional Health Benefits
Benefit Quality - Reputation - Dependability
Selection - Uniqueness
Variable Costs
Confidence: no frustrations, headaches
Direct Costs Materials Reference Prices
Context - Urgency
Functionality
Low Perceived Value
Statewide High Tunnel Conference 12 2010, Karl Foord
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11. Customer Perception
 Key customer perception
factors
 How buyer uses product &
impact of attributes on value
 Value varies among buyers -
all will not use it in the same
way
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12. Perception management
 Manage customer perception
 Proactively to influence the gap
between price paid and value
received
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13. Improving customer
experience
 5 Sense your market
 Taste, touch, smell,
sight, sound
 Do you provide recipes?
 Sensory extrapolation
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14. Customer overview
 Understand key customer
perception factors for your
products
 Consider impact of emotion
on the total customer
experience
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15. Pricing Issues
 Capture the early premium
 Understand the true impact
of price reductions
 Vary your crop mix with an
eye to margins and
profitability
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16. High Tunnel Revenue
3,000
2,500 Determinate Revenue
Indeterminate Revenue
2,000
Dollars
1,500
1,000
500
0
1 2 3 4 5 6 7 8 9 1 1 1
Weeks of the Season Beginning July 1
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17. Price changes through the Tomato Season
July August September
Price
Weeks Weeks Weeks
Strategy Revenue
Season
1 2 3 4 1 2 3 4 1 2 3 4 Difference
Revenue
Hold (Hold vs.
$3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 Totals
Price Drop)
Yield - 14
lbs./plt
Revenue from Hold Strategy
373 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $1,119 $13,428 $1,306
Drop
$3.00 $3.00 $3.00 $3.00 $2.75 $2.75 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50
Price
Yield - 14
lbs./plt
Revenue from Drop Strategy
373 $1,119 $1,119 $1,119 $1,119 $1,026 $1,026 $933 $933 $933 $933 $933 $933 $12,123 ($1,306)
Statewide High Tunnel Conference 12 3 2010 - Karl Foord
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18. High Tunnel Crop Mix
Mini Bell
Item Tomatoes Cut Flowers Cucumber
Peppers
Number of
320 1350 630 384
plants
Total crop
0 2,700 25,200 11,520
produced
Unit size Pound 10 stems each each
Price/unit $3.00 $3.50 $0.40 $1.00
Gross income $0 $9,450 $10,080 $11,520
Income/foot ² $0.00 $4.92 $5.25 $6.00
Season 7/10-10/5 6/25-9/15 6/30-9/15 7/10-9/15
96' x 20' high tunnel
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19. Go to spreadsheets
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20. Author and Reference
 Karl Foord Ph.D. MBA
 Regional Educator, Horticulture
 foord001@umn.edu
 (651) 480 7723
 High Tunnel Production Manual
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