I had trouble deciding on a product to feature this week. After spring mix, strawberries, tomatoes, and rhubarb, the revelation that prices vary considerably for the same product within very close geographies and timeframes is somewhat less revelatory now, a month into the season. Without knowing how these price variances affect sales, and, ultimately, profitability, the story is starting to feel a bit one-dimensional (and dull). Let’s just agree that prices vary, without corresponding product or channel differentiations, and that those price variations can have a significant impact on revenue for an individual farm. Now, we can move on….
I’ve just spent entirely too much time reading up on pricing theory, consumer perception of value, consumer perception of quality (not the same as value!), and the pros and cons of various pricing strategies (cost-based, competitive, and value-based).
I did this to find the answers to questions that have been nagging me since I began the research into farmers’ market prices:
1) Do lower prices translate into greater sales at the farmers’ market? 2) To what degree does price influence consumer perception of value and quality for sustainable produce?
Over the last few weeks, I usually came across a trend: most prices clustered in one region, with outliers on the high and low end, either challenging the price ceiling or trying to drive greater volume with lower-priced sales, respectively.
I’m eager to know how either or both of the outliers fared compared to the clusterers? Could choosing either of those strategies be more effective than clustering toward the middle, or is one strategy demonstrably more effective than the other? Does pricing higher than competitors suggest to consumers that your product is better quality, or have vendors at a farmers’ market surpassed a quality hurdle, simply by being there, and not need to differentiate any further?
I have my theories, but if anyone has any thoughts, I’m eager to hear them. I’ll be getting back to the price analysis next week with a look at what happens to early season products’ prices once the showstoppers arrive on the scene.