Farm Progress

Side business can add to farm income

Find your niche, build a brand and establish a customer base.

November 12, 2018

3 Min Read
KNOW YOUR PRODUCT: Are you enhancing your farm income with a side business, such as custom haying? Knowing your product's attributes can help you tailor your management and marketing plan.

By Austin Duerfeldt

Few farm operations are strictly production-based models anymore. For example, row crop farmer Smith sells seed corn as an additional business and his brother Randy does custom hay harvesting. Beef rancher Wilson builds fence and rents out some portable cattle chutes and alleys. Producer Davis is doing tile and conservation work.

Some of these side businesses become major income sources for those families. If interested in starting a business, or growing an existing business, the first question to answer is: What is your product?

Farmer Smith sells seed corn, so seed corn is the product. But a product is much deeper than that. Why does someone buy a John Deere over a Case IH, or vice versa?

Both companies sell the same product, a tractor that provides the same benefit to the operation. However, reasons why one is chosen over the other could be based on color, brand, quality, services, customer care or warranties. All of these considerations are part of the product. Products actually have three levels, the first of which is the Core Product.

• Level 1 — core product. The core product is the intangible benefit of the product. What makes this item valuable to the customer? Look at hiring a chemical company to spray your bean field. The benefit of the chemical company spraying the field is you not walking beans with a bean hook in the dead heat of summer. Maybe it is the utility of an item, ease of use, convenience or speed. The core product will always be the reason why people buy a product. The next two levels determine if the purchase will be with you or a competitor.

• Level 2 — actual product. Now we look at the actual product. This level is the physical product. To demonstrate, let’s say the product is a farm tractor. What do you physically need in the product? Another way to think of this question is under a generic banner of the product. What do you think of? The product needs to have a certain horsepower and numerous hydraulic hookups. The cab needs to be spacious and have room for all your monitors. The materials need to be of a certain standard with quick and easy maintenance. Front-wheel assist is required, and it must have a tight turning radius. These considerations will help you define the actual product, the minimum product offerings needed to meet the core benefit from Level 1.

• Level 3 — augmented product. The final level is augmented product. These are features that go beyond the customer's basic expectations. Maybe, it is free two-day shipping or a fantastic warranty. This level is going to be the non-physical part of the product. Brand images and identities are formed at this level and help set you apart from competitors. Other areas, such as services, installation, financing and customer care, fall into this level. The features in this level will determine if a customer sees added value in buying from you and whether they will pay a premium for that added value. You build customer loyalty and satisfaction at this level as you mold the product in different ways to meet and exceed the individual customer’s needs.

Bringing it all together
Too often business owners don’t fully understand what they are actually selling. By fully understanding what your product is, you have a wealth of power. You might identify situations where you undervalue or overvalue your product. Maybe you are starting to lose customers to a competitor who is selling the exact same actual product for the exact same price. Figuring out your product will help you to find your niche, build a brand, and establish customer loyalty and satisfaction.

Duerfeldt is an agricultural systems economist with the University of Nebraska Extension. This report comes from UNL CropWatch.

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