What Is Marketing Risk?
Anything that leads to uncertainty about costs, prices and demand for your product. Marketing risk derives from price risk, product quality, and market availability.
Maintain your knowledge of markets for your products, so you understand your risks well and both mitigate and create contingency plans for them.
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Sources of Marketing Risk
- price risk
- loss of market access
- loss of marketing power due to lack of knowledge
- improper or lax record keeping
Some Questions to Ask to Assess Your Marketing Risk
- Is my knowledge about markets and marketing tools up to date?
- Do I have a current marketing plan? Does it cover the entire calendar or crop year?
- Are all my crop and/or livestock enterprises covered in my plan?
- How much risk am I comfortable with regarding my marketing options and plan?
- Do my marketing plans account for impacts on other parts of my operation? For example, does income from marketing cover cash flow needs?
- Have I calculated production costs and estimated yield to determine my break-even price?
Alternative Marketing Tools:
- What are the potential costs and returns of alternative marketing strategies?
- Will using a particular marketing tool enhance my income, reduce my risk, or both?
- Should I seek marketing support or professional marketing services?
Source: USDA Risk Management Agency. "Introduction to Risk Management: Understanding Agricultural Risks." Revised December 1997
This information made available due to a grant from the USDA Risk Management Agency.
Tools for Mitigating and Planning for Marketing Risk
- Develop a marketing plan that relates to your other planning documents
- Perform regular market analysis
- Perform regular customer research
- Price your products correctly for your markets and efforts
- Explore alternative marketing strategies, alternative marketing organizations, and value-added ventures
- Develop a contingency plan
Remember: It's important to choose the tools that are best for you, your level of risk tolerance, and your operation.
- Marketing Resources - UC Davis Small Farm Center. Articles and other resources offering information on farmers' markets, agritourism, farm stands, cooperatives, adding value, and niche meats.
- Smart Marketing - Managing Marketing Risks - Cornell . Article on common marketing risks and solutions to them.
- Risk, Liability, and Insurance for Direct Marketers - University of Wisconsin. Lays out the ways in which a direct marketer is at risk for liability and describes insurance tools to mitigate that risk.
- Developing Your Marketing Plan - UC Davis Small Farm Center. Contents of a marketing plan, performing market research, and strategies for maximizing your market potential.
- Cash Flow Budgeting Tools - Agricultural Marketing Resource Center. Worksheets and calculators for projecting cash in-flows and out-flows.
- Smart Pricing Strategies - Virginia Cooperative Extension (via Cornell). Gives an example for how to price your goods by knowing your costs, calculating your gross margin, and knowing your markets.
- Using the Internet for Direct Marketing - Virginia Cooperative Extension. Optimizing your direct marketing message using the power of the Internet.
- Creating a Farm Web Site - buylocal.org. Guidelines for creating a website for your farm or ranch.
- Using Facebook to Market your Farm - Farm-to-Fork Research. How to harness this popular social media tool to promote your farm or ranch.
- Using Twitter to Market Your Products. Let customers know where you are and what you are selling right now!