Figuring out how much to charge for your crop can be one of the most difficult chores for new growers. The goal is to sell your crop at a price which covers the cost of production and marketing, plus a reasonable profit, as well as making sure your customers feel they paid a fair price and will come back for more.
Joe Reed has been growing vegetables for over 30 years on his Indiana farm, and has developed a simple formula for pricing that works for most specialty crops. First, add up all the costs of producing and marketing your crop, then mark it up an additional 40 percent.
Joe suggests ignoring supermarket prices, as customers are willing to pay a premium price for fresh, home-grown produce. He says,
“They can get a bruised, wilted, 10-day old head of lettuce at the supermarket, but ours are fresh picked today. Never forget, people are willing to pay the price for quality.”
If someone offered you a chance to increase your profits by 50 percent, you’d say, sure, sign me up! If you knew a 20 percent price increase could do that, you’d say, great! The average grower makes about a 40 percent profit on their crops, so a 20 percent increase in your prices can do that, and give your bottom line a serious boost.
Ask yourself these questions to see if a price increase is right for you:
Why do customers buy from you? Are your crops available before or after the normal harvest season? Are they hard-to-find, without much competition? If so, you may be able to charge more.
How do your products compare with the competition? If you’re offering more, you should be charging more, not less. If you offer a unique or high quality product that customers won’t find elsewhere, you can probably raise your prices as well.
Here’s how to tell if your prices are too high or too low. If your product is flying off the shelves, or you are getting no complaints, your prices are likely too low. If your inventory is not moving, or customers complain about your prices, or you get a lot of “lookers,” but few buyers, your prices are likely too high.
Memorize this rule” “Price influences how your product is perceived.”
Most shoppers associate higher prices with higher quality, and lower prices with lower quality. Never give away your profits by pricing too low. Recently, there was a glut of pears at local grocery stores. The produce manager for the stores suggested that the local growers raise, not lower, prices. Those who raised their prices by 20% sold out, while the growers who cut prices by about the same ended up with unsold pears.
The two best ways to increase your prices and your profits are to specialize in crops that are hard-to-find, like unique varieties such as heirloom fruits and vegetables, or out-of-season crops grown in a hoop house or greenhouse. The other is to educate your customers about why your crops are worth more, such as organically grown, special varieties or sizes, or locally grown and picked fresh every day. If you do one, or both, your growing efforts will be more profitable.