Final Report for FW10-042
Yellowstone Grassfed Beef (YGB), by the J Bar L Ranch, is a new brand of natural grass-fed beef being marketed wholesale to food services, restaurants and grocery retail, as well as being marketed directly to consumers. Animals in the program are raised using natural production methods, are grass-fed and grass-finished, and raised on land with stellar environmental management practices. Of particular note for this project, the environmental practices result in good bird habitat, and they especially support the reproduction of sage grouse. Though not an endangered species, the sage grouse is a species of interest to the EPA.
YGB has held a vision of building an online direct-to-consumer enterprise that will be an important part of their market base. With funding from the Western Sustainable Agriculture Research and Education (Western SARE) program, YGB sought to test the hypothesis that conservation-minded consumers (as identified through membership in conservation-related organizations) might be particularly open to ordering YGB products when provided information about the company’s environmentally-friendly production practices and an opportunity to place orders.
While we continue to maintain that the hypothesis is sound and that members of conservation groups will appreciate the opportunity to use their consumer dollars to do conservation work, the outcomes of this project lead us to believe alternate strategies need to be used. On the face value of measuring return on investment, the project was not a success.
The main objective of the project was to measure and compare the inquiry rate and conversion rate to the above outlined marketing approach to that of industry averages for direct mail marketing strategies.
Early decisions were made regarding product distribution. A highly sustainable approach to product delivery was desired, and concern was expressed regarding the standard means currently used for home delivery of frozen specialty meats, where Styrofoam coolers are packed with product and dry ice and shipped via FedEx, UPS or similar service to individual homes. After discussion, Montana markets were selected where sizable amounts of product could be drop-shipped and held in frozen storage; customers would then pick up their orders at the drop site, resulting in a lower carbon footprint. Selected markets in Montana included Billings, Bozeman, Missoula and Helena.
Audubon’s membership in these markets was randomly assigned to one of two lists, with half of the membership receiving a postcard March for product pick-up in April 2011, and the other half sent a different postcard in June for pick-up in July 2011. Each card was professionally designed, and special care was taken to ensure that undeliverable postcards cards were returned so that response rate analysis would not be skewed. Each card encouraged the recipient to visit a unique URL on YGB’s website, where additional information was provided regarding YGB’s products and production practices. Analytics were included to count the number of website hits resulting from the mailings.
Results were greatly disappointing.
The project was intended to shed light on two questions.
First, would members of the Audubon Society respond to a mail solicitation for products produced in an environmentally (and especially bird-friendly) manner in an amount in excess of “normal” direct mail response rates? The results of these two trials suggest not.
“Normal” rates for direct consumer response to mail solicitation bounce all over the place and are dependent on a number of factors, including the perceived value of the offer, the quality of the mailing list, the fit between the product on offer and the members of the list, etc. Nonetheless, data from the National Mail Order Association for 2009 suggest that when using an "outside” mailing list (i.e. a list obtained from someone other than the entity making the offer) is used for food-related audiences, a distribution of response rates was as follows:
11% of the offers achieved a response rate of 0-1.0%.
33% of the offers achieved a response rate of 1-1.5%
33% of the offers achieved a response rate of 1.6-2.0%
11% of the offers achieved a response rate of 3.1-5.0%
1% of the offers achieved a response rate of 5.1-10%
When compared to this data, the sales response rate achieved by the YGB offer to Audubon members ranked in the lowest 10th percentile.
Second, would direct mail solicitation prove to be a cost-effective way of reaching consumers and stimulating sales? The data would not support an affirmative answer to that question, either.
These two tests do not support the belief that direct mail is a cost-effective means of generating sales for the particular product offers that were made in this project, as measured either by cost/impression or by cost/$ of incremental revenue.
A rough estimate of the direct costs of reaching each mail recipient would be obtained by taking the sum of card design, printing, mailing costs and order fulfillment ($7,300) divided by the number of card recipients (1,785); in this case, the cost per impression is $4.09/impression. If the objective is to make initial consumer impressions, YGB would use this $/impression and compare it to other advertising or public relations options (e.g. radio, newspaper, internet advertising, etc). At the scale of this project, the cost per impression is higher than what might be reasonably expected from other approaches.
More importantly though is the cost to attract an additional dollar of gross revenues. In this case, that number is $7,300/$775= $9.41 per dollar. The result obtained in these trials is clearly unsustainable.
On a positive note, the offer did result in 90-100 total unique visitors that visited and/or “clicked through” to the YGB website, (some delayed after the promotional time) for a response rate of about 5%. (We know that a couple/few of the visitors were project participants; nonetheless the number of prospects that visited the sites is estimated at 90+).
Education and Outreach
Attached is the post card we used for the mailings.
We also invited neighboring ranches to participate in our range tours. Three separate large ranches attended and were openly curious about intensive rotational grazing and its implications for cattle and wildlife, and especially to their bottom lines. We also had several participants from government agencies (BLM, NRCS, Red Rock Lakes NWR) and non-profit organizations (The Nature Conservancy, Western Sustainability Exchange and Natural Resources Defense Council). All participants were enthusiastic about the potential of the marketing project and how it could help all parties involved, foremost the ranchers and wildlife.
Education and Outreach Outcomes
So why were the results unsatisfactory? There are many potential reasons, but scant data to discern the differences. After consultation with project participants, leading options might include:
The nature of the product offer. The fact that almost 5% of the card recipients took the time to visit the website and learn more about the product suggests that the postcard process was sufficient to motivate an initial action by the receiving audience. After learning more, however, recipients did not further act by placing an order. This might be because:
Grass-fed/grass-finished beef is still very much a niche product, and the demand is still small; estimates vary, but suggest that the grass-fed/grass-finished (both organic and natural) is perhaps 2-3% of the U.S. beef market. It is possible there just were not enough customers interested in grass-fed beef within the Audubon Society mailing list.
The size of the packages were too large. It is possible that customers might have reacted more favorably to a smaller packages of product. The demographics of the Audubon membership were not closely aligned with those of traditional beef consumers. Late in the process we learned that the membership of the Audubon Society skews older than many other conservation groups, with higher than average numbers of “empty nesters” that do not consume larger volumes of beef. This is especially true if customers were not familiar with the attributes of grass-fed and grass-finished beef; the packages offered required too much commitment for a customer unfamiliar with the product.
The cost of the packages were too high. Similar to (b), the initial cost of the entire packages offered might have been considered too high for the perceived value, especially in a weak consumer economy.
The ordering/distribution process might have been considered too inconvenient. The process of bulk delivery to a drop site vs. the more familiar convenience of home delivery might have been deemed a negative.
Insufficient information was provided to prospective customers. The mailings were not accompanied by public relations or member education campaigns, and in essence became a “stand alone” tool in the marketing campaign instead of being one part of an integrated communications effort aimed at members.
Potential future actions:
In spite of the disappointing results of this effort, the following are potential steps that YGB might pursue in growing a direct-to-consumer base to their market:
Continue to consider partnerships with other conservation organizations. Pay attention in advance to membership demographics and compare to available profiles of beef consumers. Especially seek out partnerships that focus on email campaigns as the method for communicating with individual members, as this can have far lower distribution costs.
Continue to grow web, email and social media capacity. Continue to maintain/update the website, especially looking for opportunities to ensure that YGB comes up prominently in search engines as sources of high quality grass-fed/grass-finished beef. Make use of social media to highlight the attributes of the brand and link social media coverage to the website. Explicitly develop strategies to build an e-mail list of existing and prospective direct-to-market customers.
Pursue public relations strategies to add value and meaning to the YGB brand. Continue to use/improve land stewardship practices. Strategically seek out and implement public writing, speaking tour hosting and joint research opportunities to communicate the brand’s commitment to these practices, and their impact on wildlife habitat.
Test market small/less expensive packages of product. Provide a diversity of offerings that speak to different size households, budgets, etc.
Consider use of more traditional and convenient distribution processes. Until a critical mass of customers is developed in a particular area/region, consider use of traditional to-the-door distribution mechanisms to build demand with target regions. Once a critical mass is created, then consider moving to drop shipment strategies.