Guia Prático Conhecendo o Mercado - Edição 04 - Inglês

ADDING VALUE TO FAMILY FARMING PRODUCTS PRACTICAL GUIDE VOLUME 04

ADDING VALUE TO FAMILY FARMING PRODUCTS PRACTICAL GUIDE • VOLUME 04

Chapter 1 Introduction • 04

Chapter 2 The perception of value • 08

Chapter 3 Value creation in family farming products • 12

Chapter 4 Value also needs to be communicated • 24

Chapter 5 Value creation where to start? • 28

Chapter 6 Final considerations • 32

Bibliography • 36

SUM MA RY

IN TRO DUC TION CHAPTER 1

INTRODUCTION

Every organization that has

And an important motto in this theme is to identify

He still considers that if we remove one of these five

things that people need and offer them what they

factors, we will no longer have a business. And he

are looking for. An organization cannot do business

goes even further. In his view, every business is a

unless it has something of value to offer its custom-

collection of five interdependent processes: value

Something that brought

ers. In this manner, we can say that the best orga-

creation, marketing, sales, value delivery and finance.

some improvement

nizations in the world are those that create value

achieved success has created something of value at some point.

to people’s lives.

for people. Josh Kaufman, in his book Criação de valor – Qual o preço da sua ideia (Value Creation – What is the Price of Your Idea), defines a business

In this fourth booklet, we will show the possibilities of how to create and add value to family farming products.

as a cyclical process that: 1 Creates and delivers something of value...

2... that people want or need...

3... at a price they are willing to pay...

4... in a way that satisfies the needs and expectations of customers...

5... and generates enough profit to maintain the company’s operations.

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INTRODUCTION

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PER CEP TION CHAPTER 2

THE PERCEPTION O F VA LU E

The perception of value

Value is not only present in things, but in what the

The first step would be to understand the needs of

consumer/client perceives as a value-generating

these customers. We have already discussed, in

attribute. So first of all, it’s important to develop a

booklet 01 of this series, how to perform a survey to

basic understanding of what people are looking for.

identify these needs with the distribution channels.

a product or service fulfills

Understanding human desires and the impulses that

Therefore, it is worth emphasizing that the first step

the attributes necessary

lead to their decisions and actions are extremely

would be to understand the market.

is directly linked to what people want and how much

to meet their needs.

important. Taking the logic of consumption, impulses lead to the purchase process. The more an organization connects its product to the impulses that drive

Now we will show you some possibilities of adding value to family farming products.

its customer to purchase a product or service, the more attractive its offering will be. In a few words, the more a product or service is committed to meeting a need of a particular group of consumers, the greater the chances of success for that organization.

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THE PERCEPTION OF VALUE

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CRE ATION CHAPTER 3

VA L U E C R E AT I O N I N F A M I LY F A R M I N G PRODUCTS

For this to happen, it is important

1. PRODUCTION MANAGEMENT TO HAVE A PRODUCT WITHIN THE CHARACTERISTICS REQUIRED

BY THE MARKET

For organizations

that the organization has mastery

that produce and market

of the entire production

products, as is the case

process, including criteria and

with most family farming

production models that can bring

Production processes can be complex for certain

cooperatives, a product

to the product, in addition to the

products. Most of the time, they require proper man-

can be a tangible

quality expected by the market,

form of value.

attributes that can generate

agement so that their result – the product – is within what the market demands. It encompasses the defi-

• purchase of seeds, seedlings, matrices of good quality; • existence of good practices in production processes to ensure good productivity, homogeneity in production batches, etc.; less expensive production at a relatively low or competitive cost, reducing losses in production processes;

nition of the production model to be implemented

or create value. Some guidelines

• selection and classification of products

by the organization, the purchase of inputs within

within the standards required by the market;

are possible to try to create value

acceptable standards and levels of quality, the good

for a family farming product:

practices used, a quality system that ensures the

• storage and packaging of products

quality of what is produced, the standardization of

in stocks and packaging that allow their integrity

production batches, among others. It is unlikely for a

during transport; maintaining a basic stock

deficient production process or lack of management

of finished goods to fulfill customer orders

to produce a product within certain standards re-

as they are made.

quired by the market. For example, when we mention the quality attribute, it is no longer a way of adding or creating value, but a basic attribute to be offered in any type of product destined for the market. Some

Therefore, these steps must be carefully designed and planned. A large part of value-generating attributes may be in the production process.

ways to ensure that the production process generates a value-added product are:

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2. ORIGINALITY OR A CERTAIN SPECIFICITY INHERENT TO THE PRODUCT

3. ABSENCE OF PESTICIDES, COMPONENTS AND CHEMICAL PRESERVATIVES, AMONG OTHERS

Some characteristics or attributes can be factors of

in the market, they can be perceived as elements of

Another specificity that can be worked on in the

differentiation or value creation in family farming prod-

value. After all, they can be treated as something orig-

value creation in a family farming product is the

ucts. They can be products with a certain originality,

inal or different from competing products in the same

absence of pesticides, components and chemical

produced in regions or locations with certain soil or

existing product category or even as something that

preservatives, absence of sugar or salt, saturated or

climatic characteristics that give the product a specific

is not present in the market. It is important to mention

trans fats, lactose, gluten, transgenics, among oth-

appearance, color, flavor, texture. These characteris-

that some of these specificities, when evaluated in

ers. These are concerns of contemporary consum-

tics can add value as long as they can be perceived by

terms of nutrients to a greater or lesser degree, must

ers, who seek to change food consumption habits in

the customer. We can also consider a huge range of

be proven by tests and laboratory exams, especially

order to improve or preserve their health.

regional products from the various Brazilian biomes,

if they are connected to health information, immunity,

which in general also present these specificities. Once

or low levels of fat, sugar, salt, etc.

well defined, proven and adequately communicated

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4. LOW PRODUCTION COST AND SELLING PRICE OF THE PRODUCT

5. MISCELLANEOUS CERTIFICATIONS Certification adds value to the product. It is import-

Low production costs reflect in low prices charged

product to the display racks and retail shelves. And a

ant to understand which would be the important

for the product in the market. This generates value

question is worth asking: does the final price charged

certification(s) for the product and its organization

for the distribution channels throughout the chain,

for the product at the points of sale meet the prices

depending on the market in which it wants to access

which, for the distribution channels, allows them to

that customers are willing to pay for the product?

and operate. Each market has a logic to operate

set their margins and still practice more competitive prices for the product in relation to the competition.

Distribution channels end up having more flexibility to work on their costs and margins, depending on market demands. It is important that the organization can have real knowledge of its production costs and properly calculate its sales prices, also thinking

and, depending on this logic, some certifications are Pricing strategies adopted by marketing can also

more important and priority than others. For some

contribute to value creation. And then other pa-

products, certifications create and add value. Na-

rameters are taken into account to define the sale

tional markets may require certain certifications and

price. It’s a good idea to evaluate pricing strategies

international markets may or may not require oth-

and comprehend how they can help set the prices

ers. For the market where your organization wants

for your product.

to operate, which certification is most important or

about the distribution chain and the final price of the

priority at the moment? Some certifications that can create value are: organic, fair trade, food safety, among others. Very specific markets still demand other certifications, like markets that serve people of Jewish origin and religion (Kosher Certification) or Muslims (Halal Certification).

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6. SUSTAINABILITY, SOCIAL RESPONSIBILITY OR OTHER ATTRIBUTES

7. SERVICES ADDED TO THE PRODUCT

8. BRAND, PRODUCT PACKAGING AND LABELING

Adding services to the product can create value.

A well-developed brand, associated with packaging

Much has been said about the conscious use of

are produced are well evaluated by the market. This

There can be many ways to create value through

and labeling with appropriate information and de-

natural resources, the preservation of nature and

is a trend that should continue to grow in the coming

the services offered. Services can vary from

sign, can create value. That’s why the importance of

the environment, as well as respect for those who

years. Therefore, organizations engaged in purpos-

channel to distribution channel in the distri-

product conception goes far beyond its character-

produce. These are themes and concerns that, over

es greater than simply generating profit start to have

bution chain, as well as to the end consumer.

istics. Invest in design, sustainable packaging that

the last few years, have questioned the food product

greater prominence and preference in the market.

Some services can increase the organization’s

protects products, keeps them longer, and is easy to

and its production method in the world. Concerns

These issues can and should be communicated to

operating costs, which would require a deeper

handle, recyclable and aesthetically pleasing. Such

about a more conscious way of consuming have

the market if your organization is engaged with such

analysis of which services could be added to

attributes give another appearance and perception

been driving new practices at the time of purchase.

causes or concerns. Here’s another way to create

the product in its sale and distribution. For dis-

of the product to those who buy and consume it. A

The contemporary consumer has become more

value. We can even say that some of these attributes

tribution channels, some services add value:

labeling that brings important information to those

conscious and also concerned about the effects of

may no longer be elements of value and, later on,

competitive prices, agile and adequate logis-

who will consume the product helps a lot in their

inappropriate practices on production processes.

become mandatory elements for any supplier in cer-

tics, meeting deadlines, warranties, discounts,

purchase decision, in addition to creating a benefit,

Any initiative in organizations to generate change in

tain distribution channels or markets.

among others. For the end consumer, some

even before being required by regulatory bodies.

the way resources are treated and in the way they

services can create value: ease of purchasing the product, customer service, easy access to information about the organization and its products, possibility of exchanges/warranties, among others.

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9. OTHER VALUE CREATION ATTRIBUTES In addition to those mentioned above, we can also mention traceability. Traceable products matter and add value. For some retail chains, traceability is not a value-generating attribute, but something basic that each product must offer its customer. It is an integral part of a process of how it was produced and where that product went along its production chain.

Like so, it is important to mention that some of the attributes that we have listed above as value creators may, over time, not create value for the product, but being basic requirements for them to be on the market. Today, traceability creates value, but many buyers from distribution channels mention that, in a short space of time, it could be something basic to be part of a product.

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COM MUNI CATION CHAPTER 4

VA LU E A LSO NEEDS TO BE C O M M U N I C AT E D

Some attributes that add value to the product are easily identified, even when we consume the product itself. Others are not. For both cases, we must

Reviewing processes,

define a product communication strategy so that

products and reassessing

these values are known and perceived by custom-

the organization’s business

ers. A well-developed strategy will make it possible

model can be important

to broaden the value perception by the organization’s customer in relation to its product. Much has been said about the purpose of an organization,

for creating value for an organization.

its brand, brand positioning and what could be communicated in the booklet preceding this one.

Therefore, now we need to be aware of how to create value for the company and its product. It’s about understanding your market and what’s important to it. This initial idea could be the first step to define a value creation strategy for family farming products and organizations.

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BE GIN NING CHAPTER 5

VA L U E C R E AT I O N W H E R E T O S TA R T ?

5• Question whether the creation

This is the question to be answered.

Where to start?

of new attributes or value elements will generate new operating costs. If so, evaluate how much these costs would be more expensive or make the product less competitive and attractive to the market; 6• Evaluate the costs and recalculate them.

Define pricing strategies for your product

1• Understand the market where your organization operates and what it has as a perception of value for the category

7• Perform an action plan to create those values that the organization detects

of products you produce and sell;

as important or priorities;

2• Evaluate the products and what

8• Implement and prioritize what is most

they effectively offer in meeting the demand of those who buy; 3• Review your organization’s processes and way of operating and to what extent

important initially; 9• Develop a communication strategy for these values;

it is able to serve the market in matters

10• Make sure that these values

related to what the customer needs

are really perceived by the market;

and what the organization offers;

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or product line;

11• Remember what experience your customer

4• Identify the values that are perceived in your

relates to your company, brand and product and

product and what values could be created;

that it must live up to what you promise and deliver.

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CON SIDER ATION CHAPTER 6

FINAL C O N S I D E R AT I O N S

Value creation can be an important strategy for family farming organizations and their products.

Evaluate how much your organization can earn in terms of marketing, having a well-conceived value creation strategy.

These are basic guidelines for the organization that wants to create value in its product and differentiate itself. It is important to always be aware of what the consumer evaluates as value and to analyze what can be added to the product to generate this value.

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BIBLI OGRA PHY BIBLIOGRAPHY

KAUFMAN, Josh. Criação de valor – Qual o preço da sua ideia? Manual do CEO. 1ª edição. São Paulo: Saraiva/Somos Educação, 2016.

BAHIA PRODUTIVA PROJECT TEAM GENERAL COORDINATOR Fernando Cabral ANALYSIS AND MONITORING COORDINATOR Gilberto Andrade THEMATIC EXPERTS AQUACULTURE AND FISHING EXPERT Alexandre José de Araujo Macedo CASSAVA FARMING EXPERT André Luis Lordelo Silva GOAT AND SHEEP EXPERT Carina Moreira Cezimbra DAIRY CATTLE RAISING EXPERT José Antônio Magalhães de Araujo BEEKEEPING AND MELIPONICULTURE EXPERT Lívia Viana de Oliveira FRUIT GROWING EXPERT Marcos Raimundo Pitangueira OILSEED EXPERT Taís Nunes de Almeida SOCIO-ENVIRONMENTAL SUBPROJECT EXPERT Greice Póvoas de Carvalho AGROINDUSTRY EXPERTS Rafael Rebelo de Matos Meirelaine Rios de Almeida Mendes

SUPPORT COORDINATOR FOR TERRITORY OFFICES Dora Helena Passos MONITORING AND EVALUATION COORDINATOR Egla Ray Costa TRAINING COORDINATOR Elira de Andrade ATER COORDINATOR Wecslei Ferraz INTELLIGENCE AND MARKET COORDINATOR Aldir Parisi WATER SUPPLY COMPONENT COORDINATOR Andrevan Santana COMMUNICATION COORDINATOR Silvia Costa ADVISOR TO THE CAR’S BOARD OF DIRECTORS Ivan Fontes PROCUREMENT ADVISOR Nara Lins Muiños FINANCIAL ADVISOR Maria Juçara Monteiro MONITORING ADVISOR Antonio Berenguer WATER SUPPLY COMPONENT MONITORING ADVISOR Maria Auxiliadora Cavalcanti Produced by the Intelligence and Market Coordinator in a partnership with the CAR/SDR Press Office www.sdr.ba.gov.br / www.car.ba.gov.br/bahiaprodutiva

GOVERNOR OF THE STATE OF BAHIA Rui Costa RURAL DEVELOPMENT SECRETARY Josias Gomes MANAGING DIRECTOR OF THE REGIONAL DEVELOPMENT AND ACTION COMPANY (CAR) Wilson Dias GENERAL DIRECTOR OF THE REGIONAL DEVELOPMENT AND ACTION COMPANY (CAR) Ioná Queiroz

Headquarters of Bahia Produtiva Av. Luiz Viana Filho, 250 Conjunto Seplan, CAB ZIP CODE/CEP: 41745-001, Salvador-Bahia / Tel: (71) 3115-3941 www.sdr.ba.gov.br | www.car.ba.gov.br sdrbahia

sdrbahia | ascomcar

sdrbahia | carbahia sdrbahia

Review Renata Siqueira / Illustrations Thiago Durães / Layout P55 Edição | p55.com.br