In the October issue of Greenhouse Grower, we introduced the 10% Project, an initiative of sister magazine Today’s Garden Center to raise sales by 10 percent. This month, Michigan State University professor Dr. Bridget Behe, who was instrumental in getting the 10% Project’s pricing study off the ground, talks about what the study and future 10% Project initiatives mean for growers.
Greenhouse Grower: How did you first get involved in the 10% Project?
Bridget Behe: [Today’s Garden Center Editor] Carol Miller gave me a call very early spring, late winter last year and said, “I am interested in studying or investigating how price changes would influence demand of quantity sold.” I said, “That sounds really exciting. Count me in. How can I help?”
I helped with the setup of the study, in terms of how the data should be collected and what data should be collected. Carol was instrumental in getting the cooperation of the retailers and their buy-in for the protocol. Dr. Charlie Hall and Dr. Marco Palma at Texas A&M University were very helpful, and Dr. Marco Palma conducted the statistical analysis. It was very much a team effort.
GG: What did you learn from the 10% Project’s pricing study?
Behe: What I learned probably wasn’t as surprising to me as it may have been to growers and retailers, and that is, you can increase prices of some products and remain profitable.
Now at first glance, that might seem counterintuitive. If you raise prices you would be selling fewer units. Well, that is often true, but if you look at the profit margin and you look at the potential to make a higher margin on fewer units, the possibility to increase total revenue and profits is there. We were able to document that possibility.
GG: You say you can increase prices on some products. How do you know which ones can be sold for more?
Behe: That is a very important question. It is going to be easier to raise prices and remain profitable on the products that are easily differentiated — the products that have differences that the customer values.
Let me give you an example. Newer products, either colors or cultivars, often have more value or perceived value than colors, cultivars or products that have been on the market for some time. This is especially true for visual characteristics like flower color. Customers can see the difference, and some will say, “Wow, that’s new.” Often that newness will be worth more. Sometimes it is a new combination of plants that look good together and will grow well together. Sometimes it is a new plant form, something that is dwarf, weeping, trailing or vining. Whichever products have differences the customer can see and value, those are the ones that are prime targets for price increases. The other way we can differentiate products is through branding. Some customers will see the difference in branded plants and some won’t, but the brand name gives us another basis for differentiation.
GG: The study focused on retailers, but can growers raise prices, too?
Behe: I think the potential is there to share in the benefits of selling fewer units at higher prices. I think the growers’ best option is to work with retailers and say, “What products can I help you differentiate? What products might you and I both get a little bit higher price for, even if we sell fewer units? And how can I be a partner in that endeavor?”
For example, create QR codes that point to a specific website that gives the customer a lot of information about a particular new product. Maybe that’s cultural information. If it’s an herb or a vegetable, maybe the website includes how to use or prepare it, recipes or other ways the consumer might use it. A grower and a retailer could work together and provide extra information that would benefit the consumer, who buys it from the retailer, who gets it from the grower. That, to me, is an example of a way a grower and a retailer could work in partnership to garner the extra margin from something that is priced a little bit higher. I think the price increases should be looked at as a win-win.
GG: What other projects are in the works?
Behe: In another aspect of the 10% Project, we are going to start to do some psychographic research, trying to understand how some demographics, attitudes and behaviors impact consumer purchases. It is a little different from the pricing study, but it is another piece of the 10% Project.
GG: What do you hope to learn from the psychographic study?
Behe: It is a concern of the industry’s — and rightfully so — that many younger age cohorts are not the avid purchasers that we would like them to be. What we want to investigate are some of those barriers to buying ornamental and edible plants, not only to purchase, but barriers to enjoyment. We need more consumer research to understand how to connect with younger generations. We need to learn some of the ways that we could entice, particularly Gen Y, into embracing some of the products that our industry sells.
GG: Do you think there is something growers could learn from this study as well?
Behe: I really don’t see any of these studies as having a discreet or different benefit to growers or retailers. We just don’t have a lot of publicly available information that will benefit the growers and the retailers. There is a lot of great production information and research that gets funded and becomes publicly available, and people need to know how to manage pests and diseases. They need to understand fertility and water use, but I really see this 10% Project as contributing to the publicly available consumer research.
And my gosh, it is so badly needed by growers and by retailers. Wholesalers will benefit from this. Just about everybody in the supply chain who gets a better understanding of the consumer can work with other partners in the supply chain to their advantage. And that to me is the real benefit of the 10% Project to the industry.