January, 2008

Research Perspective and Comments & Analysis

Marketplace Perception vs. Reality (Part 2): Organics

The “law of perception” is the fourth of Al Ries’ and Jack Trout’s 22 Immutable Laws of Marketing. They say, “Marketing is not a battle of products; it’s a battle of perceptions.” An unfair statement? Well, that depends on your perception.

Produce companies that perceive an opportunity in responding to consumer perceptions can redefine their marketing strategies to keep pace with changing consumer consciousness.

Last month, I looked at consumer perceptions of food safety. Now I’ll turn to the second major theme of the Produce Marketing Association’s (PMA) research conducted with Cornell University to study consumers’ and retailers’ perceptions and focus on organics. We surveyed 544 produce shoppers in stores in four U.S. markets in the second half of last year. We then asked 40 produce executives representing 81 percent of U.S. supermarket sales to predict their customers’ responses.

Generally, we find consumers’ organic produce purchasing decisions are most often based on perception not reality — but like it or not, we must respond. We also find retailers generally know their customers’ minds regarding organics, with some exceptions.

Increasing organic offerings could go a long way to attract and keep organic shoppers’ dollars from competitors; almost half (47 percent) of this group say they select their primary food store based on organic selection.

Health is a key motivator for organic shoppers: 84 percent buy organic because they perceive those items to be more healthful than conventional. That science is still out on that topic doesn’t stop many consumers of organic produce from believing it. And it often seems to me that the more educated consumers are, the more strongly they hold this belief.

The environment is also important to this group: more than two-thirds prefer organics in bulk to reduce packaging waste. Retailers and suppliers know the operational and regulatory challenges of keeping organics separate from conventionally grown and in getting the right ring for the item. If you want evidence produce companies are responding, you need look no further than the flurry of new environmentally friendly packaging, ranging from degradable plastic clamshells to fiber trays.

This stood out this year in PMA’s first Impact Award: Excellence in Produce Packaging. Where it is feasible to offer organic items in bulk, that is the preferred option. Where it is not, marketers should develop packaging that appeals to these shoppers and do everything they can to communicate the benefits of the packaging. Packaging can and should convey a great story if you have one to tell.

The organic sector doesn’t own these topics; we all should have some level of story to tell about how we are reducing our environmental footprint and about the health benefits of the foods we grow. So, tell your story!

Conventional produce shoppers are not unaware of organics; 36 percent disagree with the statement they “don’t pay much attention to” organic fresh produce. Only 23 percent say organic produce doesn’t look as good as regular; almost half (47 percent) perceive organic fresh fruits and vegetables as more healthful — yet they still don’t buy organics.

One barrier appears to be price. Sixty percent of conventional shoppers would buy organic produce if it weren’t so expensive; retailers predicted this to the same percentage point. Yet, putting organics on sale is lost on conventional shoppers — 75 percent are unaware of sales or not convinced of organics’ benefits enough to part with their money.

With these conventional produce consumers, I think matters of relationship reign supreme. They aren’t swayed as much by environmental issues and feel conventionally grown items are just as healthful as organic. Nearly 62 percent of conventional shoppers told the researchers they strongly favor “local” over organic produce; local is sought at least sometimes by almost 70 percent of all shoppers. The upsurge of consumer interest in local produce, combined with a distrust of imported produce, indicates strong “homegrown” retail programs may be well received.

Virtually everyone in our industry can play the locally grown card in some way. Consumers’ definition of local is variable. As Jim Prevor wrote last month, a good marketing strategy ought to “emphasize the authenticity of their production locales and the experience and integrity of the farmers who grow the produce.”

Organic produce has sparked the desire of many consumers to have an emotional connection with the land and the people who bring the produce to them. Conventional produce suppliers can borrow a page from the organic industry’s marketing playbook. The same emotional perspectives fueling interest in organics and locally grown challenge our industry to reconnect with basic agrarian values.

We have the tools to win shoppers’ mindshare but need the right perspective to use them properly. Produce marketing is not a battle of organic vs. conventional or local vs. imported. It’s a battle of perceptions. Our response will make — or break — the sale. Remember — “Marketing is not a battle of products; it’s a battle of perceptions.”

Perceptions Can Be Changed

It is hard to overstate the importance of organic produce sales to the overall industry. It is not that it is such a large business — less than 1 percent of all American farm and grazing land is certified as organic, and the best estimates are that organic product, despite higher price points, still accounts for only about 2 percent of all retail sales of fresh produce. But it has been a growth area and, because supply of organic produce is constrained — land that has been used to raise conventional produce must go through a 3-year transition before produce grown there can be certified as organic — it is one of the few areas where growers can make good profits.

Yet it is also an area of great complexity when it comes to marketing.

First, there is a bifurcated market. Some consumers seek out organics and strongly prefer them. Other consumers may or may not buy them, depending on availability, quality and price.

Pursuing the motivated organic consumer may require a larger commitment than many retailers are able or willing to make and, in fact, it may require a commitment that goes beyond the boundary of the produce or perishable departments.

This is where research interpretation gets tricky. Although, as Bryan says, PMA’s research found “almost half (47 percent) of this group [organic shoppers] say they select their primary food store based on organic selection,” it doesn’t follow that a retailer increasing its organic selection by 10 percent will gather more customers.

There may be a set point — a minimal offering — of organic that will cause those shoppers motivated to buy organics to prefer a particular store or to find a particular retailer acceptable.

It also may require an initiative that goes beyond produce to attract true organic devotees. After all, consumers who are passionate about organic produce may also be passionate about organic meat, deli items and grocery products.

It is also possible that a passion for organics may be a proxy for some other attribute. For example, consumers with a passion for the environment or social justice may be influenced in their choice of a primary shopping venue not only by a product selection very heavily skewed toward organics but also by a retailer that has adopted an ethos with which this customer feels affinity.

One of the problems many conventional retailers have in marketing organics is that there is a natural hesitancy to promote any advantage to the consumer of organic produce. Conventional retailers can accept the notion of offering consumers choice, but they often hesitate to provide any justification for the price differential.

In contrast, retailers who focus on organics tend to be comfortable making stronger claims about the product.

Our own research here at Produce Business indicates Americans buy organics primarily for health reasons. This is problematic for many marketers since the evidence that people will live longer or not get diseases as a result of eating organic produce is virtually non-existent — certainly health claims of this nature have not been approved by the FDA or other authorities.

As one of the judges of the PMA Impact Award competition, this author saw firsthand the many efforts being made to produce environmentally friendly packaging — yet, almost inevitably, the reason these packages are not the industry standard is either that they don’t work as well in actual use as already existing packaging or that they are more expensive. Whether consumers are willing to make a trade-off is certainly an area that can benefit from further research.

In a sense, it is not surprising price would be an obstacle that discourages conventional consumers from buying organic. After all, most consumers cannot provide detailed assessments of what organic means — they simply assume it is better. Therefore, the only reason not to buy organic would be price.

If you really want to get into consumer psychology, consider this: Although consumers report the price of organics as being an obstacle to purchase, perhaps if organics were customarily sold at a discount to conventional, consumers might judge them to be of inferior quality. In this sense, the organic premium actually creates demand for organics.

Organic, which was the hot deal in produce until yesterday, has been supplanted by local in the opinion of both many retailers and much consumer research. Yet, even with local, as Bryan references in his comments, there are subtexts — consumers being patriotic, looking for fresh, looking for inexpensive, etc.

Sometimes getting away from the labels and focusing on what those labels mean to consumers can open the door to effective marketing. Though we agree with Bryan — and with Trout and Ries — that marketing must deal with perceptions, we also think that the industry has the power to influence consumer perceptions.

And two perceptions worth impressing on consumers are that consuming any type of fresh produce — conventional or organic, international, national or local — is healthful for individuals and that growing any type of fresh produce is an environmentally friendly use of land, maintaining open space, preserving topsoil and supporting rural communities.