MARKET OPPORTUNITIES IN TODAY'S FARM HOUSEHOLDS
by Maud Roucan and Dr. Brian Briggeman
Over the past several decades, farm structures have changed and continue to evolve. The U.S. Farm Household Typology, a classification system of today's farm, illustrates how agrimarketers can effectively and efficiently capitalize on opportunities presented by farm structure changes.
Ruralpolitans are professionals who chose a rural lifestyle. In the Single-Income Ruralpolitan group, the operator primarily works off the farm, while in the Double-Income Ruralpolitan group, both the operator and spouse primarily work off the farm. Average farm income for these two groups is negative, yet total household income is quite high for both groups. These two groups represent 47 percent of all farms today and agrimarketers cannot ignore them.
Since ruralpolitans spend a majority of their time off the farm, they have one primary need: help. Help learning about trends in agriculture, maintaining their farms, or accessing products and services. One means for reaching these groups is through the trade press — newspapers, magazines and radio. Tailoring trade press publications to reach spouses would be one way to market products or services to this group. Opportunities also exist at the retail level. Some companies provide extended store hours in the evenings and on weekend when ruralpolitans are more likely to be back from the city. Other companies are providing ruralpolitans with new products, such as multi-functional products with detailed user guides.
The Active Senior group represents 26 percent of farms. These households are still actively involved in farming since the operator works over 1,000 hours a year on the farm and the value of farm assets exceeds $300,000. For the operators who do not have a second generation decision-maker in the operation, marketers should pursue custom work and services. These operators without a successor also generally find it more difficult to adopt new technologies, and are looking for products that are easier to manipulate and are available in smaller packages.
THE FARM GROUPS
The last three groups —Farm Operator with Spouse Working Off-Farm (FOSOFF), Traditional Farm (TRAD), and Commercial Farm (COM) — have a larger amount of resources allocated to the farm relative to the other groups. They also have larger investments in farm assets. These groups are trying to get the highest return from their farm to make it a sustainable business.
In the FOSOFF group, which represents 12 percent of farms, spouses generally work off-farm. Data indicates 63 percent of total household income comes from off-farm sources. These farms are not as affected by fluctuations in farm income because of the more stable off-farm income. For this reason, it is an excellent group to maintain relationships with as they are likely to be lasting and profitable customers.
The TRAD group has both the operator and spouse working on the farm. The COM group only has the operator working on the farm, but this group always has the largest value of farm assets. Also, these two groups have more than half of their total household income coming from farming.
Agrimarketers targeting the TRAD group — 8 percent of farms — should expect to negotiate with two operators for major investment decisions. This group is a great target for agribusinesses providing training to farmers. With two operators working on the farm, it is easier for one to leave for new product or service training. The COM group — 7 percent of farms — presents a different opportunity for agrimarketers. Their value of farm assets averages near $2 million. Opportunities with this group include bulk purchases, large item sales, and services targeted to large farms.
KEY TAKE AWAY
More than 70 percent of the 2,000,000 farmers in the U.S. belong to the Ruralpolitan or Active Seniors groups. Although significant in terms of total number of farmers represented, this group does not represent a large proportion of the value of farm production. This typology of today's farm shows that there are new and different avenues for agrimarketers to reach their current customers, grow their customer base, and be better prepared for the farming landscape of the future. Finding innovative ways to serve new and existing customers may result in higher profit margins for some and be the key to survival for others.
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July 17-28, 2006
Maud Roucan (email@example.com) is a research associate for the Center for Food and Agricultural Business at Purdue University. Dr. Brian Briggeman (firstname.lastname@example.org) is an assistant professor in the Department of Agricultural Economics at Oklahoma State University.