Unknowns in consumer decision making are holding the industry back, affecting every level of the supply chain.
October 9, 2018 By Cassandra Smallman
When a customer walks through your garden centre, how do they decide on a fair price for a hanging basket? Do they value it more because it’s bright and colourful, because it’s in bloom, or according to its overall size?
The truth is that we don’t really know how consumers evaluate plants. To date, there has been no extensive consumer research done to answer this fundamental question. From the auto industry to cosmetics, industries pour millions of dollars into market research and as a result, they know precisely why their customers buy, what they prefer, and how much they will pay.
They are customer-centric because they understand and meet the demands of their customers. Conversely, the horticulture industry is worth over a billion dollars and yet there are many unknowns surrounding customer decision making. That lack of consumer understanding is stunting the industry’s ability to thrive and it’s time to start investing in the future of the horticultural industry by better understanding its customers.
The Opportunity in Consumer Research
How much is this gap costing your business and the industry as a whole? To assess that, it’s helpful to examine how the horticultural industry behaves, and compare that to other industries with presumably similar customer tendencies.
There are cases where plants serve a practical purpose, like hedging, pollinating, or increasing the list price of a home, but most plants lack a real utility like furniture or appliances. In most cases, you can’t use the plant, you simply admire it. Where else does this happen? Let’s look at the fashion industry.
Pricing Plants vs Pricing Pants
A pair of jeans could easily run you anywhere from $20 to $200. That’s a significant range in pricing and yet they sell at every price in between. How does this happen? Emotion. The way a pair of jeans looks or makes a customer feel has a huge impact on how much they’re willing to pay.
That industry has done decades of research on buying habits and has learned valuable insights about what features, designs, colours, and styles are more sought after and fetch a higher premium. Unfortunately, nobody has done a cost analysis on the long-term value of seeing a beautiful plant in their garden like they would for a pair of pants. Imagine if a little more understanding of your customers meant you could sell a hanging basket for 15 per cent more simply by including a bee-friendly variety in the basket, or by adding in trend colours. That would mean more revenue for your retail business and the wholesale grower.
Understanding the Consumer’s Perspective
Ornamental plants are not a necessity. They are a seasonal product, which makes their average price virtually unknown to the average customer. People know the price of eggs because they buy them every week. But a customer looking to buy a hydrangea generally doesn’t know what a fair price would be. So if the consumer doesn’t know what a reasonable price is, it’s up to the grower and retailer to determine what that price should be.
To share one perspective on this question, we turned to garden centre owner, Landscape Ontario President, and LinkGreen CEO, Warren Patterson. “This year, our garden centre significantly raised prices to offset the significant increase in minimum wage. Now a few months into the season, there has been very little, if any, negative feedback from our customers. Why would this be? I believe the typical consumer does not have a point of reference for the price of our products. Put in front of a consumer two, two-gallon pots that have grown to different heights, bloom stage, etc. Then ask them what they think the retail price of each plant should be. I think you would be very surprised by their answers.” In other words, not knowing what a customer is looking for in a plant keeps us from knowing how much to charge.
Setting Standard Guidelines
If each retailer has the flexibility to set their price, why does a standard consumer price matter? It’s because the consumer price drives the price at every level of the supply chain. The jeans we discussed above are not priced according to how much they cost to make. It’s based on how much the consumer will pay for it and the same principle should be applied to plants. If quality hanging baskets are valued at $35 by the consumer, then the wholesaler can sell it to the retailer for $18.50, leaving everyone with higher margins than if the retailer sold the same basket for $30.
Everyone should be basing the pricing off of the consumer price. Through greater collaborations between all levels of the supply chain, the industry can work together to ensure that the industry as a whole remains profitable and sustainable.
Working together to grow and thrive
Now that we have established the importance of consumer research to the overall horticultural industry, how will the research be conducted and who will be responsible for it? Traditionally, research is conducted by large industry leaders that can afford to do it, only benefiting that particular business. The industry as a whole needs access to the research findings which means industry associations are the obvious choice to conduct the research. Each member of the association should contribute to the funding and each member will have access to the information. This solution offers every business the opportunity to better understand the consumers who purchase plants. Through this understanding, the horticultural industry can thrive for generations to come. Stay tuned for our next article as we explore how the cost of production affects the cost of a plant.
Cassandra Smallman is a marketing specialist for LinkGreen, an online ordering and supply chain technology leader in the lawn and garden industry. For information about how LinkGreen could help your business, visit www.linkgreen.ca.
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