Vol. I, No. 2, April 2023
Taking value added agriculture to its highest level
Traditionally, value added agriculture takes raw agricultural commodities and transforms them in a way that gives them higher market value, usually into a product sold directly to the public, mostly at agritourism farms, and sometimes at farmers markets or wholesale. Some value added examples include wheat made into bread, fruits made into jams or pies, tomatoes made into salsa, milk into cheese, and apples into cider.
What happens with most value added agriculture is it moves up what is known as the progression of economic value. The progression of economic value starts with raw commodities that are transformed into goods, which are then wrapped in services, and finally transformed into experiences. Each level increases the total value to the customer and, accordingly, the total price the customer is willing to pay. Generally, price sensitivity decreases, profit margins increase, and competition decreases as you move up the progression of economic value.
We'll use apples as an example. At the first level of economic value, the apples are sold in a farm market. At the 2nd level of economic value, they're turned into goods, such as apple sauce, apple pies, cider, cider donuts, and maybe even hard cider. Based on the added value, these goods sell for a much higher price and usually have a higher profit margin than raw apples.
The 3rd level of economic value is to offer them as a service. This can include serving customers a slice of apple pie a la mode in a farm market restaurant or a glass of hard cider in a cidery. The prices for these services are higher.
Now comes the next level of economic value, the 4th level, where farms turn apples into an experience. Crazy as it is, people will pay a farm to do the labor of picking the apples (the experience) with pick-your-own (PYO), also called U-pick. Most customers for PYO, especially families with young children, don't come to PYO farms to save money by harvesting a commodity. They come for the experience of both picking the produce and consuming produce that is local and fresh. People perceive the experience as worth more than just the value of apples they get. Recognizing this value equation, many PYO farms now charge admission as well as for the value of the apples. Sometimes the premium for the experience is built into the price U-pickers pay for the container they can fill with the apples. Sometimes with U-pick pumpkins, they are priced higher than supermarket ones since there is now an experiential value to them. By offering PYO, farms are commanding a premium price for the apples versus their wholesale price and also getting revenue for the experience.
Another example of turning an apple into an experience is instead of just selling caramel apples at a fall festival, allowing customers to dip their own. And, of course, there are the apple cannons.
One of the best examples of raising the value of a commodity to an experience is a corn maze. A farmer might sell 5 acres of corn as a commodity for $6,000. Turn it into an experience by charging people maybe $8 to get lost in it, and 15,000 admissions will result in $120,000 of revenue from those same 5 acres, a 2,000% increase in revenue.
As Joe Pine and James Gilmore discuss in their book, The Experience Economy, experiences need to be "memorable events that engage each customer in an inherently personal way." However, what we missed the most during the pandemic was meaningful experiences. The pandemic has raised the bar for highly appealing experiences from being merely memorable to being highly meaningful.
There's a 5th level of economic value for experiences that has an even higher appeal to people with higher revenues and profitability than just the 4th level. Some agritourism farms are learning to tap into a 5th level, transformational experiences, to attract people to their farms and produce better profits. Transformational experiences are experiences that make you a better person.
Pam Danziger, president of Unity Marketing, identified the trend toward transformational leisure experiences in 2005: "Powered by a feeling of entitlement, Americans bring a unique achievement orientation to how we 'recreate.' We want to accomplish something meaningful and measurable through our leisure pursuits. For more Americans ... the goal of leisure and entertainment is to reach a greater self-actualization."
Psychologist Abraham Maslow placed self-actualization at the pinnacle of the hierarchy of human needs. According to Maslow, self-actualization refers to "man's desire for fulfillment... to become everything that one is capable of becoming."
Maslow's hierarchy of needs
The 5th level of theprogression of economic value and Maslow's hierarchy of needs place the greatest value on the same needs - experiences that make you a better person rather than just buying things or enjoying non-enriching experiences.
There are many types of transformational experiences. One example is working out at a gym to be in better physical condition. Another major area is learning new things of personal interest, such as for a hobby. The popularity of beer, wine, and food festivals has been partially driven by people's desire to discover and learn about foods and drinks.
In their book The Experience Economy, Joseph Pine and James Gilmore tell us that we are moving into the Transformation Economy in which we desire experiences that are not only enjoyable and create great memories but that transform and leave us improved in some way.
Today we are in the Experience Economy, with the Transformation Economy hot on its heals. You can stay in the elusory safety of past practices and keep doing the same things you've always been doing - in which case, mark my words, you too will be commoditized."
An example of the commoditization of agritourism experiences is corn mazes. In many areas of North American, they have become commoditized as so many farms in different markets now offer them. In some markets the same thing has begun to happen with sunflower festivals.
A 2015 Pew Research Center survey found that 73% of adults consider themselves lifelong learners. Three-quarters of adults (74%) participated in at least one activity in the prior 12 months for the purpose of advancing their knowledge about something that personally interests them. These activities included reading, taking courses, or attending meetings or events tied to learning more about their interests. The survey found that adults with more formal education and higher incomes are more likely to engage in lifelong learning. It found that 87% of adults with at least a bachelor's degree participated in personal learning activities in the past year compared with 60% of those with high school degrees. More than 8 in 10 adults living in households earning more than $75,000 (83%) are personal learners, compared with 65% of those living in households earning under $30,000.
Lifelong learning is about pursuing transformational experiences and Maslow's fifth level of Hierarchy of Needs - self-actualization.
Call it the need to escape, Covid revenge, or the great reprioritization; we continue to see heightening demand for self-actualization and life balance. Many people have a renewed interest in learning something new in the face of the pandemic's disruption to their regular lives. Online learning sites like Skillshare, Duolingo, and Coursera saw extraordinary growth. Enrollments in online art and music classes spiked while novice bakers flooded Vermont-based flour company King Arthur Baking's helplines.
The increasing desire for transformational experiences is also growing due to the rising education levels of people in America. As the Pew study found, lifelong learners, people seeking transformational experiences, are more likely to be more educated and better off financially. Since 2015 when the PEW survey was conducted, the percentage of adults age 25+ with a bachelor's or higher degree has grown from 32.5% to 37.9% in 2021, a one-sixth increase. It is projected to continue to increase.
Lifelong learners are likelier to be younger, probably because a greater percentage of younger adults have higher education levels than older adults. The target market for most agritourism businesses, households headed by young adults, have the highest levels of education. In 2021, 39% of Americans 25-44 years old had a bachelor's degree or higher. That compares with only 30% for those 55-64.
Apples can be elevated to the 5th level at a cooking class for an apple dessert. The attendees might even first pick the apples they're going to use. In a farm market, apple tastings where staff explain the heritage and differences of the apples are a transformational experience. It will also raise the perceived value of the apples for sale and introduce customers to buying new varieties. Other examples of transformational experiences include farmer-led farm tours, tours of a farm's cidery, and beer and cheese tastings from local producers. Having a haywagon ride guide explain the farm's history and what people see on the ride elevates the experience to a transformational level.
An example of a combination of the 3rd, 4th, and 5th levels of economic value might be a long-table dinner in an apple orchard where guests meet the farmer and learn about apple farming and the orchard where the dinner is being held. The chef who prepared the meal might explain some unique apple dishes. It's not unusual for people to pay $200 a person for this type experience. The meal itself might only be worth at the most $100 if served in a restaurant. The other $100 of value is created by the unique dining experience and its transformational additions.
In addition to the economic value and profitability at the different levels of the progression of economic value, there's another dimension on how people value each level - the progression of time. With only 24 hours a day and seven days a week, with 40+ hours a week for work and 8 hours a day for sleep, time is an immensely limited currency. Time wasted is to be avoided at all costs. Goods and services are about time well saved, so a person frees up their time for other things. Instead of spending time making an apple pie, you buy it at the farm market and save time. Experiences are about time well spent. At the 5 th level, transformational experiences, the progression of time takes on a greater value to time well invested, as transformational experiences, the improvement to either body or mind, lasts. Learning to cook a recipe that includes apples means you have the knowledge to enjoy the recipe for the rest of your life, a great return on the time you spent at the cooking class.
For many people, the decision to leave home and visit a particular leisure venue is more about using discretionary leisure time than spending discretionary money. In our time-pressed culture, the last thing people want to do is waste their leisure time. For that reason, to ensure it is worth their time, we see a trend of people choosing premium, higher fidelity, meaningful experiences when they do go out, even if they cost a premium in price,. For higher socioeconomic consumers, who are the vast majority of the out-of-home leisure/entertainment venue market and are the most time-stressed, their time is more valuable than their money. Better to part with more money to be assured of gaining the maximum value and enjoyment for time well spent or invested.
Bompas & Parr, in a report on the future of public leisure, describe time as "the new marker of luxury and a precious commodity to be spent wisely... Time is becoming a luxury as we try to cram as much into our everyday lives as possible.".
Higher socioeconomic households are the prime market for out-of-home (OOH) leisure and entertainment. Using pre-pandemic data as a normal, nearly three-quarters of all spending on OOH entertainment and art venues (71%) was by households headed by a person with a bachelor's degree or higher.
This is the population with the least leisure time (74 minutes less a day than a high school graduate), meaning they will definitely want to avoid wasting it and are willing to pay to ensure it's well spent or invested.
The PEW study found that this higher socioeconomic population has the greatest percentage of lifelong learners - 87%- meaning they are highly motivated to seek transformational experiences.
Agritourism farms can grow their businesses and profitability by making a paradigm shift by adding the offerings with the highest economic and time value to their current offerings of goods, services, and experiences - transformational experiences.
Addition information about the transformation economy:
- Six video interviews of Joe Pine, co-author of The Experience Economy book.
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