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There are only 5 ways to grow an agritourism business

There are only five ways for any agritourism venue to grow its business. Unfortunately, most concentrate (and make the most significant investment of money and management energy) on the ways that offer the lowest return. What most miss are ways to grow their businesses with the guests they already have, the way that gives the greatest return on investment and effort.

The most effective way to grow any business, based mostly on return on effort and cost, is to stop defections or guests who don't return - also known as the leaky bucket. Guests don't return for numerous reasons, but most involve things a business can control. Most businesses spend lots of money trying to attract new guests while the existing ones just leak away.

The five ways to grow a business, revenues, and profits, in increasing degree of effort and cost and decreasing effectiveness, are:

The first three, which focus on existing guests and their experiences when they visit, are the easiest to accomplish and give the highest return on expended effort and investment. The last two are focused on attracting new guests but generate a much lower return, if any, especially in developing loyal repeat guests.

Unfortunately, most agritourism businesses mistakenly focus on the last two, assuming they are the best way to grow. They fail to concentrate on the first three, and most importantly, the first, guests who defect, who leak out the bottom of the bucket. Those farmss are constantly chasing after new guests while existing guests are walking out the door and never returning.

Our company has analyzed many existing agritourism businesses for clients who wanted to improve sales and profitability. Consistently, we have found guest defection rates (also called churn rate) to be 15% and higher, meaning that 15% or more of existing guests abandon the business each year. Just to stay even, these businesses must advertise, market, and run promotions to recruit large numbers of new guests to replace the ones they've chased away, the ones who will never come back (and probably tell their friends not to, as well!). It's like pouring water into a leaky bucket as new guests replace old ones who've taken their time and money elsewhere.

There are many reasons why guests defect. It can be because of a lousy guest service encounter with an employee, dirty restrooms, broken equipment, poor quality or cold food, long waits in queues, and hundreds of other possibilities. Perhaps more worrying is that many of these defecting guests who have experienced problems never contact the business. Instead, these guests spread negative digital word-of-mouth and just spend their money elsewhere.

Conversely, even guests who don't have a bad experience may defect. With all the new experiences competing for guests' limited disposable leisure time, including all the at-home digital options and the expansion of agritourism venues in many markets, it can be as simple as not offering a compelling enough experience with a perceived value greater than its cost be overcome "been there, done that" to make guests want to return.

A survey based on interviews with 90,000 North American retail consumers by Verde Group in association with the Jay H. Baker Retailing Initiative at Wharton School found that about 45% of guests who experience problems never contact the company. "Organizations that assume no news is good news are at significant risk," according to the report. "Rather than complain, these people spread negative word-of-mouth and then vote with their feet by making future purchases elsewhere."

A survey by loyalty marketing firm Maritz found that more than two-thirds of American consumers (68%) reported they had in the past two years defected or considered defecting from a company they had frequently used. Of those who left a company, 43% cited service experiences as their main reason. Of those who left, 83% said they had told others about their negative experience.

Reasons cited for defecting were:

• Poor guest service systems or policies (85%)
• The poor attitude of an employee (77%)
• An employee's low level of knowledge about how to help (76%)
• An employee's lack of decision-making authority or empowerment to help (72%)

Focusing on retaining existing guests is known as managing for zero defections. By retaining existing guests, you increase sales by generating more revenue from them over a longer time. Studies have shown that even a 5%-point decrease in defections can result in a 25% or greater profit increase.

Evaluate the entire process of visiting your farm to eliminate any potential headaches for your guests. To better understand how guests perceive their visit, check out this article from our Leisure eNewsletter on the peak-end rule.

The second and third easiest ways to grow a business, which are equally effective, also focus on existing guests, increasing how much they spend on each visit and how often they visit.

Some ways to increase the amount each guest spends:

• Increase prices. Yes, that's right, increase prices. Our company has consistently found that over the 35 years we have worked with farms throughout North America, they typically underpriced both admissions and food and beverage items. Raising the price of a hot cider donut from $1.00 to $1.25 will not decrease the number sold and will significantly increase profits. Even if unit sales decreased by 10%, at the higher price, donut revenue would be 12.5% higher.
• Stop selling hot dogs or low-cost food options that you barely make any profit per item and only offer quality higher priced items like burgers, chicken sandwiches, BBQ, etc.
• Develop premium food and beverage items like the super deluxe ice cream soda. Check out Disney to get ideas.
• Offer a premium-priced VIP admission with added benefits that are not costly to include.
• If you offer beer, also offer non-alcoholic beer at the same price point rather than having the only non-alcoholic drink options such as soda with a lower price and profit margin. If you provide alcoholic liquor drinks, you can also offer premium-priced mocktails.
• Offer more high-margin transformational experiences. These can even be separately ticketed events and classes during festivals. One farm we work with offers cocktail classes during their festivals. It doesn't have to be alcohol-related. It could be some type of cooking class. Check out the article on transformational experiences in this issue.

A few examples of ways to get guests coming more often include:

• Add additional events throughout the year, such as food festivals, cooking classes, farm dinners, etc.
• Offer a discounted bounce-back coupon to attend some event/offering a second time.
• Limited-time offerings (LTOs) can also generate more frequent visits. One farm offers a two-month summer food-themed festival where the food theme and food offerings change every two weeks - strawberry-themed for two weeks followed by blueberry-themed the next two weeks, etc. (check out our article The lure of LTOs).

If guests are spending more and coming more often, that means they must be happy with your business.

By focusing on the first three ways to grow a business - on existing guests - you do a better job attracting new guests than the traditional route of advertising and discounting. Reducing guest defections and keeping guests happy will usually take care of attracting new guests. Guests who are delighted with your business will want to return and become your business disciples, telling their friends through positive word-of-mouth marketing to become your guests.

Powerful? You bet! Think about how you choose a restaurant to visit. Would you be more likely to visit one with an eye-catching ad on social media or one that a friend praised to the skies? Yes, we thought so.

Focusing and investing in current guests rather than those you don't have creates the most significant profit. Yes, it's different from the conventional wisdom that advertising and marketing are the way to go. Research shows that investing in the quality and consistency of the experiences your existing guests have is your best avenue to growth and success.

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