Customer Preferences for Michigan : A Case Example of a Market Research Program for a Commodity Industry

Donald Ricks, James Sterns and Timothy Woods

A series of market-research studies on Michigan apples are discussed in this paper. They provide a case example of a continuing program of market research to aid this industry. These included studies on changing preferences, needs, perceptions, practices and buying behavior for major customer segments of this industry, including consumers and grocery retailers, as well as mid-chain customer segments such as shippers and processors. While this market research program includes several component studies, the overall integration of the information from the various component studies is especially important for the development of the industry's marketing strategies. The component studies which comprise the overall market research program to date include the following interrelated phases:

1. An initial survey of shippers as key mid-chain firms-emphasizing overview information on customer needs and preferences as well as priorities for needed market research information 2. A consumer focus group study 3. A large-sample consumer telephone survey on consumer preferences, behavior and attitudes 4. Consumer taste tests emphasizing fruit firmness and taste 5. Consumer visual tests regarding purchase preferences for fruit size and color 6. A survey of consumers using an in-store taste and sampling program 7. A follow-up survey of shippers that concentrated on apple varieties preferred for current and future markets 8. A similar survey of apple processors on apple varieties preferred for processed apple markets 9. A survey of grocery trade customers on their needs and preferences for fresh apples 10. Integrative analyses comparing and contrasting preference information obtained from the studies listed in 1-9. The market research was done as part of broad-scope industry efforts to analyze, target and develop major strategic directions intended to position the industry for high performance and success in the future. These identified strategic directions have the goal of improving the industry's overall performance, including effectively meeting the needs of their consumer and trade customers in order to improve industry's competitiveness and economic viability. The specific types of information, priority questions and customer targets for each of the component market- research studies were developed in close cooperation with industry leaders and major industry organizations such as the industry's generic promotional commission. The industry has used the information from these market-research studies to develop their evolving strategies to most effectively serve their customer needs and hence to compete in the changing markets for their industry.

In the highly competitive and dynamic environment formation in order for an industry's entire verti- of today's modem business world, it is very im- cally-linked supply-marketing chain to adjust ap- portant for food industry suppliers to understand propriately to these types of changes. the changing needs and preferences of their cus- Obtaining market-research information on cus- tomers. Large food firms such as food manufactur- tomer needs is often more difficult for a commod- ers typically devote substantial financial resources ity industry than for a large food-manufacturing to continuous market research on their customers firm. These difficulties are related to the typical and how to advantageously meet their changing situation of agricultural industries in which many needs. Agricultural commodity industries also need small and diverse firms must be coordinated a continuous flow of relevant market-research in- through the supply-marketing chain with its sev- eral vertical levels between farm producers and fi- Donald Ricks is professor, Department of Agricultural nal consumers. Economics, Michigan State University. Timothy Woods is There are substantial opportunities for business associate extension professor, Department of Agricultural and food system economists Economics, University of Kentucky. James Stems is assistant at universities to do professor, Department of Food and Resource Economics, useful market research related to agricultural com- University of Florida. modity industries. This type of research, especially 126 March 2002 Journalof Food DistributionResearch when done in partnership with a commodity indus- various industry segments, a special industry coun- try, can provide substantial and relevant informa- cil, designated the MichiganApple Industry Stra- tion on changing customer needs-and hence aid tegic Planning Task Force (MAISPTF), was in developing and implementing appropriate adjust- formed to act as an industry think-tank. This group ment strategies for the vertical supply-marketing includes representatives from growers, packers, system of the commodity industry. shippers, processors, the industry's promotional This research report summarizes a market-re- commission, the grower bargaining association, the search program, including a series of interrelated state horticultural society, trade associations of ship- specific research studies conducted in recent years, pers and processors, the industry's research com- regarding changing customer needs and preferences mittee, various state grower organizations, the na- related to the Michigan apple industry. These stud- tional growers' trade association, and the state De- ies were designed and developed in close partnership partment of Agriculture. University representatives, with Michigan apple industry leaders, including the including both extension and research, are also in- industry's generic promotional organization. volved in a close partnership with the industry lead- While this market-research program includes ership for the on-going planning efforts. An im- several component studies, the overall integration portant goal of this industry think-tank has been to of the information from the various component explore and recommend various strategies which studies is especially important for the development will contribute to the performance of the industry's of the industry's marketing strategies. Results of vertically linked supply-marketing chain. the market research have been and continue to be In the early phases of the analysis and discus- implemented by the industry. sions by this group there was strong agreement that the entire industry needs to be highly market and market-research studies As a Part of Industry customer oriented rather thanproduction oriented. Strategic Planning It was also agreed that this market and customer orientation is needed at each of the vertically linked The series of market-research studies discussed in segments of the industry's marketing-supply chain. this paper were done in the context and as a com- The MAISPTF emphasized that this increased ponent of, broad-based industry strategic planning customer and market orientation included a need for efforts within the Michigan apple industry. The an on-going series of market-research studies. Indus- goals of this strategic planning have included im- try leaders agreed that this market research was needed proved competitiveness, market growth, and to obtain more specific and up-to-date information strengthened economic viability of the industry. about changing customer needs, preferences, require- These strategic-planning efforts were made to aid ments, purchase decisions, and standard operating the industry in its efforts to analyze its dynamic procedures important for apple markets. market situation, the major driving forces which are impacting it, and important problem areas which Initial Industry Surveys need industry attention. Development and encour- agement of various strategies to aid the industry's An early phase of the series of market-research stud- needed adjustments to be successful within their ies was an initial survey of the Michigan apple ship- dynamic and competitive business environment pers. This survey was requested by the MAISPTF have also been given considerable emphasis (Ricks to identify key needs and priorities of this segment et al., July 1996). of mid-chain customers and to determine the re- The industry strategic planning process has in- search priorities of this industry segment (Ricks and cluded substantial and on-going involvement of Woods). A similar survey of the grower segment industry leaders representing many segments of the of the industry was also requested (Ricks, Woods, industry, major industry organizations, and lead- and Lyford). ing firms in several of the vertical levels of the Results of the initial surveys of the industry's marketing-supply chain. To facilitate the broad stra- shipper and grower segments indicated strong sup- tegic-planning process and the continued involve- port for more market research as a part of the ment of the industry leadership representing the industry's efforts to improve its competitiveness. Ricks, D., J. Sterns, and T. Woods Customer Preferencefor Michigan Apples 127

With this strong support from both the industry on consumers' reasons for preferring bagged apples leadership planning group and the industry's rank has been used in marketing efforts with trade cus- and file, plans were made to develop and conduct a tomers to encourage retailers to carry more bagged further series of market-research studies to provide apples along with bulk display apples to meet the information on the industry's customers. consumer preferences for both of these types of packs. Another strategy has been to emphasize tray A Consumer Focus Group Study pack for some of the newer varieties from Michi- gan for bulk display at retail for those consumers An important early component of the apple market who prefer to purchase apples in this way. research was a consumer focus-group study. These Another important objective of the focus-group focus groups used in-depth discussions to explore studies was to obtain information from consumers consumers' perceptions, preferences, reasons for on their overall perceptions and positive associa- apple purchases, positive and negative experiences tions with apples. It was found that consumers have with apples, knowledge of apple varieties, psycho- positive associations with apples which include logical associations, and various other aspects re- "healthiness, contribute to a nutritious diet, are good lated to consumer demand for apples. The specific for snacks, tasty and juicy." Some consumers also topics and questions to be explored with the focus said that they have "positive associations of apples groups were developed in close cooperation with with farm markets and enjoyable trips to the coun- industry representatives from the Michigan Apple try for good apples and pleasant experiences." Committee (MAC), the industry's promotional The industry has emphasized these positive commission. associations in their advertising, promotions, and One key topic which was discussed with the trade merchandising. They have also used this in- consumers in these focus groups was related to formation to explain the positive attributes of apples which characteristics of apples are most important in consumer-information articles published in news- for their purchase decisions. These consumers in- papers and magazines. dicated that the following characteristics are espe- The results of the consumer focus-groups stud- cially important: firmness and crunchiness; free- ies also were used by the industry to develop spe- dom from bruises and blemishes; outward appear- cific questions for the next phase of the market re- ance, including color and fruit size; flavor; and search-a large-sample consumer telephone sur- keeping quality (Beggs, Ricks, and Heinze). Many vey. The questions in this telephone survey regard- of the consumers in the focus groups explained that ing which apple characteristics consumers regard a very negative experience with apples occurs when as important were based upon the results of the they buy beautiful bright-red apples which turn out consumer focus-group discussions. to be soft and/or mealy. They emphasized that for their repeat purchases it is very important for them Consumer Telephone Survey to experience apples which are firm, crisp, and crunchy when they eat them. A major component of the series of market-re- Another key objective of the focus group study search studies was a consumer telephone survey. was to obtain information on consumer buying be- The objective of this telephone survey was to ob- havior and purchase decisions regarding apples re- tain information from a large sample of consumers tailed in bags compared to apples retailed in bulk about their preferences, attitudes, psychological as- displays (which are supplied by the apple industry sociations, and buying behavior regarding apples. as tray-pack apples). The consumer focus group Although these goals are similar to those for the participants explained why they buy either bagged focus groups, a limitation of the focus-group ap- apples or those from bulk in-store displays. proach is that it involves only a small sample of This information on consumer preferences and consumers. Therefore, a telephone survey with a buying behavior has been used by the industry to large sample of consumers was undertaken as the develop specific strategies for expanding markets next step of the market research in order build onto for Michigan apples in both bags and tray packs and to further explore and test the information from for bulk display at retail. For example, information the earlier focus groups. 128 March 2002 Journalof Food DistributionResearch

The consumer telephone survey was conducted firm, crisp apples for the consumers. This involves in three major metropolitan markets: Detroit, Chi- a complex set of several strategies and manage- cago and Kansas City. These markets were recom- ment practices which are needed at all vertical lev- mended by the MAC because they are major mar- els between growers, storage operators, packers, kets for Michigan apples. and shippers. The market-research results helped During this telephone survey, one of the ques- the industry more widely recognize the importance tions asked was, "What apple characteristics are of the complex but difficult set of coordination strat- most important to you as a consumer when you are egies and management practices which are needed making your apple purchase decisions?" Flavor, within the industry to provide crisp apples and unbruised and unblemished, and crispness were said hence more effectively serve the changing prefer- to be "very important" by 81-91 percent of the con- ences of its consumer customers. sumers (Ricks et al., 1995). This consumer-prefer- The Michigan apple industry also used the ence information indicates that the apple industry market-research results to support their continued and grocery retailers need to give special attention and increased emphases onflavor in their advertis- to providing apples with these characteristics in ing and promotions such as those by the MAC. order to effectively meet consumer preferences. Another industry response to the results of the con- In contrast to very high ratings which consum- sumer telephone survey was a recommendation for ers gave to factors such as crispness and flavor, additional consumer market research regarding only 36-46 percent of the consumers said that color, specific color and fruit-size preferences by consum- variety, and price are very important for their apple ers. This recommendation by the industry led to purchase decisions. Only 20 percent of consumers later market-research studies involving visual tests said that fruit size is a very important characteris- of consumer purchase preferences related to color tic for their apple purchase decisions. Many con- and fruit size. sumers did indicate that color, variety, price, and The market-research information from both the fruit size are "somewhat important" to them. consumer telephone survey and the focus-group The consumer-survey findings of a medium im- research on why some consumers have preferences portance for color and price along with a relatively for purchasing apples in bags has been used by the low importance for fruit size are interesting results- MAC in their work with trade customers. These especially since grocery buyers have historically industry efforts are aimed at influencing retailers placed great emphasis on red color, low prices, and to provide substantial shelf space for Michigan large fruit size when they buy apples from the bagged apples as well as consumer promotions for industry's shippers. The survey results suggested that these Michigan apples. retailers should work more closely with the apple- supplying industry on providing crisp, flavorful, A Consumer Survey Related to In-Store Demos unbruised apples and put less emphasis on very high color, low prices, and large fruit size. The market-research series of studies on apples in- The consumer survey results also showed that cluded a small survey undertaken in connection the state of origin of the apples-where they are with some of the in-store demonstrations conducted grown-is of relatively minor importance to most for certain Michigan varieties. This survey was consumers. On the other hand, information from done in part to test the effectiveness of this in-store- the focus-group study indicated that some consum- demo marketing approach, which has been increas- ers use the state of origin of the apples-e.g., Michi- ingly emphasized by the Michigan Apple Commit- gan or Washington-as an identifiable proxy for tee during recent years. other desired apple characteristics. One question in this in-store-demo survey was, The Michigan apple industry has made substan- "Now that you have tasted this variety, would you tial use of the information from the consumer tele- consider buying it?" A very high 95 percent of the phone survey and the consumer focus groups to consumers who sampled the relatively new variety develop a number of strategies. One important in- said that they would consider buying that variety dustry response has been the development of a spe- in the future (Ricks). This suggested a high degree cial emphasis on a set of strategies for providing of positive responses by the consumers to the in- Ricks, D., J. Sterns, and T. Woods Customer Preferencefor Michigan Apples 129

store sampling and confirmed the importance of pressure) were rated much less satisfactory than the industry's increased emphasis on in-store sam- were the apples with 13-14 pounds of pressure. For pling that was being done by the MAC. , 94 percent of the consumers said Another question was, "What do you like about they either "definitely would buy" or "maybe would this variety?" Ninety-eight percent of the consum- buy" apples with the 13-14 lb. degree of firmness. ers had positive comments about the sampled vari- By contrast, 38 percent of consumers said they ei- ety of apples. These comments provided informa- ther "definitely would buy" or "maybe would buy" tion about the positive characteristics of the vari- the low-pressure Red Delicious. These consumer ety which was later used to develop new advertis- preferences indicate that for greater consumer sat- ing and promotional materials about the variety. isfaction with purchases of Red Delicious, the in- As a result of the very positive responses by dustry should try to provide apples with 13-14 Ibs. consumer participants in the in-store-demo survey, pressure. the MAC decided to give even greater emphasis to In addition, the industry has considered the in-store demos and sampling-especially for new possibility of the development and implementation varieties that are less familiar to many consumers. of an industry-wide program to provide greater in- Thus in-store demos have been expanded as a part centives and customer assurance that the industry of that organization's long-run strategic plan. will supply high-condition crisp apples that meet consumer preferences. Two alternative approaches Consumer Taste Tests for such industry-wide programs for improved con- dition apples include: Because consumers indicate that fruit firmness or (1) Possible new grade standards for Michigan crispness strongly influences their repeat-purchase that would include a measurement of fruit decisions, the industry recommended that an im- firmness as part of the grade. portant next phase of the market research should (2) A possible new state program with manda- include taste tests for firmness. The taste-test study tory minimum levels of fruit firmness be- was conducted primarily to determine the specific low which apples could not be sold for fresh level of apple condition or firmness the industry market. This would be an even stronger should provide to adequately satisfy consumer pref- approach to assure consumers and trade erences and hence to maximize sales. The industry customers that they would consistently re- indicated that this information is needed in order ceive high condition apples. to help target the appropriate goals for fruit firm- If such programs are pursued further by the ness required by the coordinated series of quality industry, the taste-test market research results could improvement steps in the various vertical levels of be used as an informational base for setting appro- the supply chain. priate levels of condition for either of these types In this study, consumers tasted apples with three of new quality-improvement programs. Although levels of fruit firmness as measured by pressure the industry has discussed the development of new tests, the standard quality-control measure. Three program approaches to encourage the production levels of firmness were suggested by industry lead- of high-quality fruit, there has not been sufficient ers as commonly recognized levels for high-, me- consensus developed within the industry to proceed dium-, and low-condition apples. After tasting the with any such program. It remains to be seen if the apples with the different levels of firmness or con- industry will develop such programs in the future. dition, consumers were asked to indicate their level of satisfaction with each degree of crispness and Consumer Visual Tests whether or not they would buy such an apple. The resulting consumer responses from these Because of the results of the consumer telephone taste tests showed that most consumers prefer survey and the consumer focus groups which apples with a medium pressure of 13-14 Ibs. of showed that consumers rate color of only medium pressure for their purchases of both the Red Deli- importance, whereas grocery retailers historically cious and varieties (Greaves, Ricks, and have given quite high importance to highly red Heinze). The apples with low pressure (8-12 Ibs. color, the industry recommended that the market 130 March 2002 Journalof Food DistributionResearch research series of studies should include visual tests for their purchase requirements. Furthermore, a for consumer preferences regarding apple color. high percentage of consumers in the telephone sur- The main purpose of these visual tests for color vey indicated that they prefer "medium-size" apples was to determine what degree of red color is pre- rather than "large" apples. Therefore the industry ferred by consumers for their apple purchases. recommended that these visual tests for fruit size Consumers were shown apples with three dif- be done in order to provide further information on ferent degrees of red color, and asked which ofthese the specific sizes of apples preferred by consum- apples they would purchase. For Red Delicious the ers. A related goal of these visual tests was to de- tested levels of color were 90-percent red, 80-per- termine more specifically what consumers mean cent red, and 60-percent red. For Empire the tested when they say they prefer "medium-size" apples. levels of color were 80 percent, 60 percent, and 40 In the consumer visual tests for fruit size the percent because Empire tends to be a less com- consumers were shown different sizes of apples and pletely red variety). asked which sizes they would buy. There were three The results showed that while somewhat more sizes of apples for the Red Delicious variety and consumers preferred the 90-percent red color, 67 three for the Empire variety, although with a some- percent of the consumers said that they either "defi- what different range of size categories. nitely would buy" or "maybe would buy" the 80- The results for Red Delicious showed that al- percent colored Red Delicious (Greaves, Ricks, and though some consumers indicated that they prefer Heinze). This indicates that the 80-percent-colored somewhat larger fruit, 71-80 percent of the con- Red Delicious may be adequate for many consum- sumers said they either "definitely would buy" or ers and would be worthwhile for grocery stores to "maybe would buy" the 100- or 125-count Red carry. This is a somewhat lower percentage of color Delicious (Greaves, Ricks, and Heinze), indicat- than is typically required by grocery retailer cus- ing that it would be appropriate for grocery retail- tomers for Red Delicious. If grocery customers ers to stock this size. This is favorable market-re- would regularly stock and carry the 80-percent col- search information for the Michigan industry be- ored Red Delicious this would help the Michigan cause these size apples are more commonly pro- industry increase its apple sales. duced in Michigan than are the larger sizes. Results of the consumer visual preferences for color of Empire apples showed that 85 percent of Shipper Survey on Varieties in Demand the consumers indicated that either they "definitely would buy" or "maybe would buy" the 80-percent An important aspect of meeting customer needs and -colored Empire, while only 47 percent of the con- preferences is growing the varieties of apples which sumers indicated that they "definitely would buy" provide the characteristics which consumers and or "maybe would buy" the 60-percent-colored Em- trade customers desire. These include varieties pire. These results indicate that although consum- which provide the preferred firmness and flavor, ers do not expect as high a percentage of color for are not easily bruised, have adequate fruit color and Empire as for Red Delicious, the industry needs to size, and have good shelf life in the retail store. strive for the 80-percent color level for the greatest Although consumer and trade-customer pref- consumer satisfaction and purchases with Empire. erences for apple varieties can change rapidly, a long-lived perennial tree crop such as apples re- Consumer Visual Tests for Fruit Size quires many years and large long-term investments by growers. Switching varieties to meet changing The industry recommended that the market research customer preferences is difficult and costly. Be- should include a study of consumer visual tests for cause of this, the apple industry and especially the their fruit-size preferences. This was recommended apple growers need to anticipate as best they can because the earlier consumer telephone survey and many years in advance which varieties will be in consumer focus groups showed that consumers rate demand and should therefore be planted, grown, fruit size as of relatively minor importance, while and maintained in their apple orchards. With rap- grocery-trade customers have historically given idly changing market demands and consumer pref- substantially greater emphasis to larger fruit size erences for different varieties which have the de- Ricks, D., J. Sterns, and T. Woods Customer Preferencefor Michigan Apples 131 sired characteristics, predicting the varieties which purpose of obtaining up-to-date information from will be needed in the future is a very difficult job. these key mid-chain firms regarding the apple va- Because of these difficulties, along with the rieties most needed to meet their requirements and substantial importance of accurately predicting those expected to be most in demand in the future. which varieties will be needed in the future, the This processor variety survey was sent by mail to apple industry gives a priority to obtaining as much all Michigan apple processors. and as accurate information as possible about ex- The different varieties were given an overall pected future demand for the different apple vari- ranking according to various aspects including suit- eties. The MAISPTF therefore recommended a ability for processing, future demand, and proces- market-research study to survey the Michigan apple sors' suggestions for grower plantings for process- shippers regarding their best available and up-to- ing markets. For this overall summary ranking, date information on expected future demands for , Ida Red, and received an Michigan apple varieties for fresh market. The ship- overall grade of "A." and Rome re- pers were recommended as this survey's focus be- ceived an overall grade of "B." , Wine- cause they are key mid-chain firms with substan- sap, , and Empire received a "C" grade. tial knowledge about changing market needs for McIntosh, , , and Greening apple varieties, demand factors, and other market received a "D." An overall rating of "F" was re- requirements related to varieties. This study in- ceived by Red Delicious and for pro- volved a mail survey which was sent to all Michi- cessing markets. The relatively new varieties of gan apple shippers. and received relatively high overall Results of the survey showed that shippers at ratings of"B," although many processors said that that time (1996) ranked the top five varieties for they had not yet had enough experience with these fresh-market demand for Michigan in the future to two varieties to accurately rank them (Ricks and include Red Delicious, , Golden Delicious, Sterns, 1997). Jonagold, and Jonathan. The survey also obtained additional information about which apple varieties Grower Acreage Adjustments by Variety shippers expected would be needed in volume in Related to Changing Demand future years. These included Red Delicious, Golden Delicious, Gala, Jonathan, Jonagold, McIntosh, A major purpose of the shipper and processor vari- Empire, and Fuji (Ricks et al., 1996a). ety surveys was to provide market research to aid Industry leaders suggested that two specific growers with their orchard planting and removal follow-up analyses be done to.build on the infor- decisions. A Michigan orchard survey completed mation obtained with this shipper variety survey: in 2001 shows how growers have recently adjusted an analysis of the Michigan varieties being grown their acreages by variety since the earlier surveys compared to the demand information obtained from on expected demand. These adjustments provide the shipper survey; and a similar variety survey of data on actual industry adjustments which can be Michigan processors, because of the substantial compared to the previous indications of needed percentage of the Michigan apple crop marketed adjustments provided by the earlier variety demand through processors. Results of this processor sur- surveys of key shipper and processor marketers. vey would then accompany the shipper variety sur- Gala-The earlier variety surveys-especially vey in an expanded information package to help the shipper survey for fresh markets-indicated an the industry adapt to meet changing market de- expected increasing demand and an indicated op- mands. portunity for a substantial increase in plantings of Gala in Michigan. The 2001 orchard survey indi- Survey of Michigan Processors on Apple cates that growers responded consistently with the Varieties in Demand for Processing Markets earlier survey projections, increasing their Gala plantings by 110 percent since 1995. In response to the recommendation by indus- Rome, , Paula Red, and Greening- try leaders, the next phase of the market-research The variety surveys of shippers and processors in- studies involved a processor variety survey for the dicated that there would be decreasing demand for 132 March 2002 Journalof Food DistributionResearch

these four varieties and hence a need for signifi- They also wanted more promotional payments paid cant reduction of acreage of these varieties by to them to supplement their own Michigan-apple Michigan growers. The 2001 orchard survey shows advertising budgets. Others suggested that Michi- that since 1995 Michigan growers have decreased gan needs to continue to develop higher-quality tray their acreages of these four varieties substantially: packs and increase volume of the newer varieties down by 27 percent for Rome, 62 percent for Wine- that meet consumer preferences. sap, 36 percent for Paula Red, and 38 percent for When asked, "What can be done to influence Greening. These significant downward acreage ad- consumers' willingness to try new varieties?" all justments indicate that growers have been respond- of the trade customers said that efforts to introduce ing consistently with the declining demands for new varieties should include in-store demonstra- these varieties as projected in the earlier variety tions and consumer sampling of the new variety. surveys. These trade customers also commonly stated that a combination of marketing and promotional pro- Survey of Grocery Trade Customers grams for the new varieties that includes advertis- ing, price specials, point-of-sale materials, and in- An important later-phase component of the series store sampling is most effective in helping to es- of market-research studies on Michigan apples was tablish these new varieties in the minds of consum- a survey of grocery retailer trade customers. The ers (Sterns and Ricks, 1998b). main objective of this grocery trade survey was to Another topic discussed with the trade custom- obtain up-to-date information from key grocery ers was the effectiveness of promotional materials customers on the needs, preferences, and require- provided by the Michigan apple industry, especially ments of these trade customers regarding Michi- by the MAC and by shippers. At the time of this gan apples, including their suggestions for ways survey, the MAC was in the early stages of intro- the Michigan apple industry could both meet the ducing new promotional materials for use in bulk- needs of these grocery customers and help them bin displays in grocery store produce departments. more effectively serve the final consumers. The surveyed retailer customers were very posi- This survey was conducted through personal tive about these new materials and their future po- interviews with most of the grocery trade custom- tential. They said these promotional materials ers in three main metropolitan markets. These mar- should be eye-catching and colorful and suggested kets were suggested by apple-industry leaders, es- they be expanded to include wrap-around materi- pecially the MAC, because of their importance for als for the bases of display shelves. Many also said Michigan apples. that recipes should be included. One highlight of the results was that most gro- Based on the results of this survey, the MAC cery customers indicated that the Michigan apple has expanded its advertising and promotional pro- industry had substantially improved the quality of grams, given increased emphasis to in-store demos, its apples between 1993 and 1998) (Sterns and and expanded promotional emphasis on new vari- Ricks, 1998a). The grocery customers said that eties by devoting considerable effort to the devel- Michigan's performance was especially improved opment of colorful new promotional materials in- in providing consistently good condition apples that cluding bin-displays, wraparound skirts for store are sufficiently firm and crisp, qualities previously display cases, and other POS materials. The MAC identified by the industry as being of particular has also developed new recipes and informational importance. materials emphasizing the array of new and older Another topic explored in the trade survey was, Michigan varieties. These have been received very "How can the Michigan apple industry help the positively by trade customers. trade customers sell more Michigan apples?" Most of the trade respondents indicated that they wanted Comparing Resultsfrom the Trade Survey and more of the MAC's effective promotional pro- the Consumer Survey grams. For example, many trade customers stated that they wanted more advertising, more tie-ins, and An important objective of both the grocery trade coupons in the bags to promote Michigan apples. survey and the consumer telephone survey was to Ricks, D., J. Sterns, and T. Woods Customer Preferencefor Michigan Apples 133 obtain information on the relative importance of grocery retailers say that consumers' actual pur- various characteristics of apples which are impor- chase behavior for apples is heavily influenced by tant in influencing the apple buying decisions of apple color, especially for highly red apples, even both consumers and trade customers. This infor- though consumers say that color is less important mation can be very useful to the industry in deter- than several other characteristics. That is, trade mining which of these characteristics deserve to be customers say that "the consumer buys with her/ given the greatest emphases in the industry's strat- his eyes." A more detailed explanation, based upon egies to increase demand and sales for Michigan information from the consumer focus groups, the apples. consumer telephone survey, and the trade survey The surveyed grocery trade customers and con- research, suggests that appealing color has a high sumers were asked to rate the relative importance influence on consumers' initial or impulse pur- of a set of characteristics of apples which influ- chases of apples-which are emphasized by retail- ence their apple buying decisions, including fla- ers-while consumers' repeat purchases of apples vor, unbruised, unblemished, crispness, color, va- are heavily influenced by other characteristics that riety, price, fruit size, and origin of the apple (pro- are not readily visible such is crispness, flavor, and duction region). Since retailers try to provide prod- freedom from bruising. uct characteristics preferred by their customers, it Another factor influencing the differences in would be logical to expect a high degree of simi- the relative rating of color is that, as indicated in larity in the rankings of the relative importance of the trade survey, retailers give substantial impor- apple characteristics by both consumers and the tance to color-especially the bright red color for grocery retailer trade customers. apples-as an important factor in providing an at- The results from the consumer market-research tractive and appealing produce department for the survey and the grocery-retailer survey showed high store. Another possible explanation for the differ- agreement between retailers and consumers regard- ences in the relative importance of color is that with ing the relative importance of some characteristics, increasing preference and demand for some of the but there were some substantial differences in rela- newer varieties with less than full red color and a tive rankings for other characteristics. corresponding decreasing demand for Red Deli- The relative-importance rankings for flavor, cious with its full red color, there may be a lag in unbruised, unblemished, and crispness were fairly the full understanding by retailers of the magni- similar for both the consumers and trade custom- tude of the changing consumer preferences regard- ers (Stems and Ricks, 1999). Between 88 and 100 ing apple color. percent of both trade customers and consumers The relative rankings for price as a factor in- rated these characteristics important for their apple fluencing purchase decisions also differed between buying decisions. One relatively minor difference the consumer survey and the trade survey. Although was that the consumers rated both crispness and both consumers and trade customers rated price as flavor "very important" somewhat more often than considerably less important than a number of other did the trade customers. apple characteristics such as flavor, crispness, and Major differences were found in the ratings of bruising, more consumers gave a higher importance apple color between consumers and trade custom- to price than did the retailers. Seventy-eight per- ers. Trade customers rated a high degree of apple cent of the surveyed consumers said that price was color much more important than did the consum- important to their buying decisions, while only 50 ers. Seventy-three percent of the trade customers percent of the trade customers said that price is but only 46 percent of the consumers ranked color important to their buying decisions. In addition, 39 as very important. In addition, 96 percent of the percent of consumers but only 23 percent of the trade customers but only 76 percent of the consum- trade customers said that price is extremely impor- ers said that color is either somewhat important or tant in influencing their apple purchase decisions. extremely important. These are very interesting results, particularly Several possible explanations exist for these in view of the common trade-customer practice of significant differences in ratings of apple color by striving for the lowest possible prices in their pur- the trade customers and the consumers. One is that chase negotiations with apple shipper suppliers. 134 Ma~rch2002 Journal of Food DistributionResearch

Apple industry people commonly ask the question, being conducted because market conditions and "If retailers say that price is only moderately im- customer preferences for varieties seem to be portant, why do they consistently bargain so hard changing rapidly and industry leaders need updated for the lowest possible prices for their apple pur- information to help the industry pro-actively ad- chases from the supplying industry?" just to changing markets and customer preferences in regard to varieties. New 2001 Shipper Survey on Varieties in Preliminary results of this most recent survey Demand for Fresh Market on the demand for fresh market varieties shows that shippers expect that Red Delicious, Gala, Jonathan, The latest component of the series of market-re- McIntosh, Golden Delicious, Rome, Empire, and search studies which have been done on Michigan Jonagold will be the most popular Michigan-grown apples is an updated survey (not yet compiled) of varieties in the near future. Also, the results indi- Michigan shippers regarding the apple varieties cate an increased demand for McIntosh and Fuji they expect to be in demand during the next few but a decreased demand for Golden Delicious, Red years. This survey, which is very similar to the ear- Delicious, Rome, Empire, and Jonagold over the lier shipper survey on fresh market varieties, is projections from five years ago.

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------·------·r;~ ._ ~~~~~~~~_~~~~~~~~~~~~~~~~---- ~~~~_____~~~~~~~. I -I~~~~~ Ricks, D., J. Sterns, and T. Woods Customer Preferencefor Michigan Apples 135

Summary Related to Michigan Apples." Department of Agricultural Economics, Michigan State Uni- The series of market-research studies on Michi- versity, Staff Paper No. 95-47, September. gan apples, which are discussed in this paper and Ricks, D., C. Lyford, T. Woods, and D. Boughton. summarized in Figure 1, provide a case example of 1996a. "Strategic Planning for Improved Com- a continuing program of market research over a pe- petitiveness with the Michigan Apple Indus- riod of several years. This program was designed try." Department of Agricultural Economics, specifically to aid this industry by providing rel- Michigan State University, Staff Paper 96-108, evant information on changing customer needs. July. This includes an interrelated series of studies on Ricks, D., C. Lyford, T. Woods and D. Boughton. the changing preferences, needs, perceptions, prac- 1996b. "Apple Varieties for Michigan: Results tices, and buying behavior of major customer seg- of a Shipper Survey and Comparisons to Or- ments for this industry. The specific types of infor- chard Acreage Trends", Department of Agri- mation, priority questions, and customer targets for cultural Economics, Michigan State University, each of the component market-research studies Staff Paper No. 96-10, February. were developed in close cooperation with industry Ricks, D., and J. Sterns. 1997. "Future Demand For leaders and major industry organizations such as Apple Varieties-A Survey Of Michigan Pro- the industry's generic promotional commission. cessors." Department of Agricultural Econom- This market-research program was conducted ics, Michigan State University, Staff Paper No. in the context of broad apple-industry efforts to 97-21, May. analyze and target major strategic directions to ef- Ricks, D., T. Woods, and J. Stems. 2000. "Chain fectively meet the needs of their consumer and trade Management for Improved Marketing Perfor- customers. The intended goal of these efforts was mance in Fruit Industries." Acta Horticulturae to improve the performance, competitiveness and 536(September). economic viability of this industry. The industry Ricks, D., T. Woods and C. Lyford. 1996. "Michi- has used the information resulting from these stud- gan Apple Industry Survey Results On Re- ies to develop their evolving strategies to more ef- search and Extension Needs." Department of fectively serve their customers' needs and to com- Agricultural Economics, Michigan State Uni- pete in ever-changing apple markets. versity, Staff Paper No. 96-2, January. Ricks, D. and T. Woods. 1994. "Michigan Apple References Shipper Survey-Issues, Needs and Industry Strategies." Department of Agricultural Eco- Beggs, J., D. Ricks, and K. Heinze, 1995. "Con- nomics, Michigan State University, Staff Pa- sumer Focus Group Results on Michigan per No. 94-69, December. Apples." Department of Agricultural Econom- Sterns, J., and D. Ricks. 1998a. "1998 Apple Trade ics, Michigan State University, Staff Paper Survey Results: Overview Of The Michigan Number 95-33, September. Apple Industry's Performance." Department of Greaves, A. J., D. Ricks, and K. Heinze, 1998. Agricultural Economics, Michigan State Uni- "Michigan Apples: Consumer Preference Re- versity, Staff Paper No.98-26, October. sults from Taste Tests, Visual Tests and Focus Stems, J., and D. Ricks. 1998b. "1998 Apple Trade Group Discussions." Department of Agricul- Survey: Results Related To Retailing Fresh tural Economics, Michigan State University, Apples." Department of Agricultural Econom- Staff Paper Number 98-28, August. ics, Michigan State University, Staff Paper Ricks, D. 1997. "Use of Consumer Market Research No.98-30, October. for Apple Industry Planning." Department Ag- Sterns, J., and D. Ricks. 1999. "Comparing Con- ricultural Economics, Michigan State Univer- sumer and Trade Customer Preferences for sity, Staff Paper 97-8, January. Fresh Apple Characteristics." Department of Ricks, D., K. Heinze, J. Beggs, and P. Miklavcic. Agricultural Economics, Michigan State Uni- 1995. "Consumer Perceptions and Attitudes versity, Staff Paper No. 99-7, January.