Regional Benchmarking Survey: Pricing, advertising and expansion

The National Nursery Industry Survey is conducted every five years by the Green Industry Research Consortium of agricultural economists and horticulturists from 24 land-grant institutions in the U.S. This 2003 data is the latest information available. Results for the 2008-2009 National Nursery Survey will be available in 2010. The survey data were broken into eight geographic regions: Appalachian, Great Plains, Midwest, Mountain, Northeast, Pacific, South Central and Southeast.

Factors impacting pricing
Nurseries rated eight factors to consider when establishing prices. They rated each factor in terms of its relative importance using a four-point scale with 1= not important to 4=very important (Figure 1):  Production cost, inflation, last year’s prices, other’s prices, plant grade, product uniqueness, inventory and market demand.

Production cost (3.27) had higher average ratings than other factors contributing to price determination in all regions except for the Mountain (3.33) and Northeast (3.27) regions. Plant grade (3.14) was the second most important factor in price determination in all regions except for Mountain (3.36) and Northeast (3.20). Ratings for plant grade were slightly higher for nurseries in the Mountain region compared to the Pacific (3.05) and Great Plains (3.02) regions.
 
Market demand (2.99) received equal and moderately high average ratings, making it the third most important factor in price determination for nurseries throughout the U.S. Inventory level (2.41) received equal and slightly lower average ratings in all regions. Product uniqueness (2.79) received similar average ratings from nurseries in all regions except for slightly lower ratings in the Great Plains (2.31).
 
Prices of other nurseries’ products had a lower average rating for nurseries in the Great Plains (2.42) compared to other regions (2.72). Last year’s prices (2.33) had a higher average rating from nurseries in the Appalachian (2.55) and Midwest (2.49) regions compared to the Southeast (2.14). Inflation (2.00) received the lowest average ratings of any factor, but they were lowest for nurseries in the Great Plains (1.81) and South Central (1.87) regions, and slightly higher for nurseries in the Appalachian (2.18) region. The rating for impact of inventory (2.41) and market demand (3.09) were similar across all regions.

Advertising expenditures
Tremendous variability existed in the average percentage of sales spent on various forms of advertising. Catalog advertising varied from a low in the Southeast (7 percent) and Great Plains (7.8 percent) to a high of 15.4 percent in the Midwest. Respondents in the Appalachian (15.1 percent), Midwest (15.4 percent) Mountain (14.8 percent), Northeast (14.6 percent) and Pacific (12 percent) regions spent more on catalog advertizing as a percentage of total sales than any other form of advertising. The yellow pages were the major form of advertising for respondents in the Great Plains region (13 percent) and the second form of advertising in the Mountain (13.5 percent), Midwest (12.1 percent), South Central (12.4 percent) and Northeast (7.1 percent) regions.
 
The average percent of total sales spent on newsletter advertising was similarly moderate in every region except the Great Plains (13 percent) where it was the most important type of advertising. Respondents in the Southeast (14.1 percent) and South Central (13.5 percent) regions spent more on trade journal advertizing as a percentage of total sales than any other form of advertising. This was similar to expenditures in the Appalachian region (14.5 percent), where it was the second most important type of advertising in terms of average percent of total sales.
 
Web site advertising received the next highest average percentage of total sales, with the least amount spent in the Great Plains (2.1 percent) and the most spent in the Pacific region (6.8 percent). Radio and television advertising varied from a low of 1.1 percent of total sales in the Pacific region to a high of 10.9 percent in the Great Plains region. One form of advertising which did not vary by geographic region was the percentage of sales allocated to gardening publications, averaging 2.8 percent for all regions (data not shown). Billboard advertising (data not shown) was the category with the lowest average percentage of sales, varying from 0.1 percent in the Southeast region to 2.4 percent in the Great Plains region.

Factors limiting business expansion
Businesses rated the importance of seven factors which might limit business expansion using the same four-point scale. There were no differences among regions for the average ratings for debt capital (2.17), equity capital (2.11), marketing (2.39), personnel (2.50) and production (2.15). Each of these factors received a rating between 2.1 and 2.7 indicating a somewhat uniform and moderate level of importance to nurseries across the U.S. There were minor differences for ratings of plant offerings (2.15) and transportation (2.21).

Nurseries in the Great Plains (1.94) rated plant offerings as less important than nurseries in all other regions. Nurseries in the Mountain (2.49) region gave transportation as a limiting factor a higher rating compared to nurseries in the Great Plains (2.10) or Northeast (2.10), while the South Central (2.41) and Pacific (2.45) region rated this factor similarly high compared to nurseries in the Southeast (2.29), Appalachian (2.37) and Midwest (2.12).