One Small Step

[JR Strack]

Hi all. I am fairly new, and I am sure some of you have seen my insight to some of the posts along the page. I hope that they have been constructive in nature and not harmful. Now I am the one seeking additional advise.

My business partner and I are looking to start a Wood Pellet Production facility in NE Indiana. We have several sawmills around us which could supply our site with all the raw materials we would need. We are looking to produce enough for the local market (50 mile radius) our first 2 years. We estimate that this consumption via private sales and the possibility of a corporate account will requre approximately 2000 tons each year for our first 2 years.

Would word of mouth be enough of a marketing campaign or would an encentive based referal program provide additional benefits?

We are considering a $2 credit per referal off the cost of a tonage purchase. We intend to sell our product at a fair market value yet still undercutting the larger competition.

Would Social Media be a beneficial outlet to promote as we are attmepting to stay local in our initial reach as not to overload the plant in it's capacity?

Any advise you could provide on any subject pertaining to this type of startup would be greatly appreciated.

We have the following on site, and already agreed upon.

~ Production Building
~ Storage Building
~ Invoices
~ Bill of Sale
~ Bag Design W/SKU
~ Raw Material Loader
~ Augers
~ Conveyors
~ Floorplan Layout
~ Office Space

Thank you again.

[Freelancier]

We estimate that this consumption via private sales and the possibility of a corporate account will requre approximately 2000 tons each year for our first 2 years.

Would word of mouth be enough of a marketing campaign or would an encentive based referal program provide additional benefits?
The question not answered specifically: who are your best potential clients? Always start with that question and then dive as deep into that question as you can to tease out where they might find their wood pellet supplier. Then put yourself dead center in the cross hairs of where they are looking.

We did a good walkthrough of this process in this thread: How do you identify your Target Market (http://www.small-business-forum.net/traditional-marketing/7293-how-do-you-identify-your-target-market.html). Start there then come back here and write down as much as you can about your best potential customer. Then we can advise you about how to reach those customers, but I'll bet you'll already have outstanding ideas at that point.

[walmart]

Hello and I agree sounds like you have an awesome problem lol. Use social media as much as you can. If for now your looking to stay local then networking is key. Good for you!

[Fulcrum]

Hello and I agree sounds like you have an awesome problem lol. Use social media as much as you can. If for now your looking to stay local then networking is key. Good for you!

I'm not so certain that social media will be the OP best marketing tactic to start. Granted, I'm not the most qualified to make this statement but the target market probably won't be looking at Facebook/Twitter for suppliers. I would think that a better target market would be the stores and manufacturers who produce the pellet burning stoves.

@JR Strack, I wouldn't offer a $2 referral credit at the start. Focus on a quality product (cleaner burning, size of pellets, etc.) and offer discounts based on volume/weight.

[JR Strack]

Freelancier: Our best Potential Clients would be the big Box stores like Menards, Tractor Supply, Lowes, Wal-Mart, ect. However we do not have the 2 Million dollars to run a facility which would be needed to produce enough tonnage to supply those particular clients. We will market to them post 5 years of operation. As for an initial phase we are looking to promote sales locally which would undercut our current big box sellers by as much as $40 dollars a ton and $1.50 per bag. This savings I believe would be substantial enough to our consumers to promote word of mouth and sustain our target goal of 2000 Tons a year.

Fulcrum: We are looking to market out product as a Premium Pellet. The Pellet Fuels Institute requires the following to be listed as a Premium Pellet.

Bulk Density 40-46lbs/ft^3
Diameter: .230 - .258 in / 5.84 - 7.25 mm
Durability: Greater than or equal to 96.5
Fines: Less than or Equal to 0.5%
Ash content (as received) less than or equal to 1%
Length: less than or equal to 1% are longer than 1.5"
Mositure: Less than 8%
Chlorides less than or equal to 300 PPM

[Freelancier]

Our best Potential Clients would be the big Box stores like Menards, Tractor Supply, Lowes, Wal-Mart, ect. However we do not have the 2 Million dollars to run a facility which would be needed to produce enough tonnage to supply those particular clients.Then those are not your best potential customers, because you can't service them properly.

As for an initial phase we are looking to promote sales locally which would undercut our current big box sellers by as much as $40 dollars a ton and $1.50 per bag.Ok, that's a start, but it still hasn't identified who "locally" will be your best types of customers. That needs some fleshing out.

[JR Strack]

By locally I mean private sales to pellet stove owners who use them for heating thier homes within a 50 mile radius. We are located 10 minutes from the second largest city in Indiana, and 2 hours North of Indianapolis. So by targeting within 50 miles there would not be a large demand on thier commute if they would save $40 dollars per ton compared to going to a box store and buying it. In our city there is only one sales location for wood pellets and they are currently selling them for $240 a ton, and the cheapest per ton is almost 30 minutes away for $225. So if we allow locals to come and purchase our product on site we can cut out the middle man and offer them a quality product similar to what they would recieve in the store at a significant savings.

The typical homeowner who uses pellets to heat thier home use anywhere between 3-5 tons per winter season. On a particularly harsh winter a homeowner can use anywhere between 5-9 ton.

[Freelancier]

So now that you have your target audience identified... how do those people look for their fuel pellets now? An ad in one of those Valuepak things? Facebook? A flyer on their mailbox?

[JR Strack]

As far as market reach, we have very few distribution points within a 50 mile radius from our town. We have one local retailer who sells a miriad of different types of pellets throughout the year (this includes thier own brand they manufacture). There are three distributors 35 miles west, and about the same number east which is 20 miles away. One of each of the distributors is the same franchise as our local distributor, and none of these large retail outlets carrys a consistant manufacturer thus resulting in inconsistant product to the consumer.

Our target audience not knowing that many of these retailers price match from one another wind up paying full retail which increases as the season draws on. The majority of these prices are ran in a weekly publication which will go out with the local newpapers. Very rarely would I see a flyer which is not attached to the distributor's weekly ad.

With the inconsistancy in the carried material as well as only having minimal available retail outlets I strongly feel we would be in a position to best serve our target area as a source of consistant high quality, high BTU output, as well as all hardwood heating pellets.

Our first initial push in marketing would come from direct mailings to all residents within our zipcode, and with a maximum of a 50 mile radius.

[Freelancier]

One of each of the distributors is the same franchise as our local distributor, and none of these large retail outlets carrys a consistant manufacturer thus resulting in inconsistant product to the consumer. There's a reason that the retail outlets are doing this... clearly they aren't hearing strong demand from end-users for a consistent manufacturer's supply and the distributors are likely looking to get the best price from their suppliers, so they change suppliers throughout the season. Or maybe suppliers are having a hard time keeping up with demand. Either way, it's something you should figure out by calling the distributors and retail outlets to find out, because it could affect your business model.

[Freelancier]

BTW, JR, just as an aside, this conversation came in helpful yesterday. Got called for help from a guy who owns a wood pellet manufacturing plant. And I knew what to ask! Just because of this conversation, I didn't stumble over "what's a wood pellet?" :)

[JR Strack]

Glad I could be of some assistance. I know you all have helped me figure out a few of the ins and outs to look for.

Hope he wasn't near me in any form or another. LOL

[JR Strack]

What are your thoughts on USPS direct mailings for initial outreach as we open our facility for public sales?

Would it be worth the ROI or would it be a larger expense that we could best allocate elsewhere?

[Freelancier]

No, nowhere near your area of the country.

The cost is going to be based on the number of people who are in your area, so hard to know without that, but you probably can talk to a local printer to get some insight into the costs and reach.

Any good billboards around? Can you just get yourself into a few independent retailers to get through the season and get some traction? How do people try to find someone who sells what you're selling?

[JR Strack]

The majority of pellet providers are out of state, so people are relying on either mini mills they can buy themselves, or a retailer. So by our location we would be able to be the only wholesale provider withing almost 200 miles.

We do have billboards around, and it is off of one of the largest highways throught the midwest. So that may be a better option than direct mailing.