Review shows Potato Board promotions produce returns
By JOHN O'CONNELL
For every dollar the U.S. Potato Board invests in a program that assists retailers in promoting fresh potatoes and organizing displays, the organization generates a $21.83 return on investment, according to results of a recent economic study.
The study also concluded USPB programs in general average a 551.2 percent rate of return in the long run and a 416.7 percent rate of return within three years.
Rather than increasing per capita spud sales, however, USPB officials believe their work has slowed a gradual consumption decline throughout the past decade.
USPB Domestic Marketing Vice President Kathleen Triou said her organization will use the data to prioritize programs and to provide an independent affirmation to growers that their money is being spent wisely.
"We've got a solid program that has been based on sound strategies that are being executed in the right way," Triou said.
USDA requires commodity organizations funded with grower checkoff fees to have an analysis of their effectiveness conducted every five years. USDA spokeswoman Gwen Sparks said many research and promotion organizations have demonstrated similar successes.
"USDA economists review the evaluation results to determine credibility, whether the factors and assumptions used in making computations appear reasonable, whether the analytical approach in the study is thorough and appropriate and whether the study results are a good representation of program impacts," Sparks said.
USPB contracted with economists Timothy Richards, from Arizona State University, and Harry Kaiser, from Cornell University. Their study, released to the public April 1, focuses on the 2007-2011 marketing years.
The economists crunched numbers from sources including USDA and Nielsen Perishables Group, run through a model utilizing a statistical method of estimating relationships among variables, called regression analysis. Richards explained his model isolates each variable affecting sales, excluding USPB's influence, to estimate how USPB affected the actual market. He believes his results have a 5 percent margin of error.
Richards also conducted the USPB's 2006 return on investment study. Since his last assessment, he's found the organization has improved its return on investment by roughly 50 percent.
USPB's collaborative effort with retailers, called Best Practices, had just started when Richards completed the previous study. To demonstrate the exceptional return rate from Best Practices, Richards used Nielsen data to make direct sales comparisons of stores involved in the program with other stores.
Richards said USPB invested an average of $900,000 per year in Best Practices. USPB, funded by a 3.5 cents per hundredweight grower checkoff fee, has budgeted to spend $20.39 million in fiscal year 2013, including $10.726 million in international marketing and $7.214 million in domestic marketing.
"It gives me confidence that the money we pay to the board should be looked at as any input," said Eastern Idaho grower Ritchey Toevs, cochairman of the USPB International Marketing Committee. "We need to demand a return on investment just like fertilizer or anything, and I'm glad to see the board is creating value."