June 25, 2012

What retailers can teach ag marketers about boosting sales

By Joy Parr Drach, Entira

We all know the ag market is going through lots of changes. One of the biggest of these is in our customer base. It's more diversified than ever before. And that leads to some important questions for you to consider:

Have you changed your marketing mix to address this new customer diversification? Or are you still selling "one size fits all?" How about your go-to-market strategy? Is it the same old, same old? Or have you adapted it to the changing market? And what about your long-term business plan? Can you afford to use your old model? Or is it time to make some drastic changes?


Know where your market is headed

The answer to whether you're ahead of the curve or behind it probably depends on how well you really understand the magnitude of changes in the marketplace. For example, did you know roughly one out of every two dairy farms that was in business last year won't be around just four years from now if the current trend continues? And less than 35,000 farms control half of all the US farm revenue? Are you mistakenly treating each of these customers the same?

We hope not. Ideally, your average marketing expenditure for each group reflects its relative long-term value. Ideally, your reps spend enough time with the buyers of tomorrow instead of spending more time with their pals they've already sold, regardless of their future value. And ideally, your product/service development program creates what the movers and shakers want or need.


Does size really matter?

If you're not so confident your organization meets the ideal, how do you figure out where you should focus your time, efforts and money? Most companies go after the big guys. After all, bigger business concerns have the money to buy more product.

I'm not about to try to convince you that size doesn't matter. The problem is, all too often, we use size as a crutch in marketing plans when we don't have a better tool. This, despite the fact that again and again, studies we've done on behalf of our clients show size generally has a surprisingly weak correlation to the drivers of long-term profitability with customers.

Hard to believe? Then, consider two customers who, on the surface, appear identical demographically speaking: age: 52; acres: 3,400; geography: Central Illinois; gross farm receipts: > $1 million. With so many similarities, these customers must make the same buying decisions, right? Wrong.

One of these producers, I'll call him "Tom," grows corn under contract for a value-added processor and a seed company, and he has interest in an ethanol plant nearby. Don't waste time trying to influence his seed purchase. He grows what makes him more money -- a hybrid specified by the contractor.

What about selling equipment to our two customers? Both look like good targets. But while our other customer, "Steve," buys some for his livestock operation, he custom hires most of his fieldwork. So, you'll never sell Steve even a quarter of the equipment Tom's willing to buy.


Cluster 'round and listen

So, how do you deal with the problem of finding the right customers and profitably selling them the right products? Start by using data wisely. Your concerns may be different if you're a C-level executive responsible for long-term strategy versus a marketing director responsible for the mix, but both win with better data and segmentation. Information truly is power in the ag economy of tomorrow -- if it's used wisely. In other words, manage the increasing diversity of your market through smart segmentation.

While the ag industry in general has been slow to embrace this concept, some retailers have begun to implement it with remarkable results. For instance, consumer electronics giant Best Buy doubled its company average sales at stores that used a new concept called "clustering."

First, Best Buy grouped customers into five different types or "clusters":

  • the small business shopper

  • the technogeek who has to have the latest gadgets

  • the professional who has more money than time and wants personal service with high-end equipment

  • the budget-conscious family man who wants technology for the home

  • the busy mom who is chief buyer in the household and needs help navigating technology

Based on an analysis of the consumers in each geographical area, Best Buy married the store concept to them and designed stores around the needs of each of these clusters. So, the store design for "moms" has wider aisles, warmer lighting, and more appliances and technology-related toys. Personal shopping assistants are available to educate the technology novice. Stores designed for "technogeeks" feature interactive displays that allow them to go it alone and test-drive new equipment by themselves.

How can we in ag change our "store layout?" At Entira, we've given companies that market to mega-dairies the foundation for a psychographic segmentation they need to capitalize on clustering.

But unfortunately, many ag companies don't have the data nor the systems they need to capitalize on it. If you'd like to find out more about how your company can gather and harness the information you need to succeed, contact us at info@entira.net to learn more about CRM, why it's important for your business, ways to get started -- and how to start cashing in on the differentiation among your customers.

This article appeared in the July 2006 issue of Strategic Agribusiness Review.