Selling Commercial Producers November 20, 2003 Dave Downey Purdue University Center for Food and Agricultural Business Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

What Does The Mean To Our Field Marketing and Selling Strategies? Answer…. We have a very diverse and complex market that must be....  Dissected  Analyzed  Prioritized and specific strategies developed for target segments Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Market Segmentation Identifying meaningful and practical segments and designing effective and unique strategies is proving to be the key to success  Part-time and Life Style farmers  Traditional producers  Commercial producers  Mega / Industrial farms All have unique needs, problems, and values and offer significant profit potential if served properly Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

l Suppliers understand the traditional segment and are quite comfortable with this business and it is abundantly clear that this segment continues to be the ‘bread and butter’ for many l Many suppliers are recognizing the potential of the part-time/life style segment... and it is growing for many Market Segmentation Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Market Segmentation l But the Commercial producer and the ‘Mega’ farmer are the key focus and challenge l Sheer economics makes the importance of these segments of crystal clear l Nearly every supplier understands they must capture and maintain a significant share of these segments to remain economically viable Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Commercial Producer In many ways, the commercial producer is very much like other segments so the same marketing strategies work equally well …..especially when implemented by good salespeople Yet there are important differences that demand different strategies applied in different degrees Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Commercial Producer Significantly Larger…..  Economically more important  Volume creates potential economies of scale and operating efficiencies  Enhances suppliers market image ( and strokes the supplier’s ego? ) …..justifying unique attention and tailoring value to individual needs Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Commercial Producer More Sophisticated Managers  View farming as a “business” rather than a way of life…  See management and labor issues as major challenges in next five years  Spend more time ‘purchasing’ inputs  Use more sophisticated mgt. techniques Develops cash flow & risk management plans Attend management seminars Have written business and marketing plans Utilize computers and the internet heavily Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Commercial Producer Focused More On Technology  Adopt new technologies more quickly  Spends more time evaluating new technology More Complex Production  More Value-Enhanced crops & livestock  More contract production Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Commercial Producer More Complex Decision Process  More people involved in purchase decisions Family and non-family employees Independent consultants More Price Conscious (or is it value issue?)  Price is number one issue  Performance, Service, and Convenience is also important Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Selling Commercial Producers Fundamental Questions….. What kind of sales strategy is most effective for selling and servicing commercial farmers?  What role does the salesperson play?  What role should the salesperson play?  What kind of salesperson is most effective?  How should the sales function be organized and managed? Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Role of the Salesperson  Farmers say they are spending more time evaluating technology than five years ago  The local dealer (salespeople) plays a powerful role as an information source Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Role of the Salesperson  Local dealers (salespeople?) rate quite high as a source of information and now rate higher than ‘other farmers’  Manufacturer sales/tech reps also play an important role …especially for expendables Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

For the expendable items I buy, I find I am relying more on manufacturer reps than local dealer reps for information than I did 5 years ago by Size Significantly different at p<.05 Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

For the capital items I buy, I find I am relying more on manufacturer sales/tech reps than on local dealer sales/tech reps for information than I did 5 years ago Significantly different at p<.05 Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Role of the Salesperson  The ability to provide information is an important component of the farmer’s purchase decision  Farmers see significant differences among suppliers Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The ability of the supplier to provide information is important to me when selecting a supplier Significantly different at p<.05 Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Role of the Salesperson Salespeople continue to play a critical role in the purchase decision process  Farmers say they rely more on salespeople for information than five years ago Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

I am relying more on salespeople for information and advice than I did 5 years ago Not significantly different at p<.05 Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

What Do Farmers Value in Salespeople? The Top 3 Characteristics are…… l Honesty l Technical Competency l Follow-up Service The same ranking as 1998 but more pronounced in 2003 Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

* Significantly different at p<.05 Top 3 Characteristics of the Best Ag Salesperson by Size (Part I) Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Top 3 Characteristics of the Best Ag Salesperson by Size (Part II) * Significantly different at p<.05 Note: ‘Fairness’ and ‘Friend’ ranks higher for mid-sized farmers ‘Innovative ideas’ and ‘Access to supplier resources’ ranks higher for large farmers Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Each Commercial Producer is Unique Within the Commercial Producer segment there are many significant characteristics that many farmers have in common Yet it is equally as clear that there is huge variation within the segment Each Commercial Producers is unique its detail Financial situation Management capacity Resources Organizational structure Values Needs and problems Decision processes Plans Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Large and Mega Producers Large commercial and mega producers offer major business opportunities for input suppliers at all levels But they also present some of the largest marketing challenges of the decade Our industry is not geared to dealing with very large customers and we are struggling to adjust Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Large Commercial and Mega Producers Are Different Large and Mega Producers are sometimes….  As large as their local supplier (or larger)  As technically competent (or more so)  As knowledgeable about the market (or more so)  As good at negotiating (or better)  As sophisticated in organizational structure Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Many Local Dealers Have Trouble Selling Large Commercial Producers Many large producers place little emphasis on what the traditional supplier wants to sell them Or they find that the local source is not capable of providing what they want at price that is competitive Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Large and Mega Producers Extremely dangerous to make generalizations They can be …. Economic Business Relationship buyers but most often they are Economic or Business Buyers Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Large and Mega Buying Styles There are two basic types of “Mega” farmers Both demand … and will get … a really good deal! Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Large and Mega Buying Styles  “Ruthless Megas” are ….Economic Buyers who focus on price and then try to squeeze service out of the supplier l Often pit one supplier against another l Withhold information from suppliers l Split purchases among suppliers l Jerk suppliers around l Are not concerned with the profitability of their suppliers. Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Large and Mega Buying Styles “Reasonable Megas” ….Business Buyers who focus on ROI and place value on services that are important to their operations l Concentrate purchases with a primary supplier but still check prices….just to make sure. Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

The Price Issue l Price is always important to Large Farmers but it is not about price ….it is always about value l Price must accurately reflect the cost of creating the value -- that large producers perceive as valuable l Large producers will not pay for things unless they perceive there is sufficient value to justify the price …because they don’t have to. Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Organizational Structure Large and Megas Producers l Specialists in different business functions l Complex organization multi-layered decision structure l Often separate the purchasing function from the ‘user’ function …..intentionally to reduce the emotional issues in buying. Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Working With Large and Mega Producers Must understand that there are two levels of needs l Personal needs of key players which requires good traditional selling skills and solid technical competency l Needs of the business entity itself. Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Commercial Large Producers Complex Account Needs Commercial Producers have five different sets of business needs…. 1.Product and Technical Needs 2.Operational Needs 3.Financial Needs 4.Marketing Needs 5.Personnel Needs Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Selling The Large Commercial Producer Previous research on Commercial Producers has suggested a more sophisticated approach to selling and servicing larger farmers That approach has come to be called…. Field Marketing Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Field Marketing Defined Field Marketing is an approach that combines a deeper understanding of customers and tailoring solutions to the unique needs of each targeted customer More formally, Field Marketing is the process by which sales reps develop long-term profitable relationships with targeted customers that match priorities established by the marketing strategy Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Key Elements Of Field Marketing  Identifying marketing opportunities  Segmenting, targeting, and focusing  Long term, Profitable relationships  Tailoring “value bundles”  A specific attitudes and abilities is required by the salesperson  A specific organizational structure and philosophy is required by management Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Field Marketing Company Environment & Organizational Structure Individual Attitudes Characteristics And Skills High Performance Field Rep Customer Relationships Field Marketer Traditional Field Rep Sales Activities Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Field Marketing Field Marketers must….  Have solid technical expertise  Good business savvy  Excellent selling and communication skills They must be able to use a wide variety of company resources to identify specific problems and create unique value and communicate (sell) that value to targeted customers Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Field Marketing Field Marketing cannot flourish without …  Management and organization that understands and embraces the concept  An organizational structure that encourages and rewards long term results  An information system that facilitates efficient management of field activities  Management and field personnel who are competent and well trained to do the job Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Key Account Management As Field Marketing continues to evolve some of the most successful companies have taken the concept further…. As Commercial Producers have continued to grow we are recognizing that some producers must be singled out…targeted specifically and designated as a “Key Account” This approach is sometimes called Key Account Management (KAM) Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Motivating Field Marketers and KAM’s Field Marketers and KAM’s are motivated by many different factors Involvement in professional activities Assistance in development of company strategies Assignment to important accounts Training new staff Etc. Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Selecting Field Marketers & KAM’s Building a FM/KAM organization is a long process Not everyone can be a Field Marketer Traditional salespeople fit some parts of the market Field Marketing tools can help traditional salespeople What makes a good Field Marketer? Technical competence Self confidence Good communicator Self motivator Works well on teams Can create value High passion and commitment Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Conclusion l A well defined marketing strategy that works in harmony with sales management l A corporate organizational structure that is conducive to teamwork and joint activity l Salespeople who have the ability to build long term profitable relationships and create value with targeted customers l A reward system that encourages team work and long term relationships and total systems solutions Field Marketing/ KAM Requires... Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Four Levels of Selling Takes Orders 1 Sells Stuff 2 Asks The Customer What They Can Do And They Do It 3 Anticipates Problems & Pro-actively Creates Value 4 Field Marketing/ Key Account Selling Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

From Theory To Reality….. Field Marketing and Key Account Management are far more than a theory… Many input suppliers are working hard to implement many of these concepts Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

From Theory To Reality One such example is …. Ravensdown Fertiliser Christchurch, New Zealand Mr. Rodney Green…. CEO New Zealand Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business