Aaron Troyer Marisa Zansler 2001 AAEA Case Study Competition Food & Resource Economics Dept.

XS Inc.com “Redefining Agricultural Input Supply” XS Inc.com “Redefining Agricultural Input Supply”  XS Ag.com  Website designed to enable producers, dealers, and manufacturers to trade agricultural seed, chemicals, fertilizer, etc.  Nterline  Combines the traditional agricultural input distribution system with up to date technology that streamlines the supply chain

Problem Statement XS Inc.com must consider a marketing strategy designed to meet its challenges and allow profitable operation in the future ? Marketing Plan

XS Inc.com: Challenges  Competition  Supply Chain Inefficiencies  Market Readiness

XS Inc. Internal Forces  Core Strengths  Lower Input Prices  24 hour availability  Fills Supply Efficiency need  Allows for better price transparency  Customer data management  Company Weaknesses  Internet Only Access  Service  “Return ability”  Delivery Time  No Personal Relationships

XSInc. External Forces  Opportunities  Participates in large market  Internet market is growing  Access growers around US in one location  Nterline is open platform  Pressures  Traditional markets turning e-friendly  Strong service from traditionals  Many online ag services  Compete directly with manufacturers, distributors, and retailers.

Market Power  Market Competition  Traditional Companies  UAP, Helena, Cargill  John Deere  Dow, Monsanto, Dupont  Online Ag E-tailers  DirectAg.com  Rooster.com  ASP software available  Monsanto, Ariba

XS Ag.com Market Segmentation Total U.S. Farms Inputs Billion Chemical Sales & Application 8.48 Billion Seeds & Plants 7.35 Billion Machine Parts & Repairs 3.58 Billion Animal Health 2.26 Billion Other Ag Inputs

Source: Farms and Lands in Farms, Agricultural Statistics Board, NASS, USDA February 2001 Percent of Farms and Land in Farms: By Economic Sales, U.S., Farms Reporting Less Than $20K

Source: Farms and Lands in Farms, Agricultural Statistics Board, NASS, USDA February 2001 Percent of Farms and Land in Farms: By Economic Sales, U.S., Farms Reporting Greater Than $100K

Alternatives  Continue on current course  Address issues of XSag.com and Nterline pricing and positioning  Drop either two lines

XSag.com Implementation  Redefine the target market  Launch a phone service for producers  Add enticing information to website  Increase customer service availability

XSag.com: The Target  Focus the target to specific users  Promote planning  Advertise use for specific crops  Target mid-revenue not acreage

Source: Farms and Lands in Farms, Agricultural Statistics Board, NASS, USDA February 2001 Average Farm Size: By Economic Sales, U.S.,

Target By Region Mid revenue firm size by region

Add New Telephone Service  Hire or contract new telephone customer service  Allow for orders over the phone  Can provide price information  Access potential new clients  Fits with the traditional method of communication

Expand Informational Services  65% of growers with access to the internet use it to find information  Add news and weather  Crop information  New products available  Commodity Prices and Outlooks

Launch Promotional Campaign  online and in Successful Farming  Promote Price  New Telephone Order Service  800 number to access XS ag

 Establish Customer Loyalty  Pinpoint Most Likely Users  Addressing the needs expressed by the end- user  More capital risk  Returns are somewhat unknown Evaluation PROS CONS

Revenues And Costs XSag.com  Expected 2001 Revenues 1.44 million from XSag.com  Base costs on Ag Services Powerfarm.com  They lost.03/share or $164,000 dollars  XS ag Costs then could range +/- 20%

XSag.com Anticipated 2002 Financial Data Revenues$1.44 $ $.600 Costs $ $2.05 $2.11-$2.83 Marketing Plan ROI22.5% Profit or (Loss) $.01 – $(.61) $ $.65 Dollars are in millions

Nterline Evaluation  Core competency  Software that anticipates and analyzes demand for ag inputs  Open system  Coordinates different users along different points in the supply chain  Challenges  Competition from large traditionals  Many large distributors already use some form of ASP  Must be compatible with all users

ASP Market Size Revs (M) Percentage USi$ Qwest$1007 Interliant$523.6 PeopleSoft$402.8 Corio$ eOnline$251.7 Breakaway Sol. $201.4 Agilera$201.4 Surebridge$171.2 Telecomputing$110.8 Source: Gartner Group May, 2001

Nterline Pricing  Should be based on the level of service provided  Three levels of service  Customized  Must be competitive with other available ASP  Must save customers money

Three Levels of Service  First Level provides transactional assistance throughout supply chain  Second Level available provides the first plus customer data tools and regional anonymous data  Third level includes both 1 and 2 plus and website integration.

Nterline Pricing  Each level adds additional service, thus additional price  First level $2,000 per quarter plus transactional fees  Second level $3,000 per quarter plus transactional fees  Third level $4,000 per quarter plus transactional fees plus website maintenance

Nterline Financials  Cost associated with the development of Nterline  $5.0 million +.5M to promote and service  Long term approach  Target smaller to midsize firms and Co-Ops  Set a goal of 125 customers in the first year  Yields revenue of 1.5 million

Conclusion  Chose to continue development of both Nterline and XSag.com  Nterline  profitable after 2 years  Investment recovered after 6 years  XS ag restructured:  Fits end-user needs  Increases service and support