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Agrimarketing : June 2009
23 Purdue Advertorial Page 2:00 Purdue Advertorial Page 6/12/09 3:27 PM Page 24 SALES ANDMARKETING INSIGHTS/continued frompage 23 However, as long as farmers see huge price differences for product/service bundles (including the intangibles) that they perceive as near parity, pricewill continue to be a powerful factor. WHAT’S GOING ON? Whatwemay be experiencing is the impact of a not-so-gradual trend in farmsize and sophisticationmagnified by economic conditions. Many larger farmoperations believe their size justifies the purchase of facilities and specialized equipment, and the hiring of their own technical specialists. So, they are no longer as dependant on their supplier. That clearly reduces a supplier’s ability to add asmuch value or differentiate themselves…leaving price as a bigger factor in the equation. Recent farmer buying behavior studies at Purdue seemto support this trend. Add to this the sheer economic impact on price in larger operations and the negotiating clout that larger operations bring to the table (where 10%of the larger operations often represent 90%of a supplier’s business). Itwould be easy to conclude that price is nowthe dominate factor in farmer buying decisions. But thatwould be a serious mistake. Purdue research clearly indicates the importance and growth of the balance segment. The reality is that farmers con- sidermany factors, identify their supplier short list and then negotiate aggressively with their preferred supplier—seeking the absolute best price they can get for what they want and need.What appears to be a pure price buyer to the supplier is actually a shrewd customer who knows exactly what he wants and is willing to play hard ball to get it. Will these customers pay for ser- vice and quality? Sure, but not if they believe the bundled services do not precisely fit them. Supplierswill have towork hard tomake sure that their offer closelymatches the farmer’s needs and communicates the value they offer. PERCEIVED VALUEMATTERS When it comes down to it, it always has been a value question—“Where do I get the best value for each dollar I spend.” Value is defined as what people believe they are getting compared to what they believe it costs themto get it. Perceived benefits include a host of tangibles and intangibles that come to themas a result of a purchase. The biggest andmost dramatic element in cost is price, but price is not the only factor. The complexity of communication, time invested and location are good examples of non-price costs. We have always recognized that real value can only be defined by the customer. Successful suppliers understand that their task is to discover and deliverwhat their customerswill value. The difficulty, of course, is that the larger andmore complex farmers become, the circumstances that determinewhat each values aremore unique and diverse. Each farmer is different.And larger farmers are economically important enough to justify creating unique value propositions for each individually. CHANGING NEEDS As times change, sowill farmers’ needs. They are amoving target. If larger operationswant to perform more services themselves, suppliers will have to find newways of creating value—or do a better job demonstrating to farmerswhy they are better off to outsource those services. This is not a fundamental shift in the importance of price.Wide price disparity always creates a rapid shift in buying decisions. The bigger issue iswhat are the changing needs of larger,more sophisticated and businesslike farmers, howdo suppliers respond to those needs, and how effectively can they communicate their value. The past yearmaywell have taught farmers to lookmore closely at the value they are getting. The increasing perception of parity among suppliers does putmore pressure to differentiate themselves. To be successful, supplierswill have to better understand the “unique needs” of important customers, create “unique value” for individual accounts and communicate that valuemore effectively than ever before. AM Dr.W. David Downey is the Executive Director of the Center for Food and Agricultural Business at Purdue University and a Professor Emeritus of agricultural sales and marketing. is now available online! To view, go to www.AgriMarketingDigital.com. To receive an e-mail alert when each issue is available, e-mail your request to be added to the list to: info@AgriMarketing.com. 24 Agri Marketing s June 2009
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