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Agrimarketing : May 2008 Supplement
May 2008 ¦ AgriMarketing 5 (Roundup Ready Corn 2, YieldGard Rootworm and YieldGard Corn Borer) at a price that more growers had an opportunity to use this tech- nology and gain the benefits of increased productivity. From our company’s standpoint, selling a triple stack over a broad geography also lessened production and inventory issues as we could put all three technologies in the new elite germplasm coming to market ver- sus trying to estimate during pro- duction what traits growers would want in the new germplasm and be wrong.” So, he and his team went about the process of developing a new price strategy. As background, the Monsanto business model offers its traits via its own seed brands including DEKALB and Asgrow plus the 23 regional seed companies owned by its American Seeds, Inc. (ASI) , business unit. In addition, independent seed compa- nies across the U.S. license traits from Monsanto to sell within their brands. Each licensee decides which traits it wants to offer, sets its own price to its customer, and pays a licensing fee to Monsanto. To start the process of developing the new program, Rhylander and his team conducted extensive market research among famers and gathered field intelligence from its sales force and dealers. The result of the investi- gation for this new strategy was very encouraging. Next, they discussed the concept with several of the seed companies licensing Monsanto traits. “At first, they told us charging different prices based on the value the trait provided to the customer simply would not work,” Rhylander says. However, Monsanto’s market intelligence con- tinued to say otherwise. So, he and his team hit the road for a series of meetings with the seed companies to find out what, specifi- cally, their objections were and how they could be solved. Following the meetings, and sat- isfied that they had the solutions, Rhylander and his team developed a pilot program in 2005 with a com- plete rollout the following year. In 2006, the company divided the Corn Belt into three regions and priced a corn hybrid featuring a triple stack differently in each region. Customers in each region paid more for a trait that was of higher value to them, and less for those with lower value. How did the company place a value on each trait? “We had very sophisticated computer models in place showing the annual likeli- hood and estimated damage for each of the pests the traits controlled and used them to set up the three regions,” Rhylander explains. He reports this approach has been a huge success. “Cus- tomers’ yields from the triple stack have consistently outper- formed all others. Plus, cus- tomers had an opportunity to try a trait they normally wouldn’t have and they are now seeing real value from it.” He says the model is a forerunner of strategies that may be used when Monsanto begins introducing addi- tional new traits. “For example,” Rhy- lander says, “we have a trait on the way that makes a plant more tolerant to drought. We know that trait will be of more value to those in areas that have a higher incidence of water short- ages than those in areas less subject to drought.” TECHNOLOGY SHOWCASE “Three years ago, I was attending the Farm Progress Show ,” Rhylander says. “The size of the crowd was extremely impressive. So, we decided it would be a convenient place to demonstrate the company’s current technology and what is in the pipeline to our customers.” He called a meeting that was attended by representatives from 15 of the company’s departments who would have a role in getting the new “Technology Showcase” designed, planted, tended to, and toured at the 2006 show to be held in Amana, IA. “At first, I ran into quite a bit of resistance from almost everybody,” Rhylander says. Hurdles ranged from the staff’s concerns about showing off upcoming technology to its competitors to concerns about how EPA would view the Showcase regarding how the technology would be contained on the site. Like any true marketer, Rhylander approached the objec- tions with a can-do spirit. “I asked for all to state their concerns, and then we, as a group, came up with a solution for each one.” The most restrictive were the EPA and USDA regulations that required erecting a barrier to keep participants at least six feet from the regulated products. To handle that, the entire Showcase was protected by a chain link fence to keep unau- thorized personnel – and wildlife – out. Around-the-clock security was also in place since the first date of planting. The Showcase highlighted new seed and trait technologies, as well as promising developments in the company’s new product pipeline, including: • Drought-tolerant corn, • YieldGard VT Triple , with second- generation YieldGard Rootworm stacked with YieldGard Corn Borer and Roundup Ready 2 technology, • YieldGard VT Pro (new second- generation YieldGard Corn Borer) • Roundup Ready 2 Yield soybeans, Monsanto’s second-generation (more on page 6) Rhylander with a demonstration of a triple stack corn hybrid growing in a glass display case inside Monsanto’s headquarters.