Be a problem-solver within your parameters, advocates Brad Oelmann, president at Farrell Growth Group.
He says farmer-customers naturally fall into three segments based on what they need from their ag retailers: full service, low service and the messy middle.
“Retailers know their role with the full-service and low-service customers. And low-service retailers struggle with farmers who want more from them, and likewise, full-service retailers can struggle with cash-and-carry customers. But everyone seems to struggle the most with the farmers in the middle,” Oelmann says.
He says the farmers who need different options by different conditions offer opportunities for retailers to examine better ways to do business with them.
“Have a salesperson give 10 farmer names and walk through it, giving them segmentations by how their business interacts with yours. Retailers can lose confidence in their business with the in-between segment,” he says.
To help with this, make a list of all services your business offers. The following are examples:
- Delivery or pickup
- Custom-apply/self-apply
- Seed recommendations
- Fertilizer advice
- Scouting
“Then you need to associate a cost to serve for each service. And you need to establish the value for each,” Oelmann says. “With the diversity of your customers, you have to get more specific on what it costs you to serve them.”
From his experience, this practice reduces nonconformity and one-off offers that can be harder for the business to manage.
“A key to growth is expanding your cash-and-carry customers because there’s a lot of room for expansion in their business with you,” he says. “The goal isn’t to capture the same margin as you can get from full-service customers—unless you are ready to increase your cost to serve those customers along with it.”
With the segments identified, Oelmann advises these steps:
- Develop offers for each segment.
- Set retention rate goals for customer segments.
- Measure the offers’ attractiveness for each segment.
- Monitor the share of each segment for the business.
“Have KPIs or a scorecard on customers,” Oelmann says. “My first thing to measure would be how are you doing with the 15% of customers that make up 80% of your business. Have a feedback loop so you are measuring by product type (seed, crop protection, fertilizer) and by customer segments.”
The Other Side of the Fence
When thinking of how to expand your business, Oelmann advises retailers to double down on planning with customers.
“I can’t say enough how important it is to understand the business plans of customers,” he says. “It costs more to react than to plan with farmers. And when you plan with your customers, you have a better understanding of what they need and what they don’t need from you.”
Oelmann advises retailers to see how it’s worth it for their business to share that with customers.
“It demonstrates the retailer wants to grow and wants to be aligned with how the farmer grows,” he says.
