COMMERCIAL PRODUCER INSIGHTS
Editor's Note:Following are highlights from the Commercial Producer Project about producersí buying behaviors. With the support of sponsors (ADA/Moormanís Inc., Deere & Company, Novartis Crop Protection Inc., Pioneer Hi-Bred International Inc. and Terra Industries Inc.) and an associate sponsor (Farm Journal Inc., publisher of Top Producer magazine), the Center for Agricultural Business at Purdue University collected data from more than 1,700 operators.
This article is the second of a three-part series. The first part appeared in the January 2001 issue of Agri Marketing and reported information about how respondents operate their farms. The final part will look at market segments. The goal of the Commercial Producer Project was to provide insight into the rapidly evolving group of large commercial producers because this group accounts for the majority of agricultural inputs purchased.
The commercial producers surveyed in the Commercial Producer Project were broken into three main groups: 1) mid-sized producers ($100,000 to $499,999 1997 gross sales); 2) typical large producers (85 percent of the respondents with gross sales exceeding $500,000); and 3) extra-large producers (top 15 percent of the respondents with gross sales exceeding $500,000).
To order a complete copy of the study, contact Sandy Leuck at the Center for Lifelong Learning by phone at 765/494-2748 or via e-mail at email@example.com. The book costs $49 for a single copy.
The Commercial Producer Project findings support the concept that marketing to commercial producers is moving toward a business-to-business marketing approach and away from a consumer marketing approach. Such an evolution means a more sophisticated buying process and complex decision-making strategies.
In particular, the study notes that the decision-making process was very different for expendable items vs. capital items. Of the large-producer respondents who said they were the primary farm decision-maker, 41 percent were the sole decision-maker for purchases of expendable items, yet only 26 percent assumed this role for capital purchases. Sixty-three percent of the large producers had extensive discussion with other people on the farm before making a capital purchase. The team approach to decision-making for capital items was nearly twice as common as it was for expendable item purchase decisions.
For expendable items, the larger the producer, the more likely the purchasing decision would be delegated. For example, 37 percent of the extra-large producers delegated purchase decisions for expendable items, including 3 percent who hired a purchasing agent. Only 16 percent of mid-size producers delegated responsibility for expendable purchases.
While the decision-making approaches for livestock enterprise classes tended to be more homogeneous, there were major differences across crop enterprise classes. Cotton producers tended to make purchase decisions on their own, while corn/soybean producers delegated more of their purchase decisions.
Age also was a point of differing approaches. Producers under 35 years of age were more likely than those in other age groups to use a team decision approach for capital and expendable item purchases. Producers older than 65 were the most likely to delegate expendable item purchase decisions, yet they were not necessarily more likely to delegate capital item purchase decisions.
As for purchase decision influencers on-farm or off-farm, off-farm influencers were more important in expendable item purchase decisions than in capital item purchase decisions. The larger the producer, the greater the role off-farm influencers played in purchase decisions. The local dealer was the most important off-farm influencer across all sizes of producers, all enterprise classes and all age groups.
The study went on to explore in even more detail the supplier choice criteria, differences among suppliers and satisfaction with suppliers.
Nearly half of the large and mid-size producers saw differences among brands of expendable products, while a quarter of the producers said most expendable product brands were more or less the same. Here, there were no distinctions across size classes, age groups or enterprise classes with respect to opinions about differences in expendable brands.
Four out of 10 large producers agreed that generic (unbranded or private label) inputs represented a good trade-off between price and performance. In fact, 42 percent of large producers said they expect to increase their use of generic products during the next five years.
A broad product line was important to almost half of all respondents. However, the larger the producer, the less important a broad product line was. Livestock producers were less likely than crop producers to be interested in a broad product line. Producersí opinions were divided on whether suppliers with broad product lines could provide adequate levels of information.
More than 70 percent of large commercial producers agreed or strongly agreed that "purchasing inputs to use on our farming operation is becoming a more time-consuming activity in our farm business." Further, producers who said they were taking more time evaluating technology also were more likely to feel that generics were a good price-performance trade-off. This group planned to increase their use of generic products during the next few years.
In addition, a supplierís ability to provide information was important for large producers when choosing a supplier. However, the larger the producer, the less important information was in supplier selection.
Mid-size and large producers alike perceived significant price differences for similar products from one supplier to another. For capital items, the percent of large producers who perceived significant price differences was even higher: Seventy-three percent of the large producers agreed or strongly agreed that there often were significant price differences between suppliers of capital items, compared with 63 percent for expendables.
Almost one-third of large-producer respondents said they usually purchased the lowest-price expendable items, while 38 percent said they did not. Fewer than two out of 10 producers chose their capital items based on the lowest price.
Interestingly, producers who chose suppliers based on price did not automatically choose products based on price, and vice versa. Large producers tended to be mixed in their opinions about bundled pricing of products with services or information, with some tendency to prefer the price of the product to include the service and/or information.
When considering distribution issues, 60 percent of the large producers valued locally-owned suppliers enough to pay slightly more to buy inputs from them. Younger producers were less willing to pay more to buy inputs from locally owned suppliers - only a third of the under-35 group would pay more to buy from a locally owned supplier, compared with 70 percent of those in the over-65 group.
Most producers saw significant differences among local suppliers in terms of the quality of service and the quality of information they provided. Almost one-third of the extra-large producers, one-fourth of the typical large producers and 23 percent of the mid-size producers believed they often knew more about products than did their local suppliers.
As for buying from a cooperative, producersí opinions were evenly split in their preferences. Surveyed producers also varied widely in their preferences for buying their expendable and capital items from one supplier. Forty-two percent of the large producers preferred to use a single supplier for expendables, while 31 percent did not prefer to buy this way. Older producers had stronger preferences for buying from one supplier than did younger producers. Producers were less interested in one-stop shopping if they were involved in multiple farm enterprises.
COMMUNICATION AND SALES ISSUES
The Commercial Producer Project also explored how producers perceive communications and sales efforts. In general, producers rated traditional sources of information as useful. Publications were rated the most useful of the 15 sources of information evaluated.
More than two-thirds of surveyed producers said general farm and crop/livestock-specific publications were often or always useful. In fact, with the exception of publications, commercial producers rated personal information sources higher than media information sources. Mid-size producers rated farm publications and direct mail more useful than did large producers. And older producers rated radio and television higher than did younger producers. Local dealer representatives and other farmers were the highest rated personal information sources for large producers.
Direct mail was more highly regarded than telephone contact as a method of promoting agricultural products and services. Large producers said they opened more than 80 percent of their farm-related direct mail, but only 26 percent of the direct mail was considered useful.
The study also found that producers, both mid-size and large, relied more on sales personnel for information than they did five years ago. There was no clear trend as to producer reliance on manufacturer sales representatives vs. dealer sales representatives for either capital or expendable items.
Honesty was by far the No. 1 characteristic producers valued in the "best" agricultural sales representative they knew. Technical competence, good follow-up and relevant information followed honesty as the top characteristics large producers looked for in sales representatives. Younger producers differed from their older counterparts by valuing price right behind honesty and by wanting a sales representative who is a good communicator and a friend. AM
Sarah Vacek is a communications consultant in St. Louis.