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INCENTIVE PROGRAMS MEAN MORE THAN MONEY TO RETAILERS
When developing incentive or rebate programs for ag retailers, manufacturers of crop protection products need to look beyond the obvious payment levels. While the rebates and black box payments have reached a level of "expected payment," manufacturers must understand the feelings retailers hold for these programs and design them to more effectively meet the total needs of retailers' businesses. These findings are derived from two recently completed studies among retailers conducted by Doane Agricultural Services, St. Louis.

Doane Ag Services has been conducting an analysis of retailer reactions to manufacturer incentive or rebate programs for the past four years, and a couple of things are apparent: the amount paid out to retailers is slowly increasing, from 9.9 percent in 2000 to 10.5 percent in 2003, and the range in payment amounts is narrowing among the largest manufacturers. In all, program payments comprise about half of a retail outlet's net profit from crop protection product sales, averaging around 49 percent for the past four years. And retailers would like that to decrease.

In the study, members of Doane's National Ag Retailer Panel were also asked to pick the manufacturer with the "best" program and rank a set of possible reasons for that ranking. Perched consistently at the top of reasons is the "amount of compensation" retailers received from that manufacturer, which seems the obvious choice.

Of course, the amount paid by a manufacturer is important to retailers, but what other factors are important to overall satisfaction with the programs? That question was addressed in another recent study conducted by Doane Agricultural Services Market Research department in measuring early evaluations of 2004 ag retailer incentive programs. One objective of this study was to determine key drivers of overall satisfaction with an individual manufacturer's incentive programs. Retailers provided feedback on several 2004 program components and features, as well as compared each to last year, providing an early evaluation to the manufacturer relative to any "positive" or "negative" changes according to the retailers.

The ease of administration of the programs and the program's fit with the retailer's company strategy were two of the key drivers of overall satisfaction. Another key driver was the clarity of the programs. Through the findings contained in this study, it became clear that successful programs are those designed to help the retailer's business, not just pay back some cash.

In addition, this study showed the varied strengths and challenges inherent in the programs offered by each of the primary manufacturers of crop protection products. As an example, for one crop protection product manufacturer, the program's fit with the retailer's company strategy was the key driver of satisfaction. For another manufacturer, the strength lies in the ease of program administration. In many cases with the manufacturers, the 2004 compensation levels were a key driver, but not the one with the most impact on satisfaction levels.

Overall, these studies show that retailers look at more than just compensation when judging incentive programs. Program involvement has become a fact of life for most retailers and an important part of the marketing mix for manufacturers. Through this direct, objective feedback from retailers, many manufacturers have been able to determine which parts of their programs warrant in-season refinement, management direction or significant changes for the next marketing season. AM

Joe Michaelree is the market research manager for Doane Agricultural Services. For more information on the two projects described here, contact jmichaelree@doane.com.


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