SALES AND MARKETING INSIGHTS FROM PURDUE UNIVERSITY
SERVICE: HOW DO YOU GET PAID FOR IT?
There are two components agrimarketers must consider when trying to successfully sell their services: (1) figuring out what farmers are willing to pay for; and (2) figuring out how to most effectively market your specific services.
WHAT WILL FARMERS PAY FOR?
Too often firms provide services without recapturing the value that they create. Firms need to carefully evaluate which services are of value to farmers and then create a fee structure that makes sense based on those services.
The first step in determining which of your services actually create value for farmers is to understand your customer base. Producers focused almost exclusively on buying decisions based on price may not be your target customer for service sales.
However, there exists a significant and growing segment of the market that will pay for additional services offered by your firm. Having an additional pair of eyes to scout a field, to analyze the data, and make recommendations might be of great value to this segment.
Communicating this value will require you to quantify the benefits of the services you are offering. Data often exist on how much an improved hybrid variety will save a producer per acre, or the increased gain rates as a result of a nutritional supplement.
This type of analysis is less likely to exist for a service. These quantitative examples might require valuing a producer's time, but in the end, time might be their most valuable commodity.
By using hard data to illustrate how you can save producers time and provide additional benefits, farmers are more likely to pay for the services. Simply stated, providing cost and benefit analysis might provide strong evidence that the service is a worthy investment.
To really make your services a profit center for your firm, you must stick to a pricing schedule that recoups the cost of the services offered.
The trend over the past several years has been to bundle services and products together and charge one price for the whole package. For example, perhaps Sam pays for services and products together, whereas his neighbor Sally pays only for products and no services. Upon comparing prices, Sam may demand a reduction so that his price is comparable to Sally's. Of course he does not care if Sally didn't use any additional services.
This makes a la carte offerings of services seem like a viable option for capturing the value of services.
Too often, services play second fiddle to products. Firms who would like to be paid for services don't invest in creating demand for them in the same way they create demand for their products.
Service sales are thought of as an add-on, akin to the fast food worker asking if you would like fries with your order. If all your attention is focused on the sandwich, it's very easy to forget that money can be made from selling the fries, too.
Elevating services to a higher status enhances the opportunities to make money selling services.
Define the service. The days defining service as a friendly smile are gone. A smile is table stakes in today's competitive environment. Services have feature components, the same way products do. These must be defined and itemized.
Be clear. Make sure salespeople and customers can clearly state what the benefits from a service are &$151; how it makes customers more profitable, smarter, or efficient. Assess the dimensions of service that are most meaningful to customers and emphasize those attributes with a brand or service name that will help customers remember them.
Examples of great service brands include frequent flyer clubs, over-night delivery services, Internet search services, and grocery cards.
Manage the sales. While we're quick to manage product sales volume, we should require similar information on service penetration. Managing service sales means targeting customers for specific sales opportunities, developing strategies to take advantage of those opportunities, and tracking our efforts.
Selling well-defined services is a critical issue for many of us, as we see our core products commoditized. In an environment where it is difficult to differentiate ourselves, providing service may be the only thing we have that sets us apart.
To learn more about the issue of pricing and selling services, consider attending the 2007 National Conference for Agribusiness, to be held November 13-14, 2007. A full slate of industry experts and agribusiness faculty will explore the concept of creating profit centers based on the sales and management of services.
Michael Gunderson (email@example.com) is an Assistant Professor at the University of Florida. Scott Downey (firstname.lastname@example.org) is an Assistant Professor at Purdue University.
UPCOMING AGRIBUSINESS SEMINARS
October 22-26, 2007
National Conference for Agribusiness
November 13-14, 2007