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Direct buying as a solution.

In an effort to cut costs and gain access to more customized products and services, farmers are engaging in more direct purchasing from manufacturers.

Since 1995, Canada has seen an increase in direct buying of expendable products, and the proportion of items purchased direct has also increased, particularly with larger farms. Today, roughly 30% of farmers are purchasing some expendable items direct from a manufacturer and this number, along with the proportion of expendables purchased direct increases as farm size increases.

For a manufacturer, this represents a great opportunity. As fewer but, larger farm operations dominate the buying landscape for agricultural products the need for dealer distribution to these farms appears to become less important. From a dealer perspective there are real threats that one day manufacturers may bypass them altogether and start aggressively selling direct to farms.

This presents us with an interesting paradox in the industry. While farmers are engaging in alternative ways to procure products for their business, they are also telling us that they prefer to deal locally 37% believe that their local dealer is an important part of their management team.

Farmers also view dealer representatives as being the most useful sources of information compared to other sources including manufacturer sales representatives and farm publications.

DEALERS' RESPONSE

To keep ag retail relevant, it is evident that dealers are going to have to find a new way in which they can differentiate and create some meaningful competitive advantage.

So where will this differentiation come from? Farmers have given us the answer.

When asked what are some of the top characteristics they look for sales reps who call on their businesses, nearly 50% of farmers suggested they want a sales rep who "understands my business" and "puts my best interest first."

In an industry with a growing perception of product and supplier parity, people are what create true differentiation in the eye of today's large commercial producer. Being able to develop solid business relationships with key customers and making a special effort to understand their business and personal needs is where companies are going to find ways to create meaningful competitive advantage.

And this understanding of customer needs must reach far beyond the obvious needs for things like increased production, decreased costs, and more free time. It must focus on helping individual farm businesses and their operators better achieve their higher-level goals and objectives, both long and short-term -- goals like growth, succession planning, updating assets, becoming more efficient, or reducing debt.

Anyone today can provide a farm with high-performing products. Anyone can lower prices (if they want to). The successful, sustainable supplier will be the one who is able to position products and services in a way that will help achieve the higher-level objective and in-turn be able to extract value from their customers and become a true consultant to the operation.

MAKING IT HAPPEN

In order to do this effectively, dealer organizations are going to have to focus more on professional development in both business and technical skills.

They are also going to have to be more diversified in areas that may typically be outside of their skill and comfort zone. For example, becoming more familiar with topics such as grain marketing, succession planning or business planning will only help a local dealer rise above the rest.

In other words, the days of being an order taker are coming to an end. Dealer sales reps must be more business-oriented and have the confidence and ability to ask the right questions and provide the right solutions.

While this may seem obvious, it is surprising how many dealer sales reps do not possess the skills or levels of confidence in this area. Along with a good recruitment strategy, dealer organizations should be investing in more training in both related and complementary disciplines so that they are in a position to work more closely with key customers and help them get to the next level.
DIRECT BUYING OF EXPENDABLES BY FARM SIZE

 Small Medium Large Extra Large

Purchase Direct 11% 22% 28% 37%

Amount Purchased Direct 16% 22% 38% 44%

Note: Table made from bar graph.


by Justin Funk. Agri Studies Inc., jfunk@agristudies.com

Justin Funk is Managing Partner of Agri Studies and the National Chairman for the Canadian Agri-Marketing Association (CAMA). Agri Studies is an educational and marketing research firm based out of Guelph, ON, focused on providing sales and marketing education to the agribusiness industry. www.agristudies.com
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Title Annotation:CANADIAN MARKET UPDATE -- 2ND OF A TWO PART SERIES
Author:Funk, Justin
Publication:Agri Marketing
Geographic Code:1CANA
Date:Sep 1, 2012
Words:742
Previous Article:The power of successful crm.
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