Farmers not always loyal to local supply store

WEST LAFAYETTE, Ind. – A trip to the corner farm supply store still works for some, but more farmers are basing their seed, fertilizer and pesticide purchases on factors other than convenience.
Influencing factors. Purdue University’s Center for Food and Agricultural Business looked at national surveys that found farmers place greater importance on price, product performance and customer service than on ease of purchase when making agricultural input buying decisions.
Purdue agricultural economists Corinne Alexander and Christine Wilson wrote the study report.
“Agribusiness professionals are concerned that there’s been a decline in the number of farmers who make purchases based on their long-standing relationships with businesses,” Alexander said. “Our study shows they are correct and provides insight into how today’s farmer makes those decisions.”
The five buyer groups the study identified include price, performance, convenience, service and balance.
Traditional ag input market segments include business or value-oriented buyers; economic buyers, who focus on low cost; and relationship buyers, who purchase from the same dealer year after year.
Balanced. Most farmers in both the 1998 and 2003 surveys placed themselves in the balance group, at 34.5 percent and 34.2 percent, respectively. The price group was next highest at 18.5 percent in 2003, up 1.5 percent from 1998.
Service buyers were the third largest group in 2003 at 17.3 percent (up 0.5 percent), followed by performance buyers at 16.3 percent (up 1.5 percent) and convenience buyers at 13.8 percent.
“The convenience group is declining rapidly,” Alexander said. “In 1998 that group made up 16.8 percent of our sample. The 3 percent that was lost by 2003 was about evenly split among the other four groups.”
According to Alexander, demographics are behind the decrease of convenience buyers and the rise of service buyers. She said the convenience group tends to be the oldest group of producers and since they are nearing retirement, they aren’t concerned about growing their farming operations.
Changes. However, the service group tends to be much younger farmers who are very ambitious and who want to grow their operations, she added.
The traditional relationship buyer isn’t disappearing, it’s just changing dramatically from a convenience buyer to a service buyer.
Meeting the needs of service-oriented input buyers requires more effort from agribusinesses, Alexander said.
“Service group buyers want more information and they want more interpretation of that information. They hold any input salesman to a higher level of technical competence, but they are a relationship buyer that is high value,” she said.
The Purdue survey also found some input buyer groups are more brand loyal than others and that interest in e-commerce is varied.
“A price buyer is not generally very brand loyal, but a service buyer is generally very brand loyal,” Wilson said. “Many ag input dealers may carry multiple brands or they may only carry one brand but there are certainly marketing implications either way.”
Computer use. She also said another component that relates to the demographics is the use of computers. Price buyers are going to use computers quite a bit. They are technologically capable, they are looking for the best prices and they use the Internet.
Service buyers do not use the computer to the extent price buyers do, so if an ag input dealer is focused on price buyers, they definitely want to have an Internet presence, Wilson added.
The 2003 survey also found 46 percent of price buyers are college graduates – the highest percentage among the five groups. Only 31 percent of service buyers hold a college degree – the only group under 40 percent.
Also, balance group buyers are most likely (44 percent) and convenience group buyers least likely (38 percent) to utilize the services of independent crop consultants.
Eighty-eight percent to 91 percent of farmers in every buyer group indicated they hire someone to handle fieldwork or other on-farm jobs, commonly known as custom services.
Strategy changes. As farmers’ buying habits evolve, so, too, must the marketing strategies agribusinesses employ.
“If you can tailor your products to the customers, if you are designing products that customers want and you are providing customer value to them, they are going to remain customers – even if you have to bargain with them a little bit,” Wilson said.