reconfiguring the value bundle: product? service? information? dr. corinne alexander dr. christine...

Reconfiguring The Value Bundle: Product? Service? Information?

Dr. Corinne AlexanderDr. Christine Wilson

Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Building and Branding the Value Bundle

1. Understand the Value• Market segmentation based on survey

2. Choose the Value• Trends in market segments

3. Create the Value• Chip Donahue, Brandt Consolidated

4. Extract the Value5. Communicate the Value6. Deliver the Value

• Doug BowmanSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Understand the Value Bundle

How do your customers choose their suppliers?

What do they want in terms of product, service, and information?


Factors Influencing Buying Behavior

• When you choose a supplier, how is your decision influenced by the following factors?– Convenience/Location– Service/Information & Personal Factors– Price– Product Performance– Support Services


Market Segmentation

• Identify buying behavior segments, or groups of customers, that react differently to marketing choices

• Use cluster analysis to allow buying behavior segments to be formed naturally: data-driven segmentation


Buying Behavior Segments Crops & Livestock

35%

16%18%

14%

17%

Balance Performance PriceConvenience Service

Full SampleSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

There are 5 Buying Behavior Segments

Factor Balance Performance Price Convenience ServiceFull

Sample

Convenience/Location 18 6 9 57 13 19

Service/Info & Personal Factors 21 9 10 13 47 20

Price 25 26 62 19 17 29

Product Performance 20 51 13 8 13 21

Support Services 17 7 7 5 11 11

Percent of Sample 34.2 16.3 18.5 13.8 17.3 100Source: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value”

Center for Food and Agricultural Business

Our 5 market segments refine the 3 traditional segments

1. Economic Buyer: 18.5%– Price segment

2. Business Buyer: 50.5%– Balance segment– Performance segment

3. Relationship Buyer: 31.1%– Convenience segment– Service segment


How large are the operations in the segments?

Crops• Price has largest

operations• Balance and

Performance are in between

• Convenience has smallest operations followed by Service

Livestock• Performance has

largest operations• Balance, Price, are

in between • Convenience has

smallest operations


During the next 5 years, which segments plan to grow the most?

Crops• Service and Price plan

the most growth at nearly 30%

• Convenience plans the least growth at 16%

• Corn/Soybean producers plan the most growth, 25-37%

Livestock• All segments plan to

grow about 25%• Hog producers plan the

least growth, -3 to +20%


Who is the youngest/oldest in 2003?

Crops• Service and Price are

the youngest• Performance and

Balance are middle-aged producers

• Convenience is significantly older producers

Livestock• No significant age

differences• Overall, Convenience

and Service are older


Value Bundle Preferences Crops vs. Livestock


Buying Behavior Segments

Crops Livestock

16%

16%

15%

34%

19%


Overview of Segments by 5 Primary Factors

• Crops and Livestock– Each segment dominated by a single factor except

Balance which focuses on all 5 factors– Price is the 1st or 2nd most important factor for all

segments

• Crops– Support Services is the least important factor

• Livestock– Convenience and Support Services are the least

significant factors overall


The Value Bundle: Product

• For crops and livestock, Service had the highest brand loyalty while Price had the lowest

• All segments somewhat agree generics offer good trade-off between price and quality– Price agrees most, Service agrees least

• Price strongly agree that they will increase use of generic products over next 5 years, Service disagrees– Balance, Performance, and Convenience will see slight

increases


The Value Bundle: Product

• Performance has fastest adoption of new products, services, and techniques; Convenience is the slowest

• All segments believe there are quality differences between brands – Livestock slightly less so than crops

• All segments believe that products and related information should be sold and priced as a single bundle


The Value Bundle: Service

Desirable Salesperson Characteristics• For crops and livestock, 3 primary characteristics:

– Is honest– Has a high level of technical competence– Provides good follow-up service

• Price wants a salesperson who brings the lowest price

• Service wants to be called on frequently• Convenience wants a good communicator • Livestock Service segment wants a consultant



Supplier Loyalty• Convenience is most likely to buy expendable

items from one supplier; Performance and Price are least loyal– Livestock is slightly less loyal

• Convenience and Service are most willing to pay more to buy inputs from locally-owned suppliers; Price is least likely



• Custom Services– Price is least likely to use– In crops, Convenience has high use of custom

service; Performance has low use– In livestock, Performance and Balance have

high use; Convenience has low use


The Value Bundle: Information

Computer & Internet Usage• Performance highest computer use, Convenience

and Service lowest use– Livestock use is higher than crops

• Three primary uses of the Internet are:– Obtain product/technical information– Obtain price information on inputs– Locate sources of products or dealers



Computer & Internet Usage• Performance, Price most likely to have

ordered an ag input on the Internet



Information Sources• Local dealer sales/technical people provide the

most useful information for crops and livestock– Manufacturer salespeople and other farmers also provide

a high level of useful information

• Livestock segments rate veterinarians as their second most useful source of information


Understand the Value

Pricing the Value Bundle


Pricing the Value Bundle: Service & Information

• Price wants service and information priced separately from product– Looking for the lowest product price

Price Value Bundle: Product only



• Service and Convenience willing to pay more for products from local dealers who provide good service and information– Most loyal group

Service/Convenience Value Bundle:Service & Information, then Product



• Performance and Balance are the most information intensive– High use of internet for information and

purchasing– Technical competence matters!– Product quality/brands matter

Balance/Performance Value Bundle:Product & Information, then Service


Choose the Value Bundle

What is your future value bundle?


Compared to 1998, which segments are growing/shrinking?

Crops• Balance is the largest

segment and stable at 35%

• Price grew substantially• Performance grew

modestly• Service is growing• Convenience is the

smallest segment and is shrinking

Livestock• Balance is the largest

segment at 35%, slight decline

• Price is stable• Performance grew

substantially • Service is growing• Convenience is the

smallest segment and is shrinking


Expect Balance Segment to Remain Stable

• Largest segment for crops and livestock• Relatively stable compared to 1998• Average farm size compared to other

segments• Crops and livestock expect to grow ~25%• Primarily middle-aged producers


Expect the Price Segment to Increase or Remain Stable

• Since 1998, increased substantially for crop and remained stable for livestock

• Largest farm size for crops, average or above for livestock

• Highest expected growth of all segments • High percentage of young producers


Expect the Performance Segment to Increase

• Since 1998, increased substantially for livestock and modestly for crops

• Largest livestock operations, above average crop operations

• Crops and livestock expect to grow ~25%• Primarily young and middle-aged producers


Expect the Service Segmentto Increase

• Increased from 1998 for crops and livestock• Average-sized or slightly below farm

operations• Very high expected growth rate for crops

and average expected growth rate for livestock

• Crop producers are very young, livestock producers are slightly above average


Expect the Convenience Segment to Decrease Rapidly

• Smallest segment for crops and livestock• Decreased from 1998 for crops and

livestock• Smallest farms• Lowest overall growth rate, especially for

crops• Oldest producers


Overview of Expectations

We expect that the:

• Balance (35%) segment will remain stable• Price (18%) segment will increase or remain

stable• Service (17%) segment will increase• Performance (16%) segment will increase• Convenience (14%) segment will decrease


Appendix: Supporting Data

Please feel free to contact us with questions:

[email protected], [email protected]


mailto:[email protected]

mailto:[email protected]

Crop Segments by 5 Primary Factors

0

10

20

30

40

50

60

70

Balance Performance Price Convenience ServiceConvenience/Location Service/Info & PersonalPrice Product PerformanceSupport Services


Livestock Segments by 5 Primary Factors

0

10

20

30

40

50

60

70

Balance Performance Price Convenience Service

Convenience/Location Service/Info & PersonalPrice Product PerformanceSupport Services


Size of Crop Operations by Segments

0

10

20

30

40

Mid-Size Farms Commercial Farms Extra-Large Farms

Balance Performance Price Convenience ServiceSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Size of Livestock Operationsby Segments

05

10152025303540

Mid-Size Farms Commercial Farms Extra-Large Farms


Overview of Segments by Size of Operations

• Crops– Price segment has highest percentage of extra-large

farms– Convenience segment has highest percentage of mid-

sized farms

• Livestock– Mid-sized farms make up the majority of the Convenience

segment– Performance has most extra-large farms


Crop Segments by Age

0

5

10

15

20

25

30

35

40


Age < 35 Age 35 to 44 Age 45 to 54Age 55 to 64 Age > 64


Livestock Segments by Age

0

10

20

30

40


Age < 35 Age 35 to 44 Age 45 to 54Age 55 to 64 Age > 64


Crop Segments by Age

0

5

10

15

20

25

30

35

40

Age < 35 Age 35 to 44 Age 45 to 54 Age 55 to 64 Age > 64


Livestock Segments by Age

0

10

20

30

40

Age < 35 Age 35 to 44 Age 45 to 54 Age 55 to 64 Age > 64


Overview of Segments by Age

• Crops– Age 45-54 dominate all segments except convenience– Convenience has the highest percentage of producers in

the 55 to 64 and the 65+ age ranges– Service has the highest percentage of young producers

that are 35 or younger

• Livestock– All segments are dominated by farmers who are 45-54– Convenience has the lowest percentage of middle-aged

producers (35-54), but the highest percentage of young producers (<35) and older producers (55+)


Crop Segments by Education

0

10

20

30

40

50


College GraduateSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Overview of Segments by Education

• Crops– Approximately 45% of producers in the Balance,

Performance, and Price segments have a college degree– Service has the lowest percentage of college

graduates at 34%

• Livestock– Overall, a slightly smaller percentage of livestock

producers have a college degree than crop producers– Price and Performance have the highest percentages of

producers having a college degree at over 40%– Only 29% of producers in the Service segment have a

college degree


Expected 5 Year Growth by Segments

05

101520253035


% E

xpec

ted

Gro

wth

Crops LivestockSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Overview of Segments by Expected 5 Year Growth

• Crops– Service and Price expect the most growth at near 30%– Convenience producers expect the least growth at 16%– Corn producers expect to grow an average of 30%– Overall, cotton and wheat/barley/canola producers expect

lower growth

• Livestock– All segments expect to grow approximately 25%– Overall, dairy and beef cattle expect to grow

approximately 30%– Swine expects the least overall growth


Livestock Segments by Education

0

10

20

30

40

50


College GraduateSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Primary Crop Enterprisesby Segments

05

1015202530354045

Corn / Soybeans Wheat/ Barley/ Canola Cotton



Primary Livestock Enterprisesby Segments

0

5

10

15

20

2530

35

40

45

50

Dairy Swine Beef Cattle



Overview of Segments by Primary Enterprise

• Crops– Corn/Soybeans is strongest in the Performance Segment– Cotton is strongest in the Price segment– Wheat/Barley/Canola and Cotton are significant in the

Convenience segment

• Livestock– Dairy is strongest in the Service Segment and weakest in

the Convenience segment– Beef Cattle are strongest in the Convenience segment


Crop Segments by Expected 5 Year Growth

05

10152025303540


% E

xpec

ted

Gro

wth

Corn/Soybeans Wheat/Barley/Canola CottonSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business

Livestock Segments byExpected 5 Year Growth

-10

0

10

20

30

40

50


% E

xpec

ted

Gro

wth

Dairy Swine Beef CattleSource: 2003 National Conference for Agribusiness, “Serving Commercial Producers: Meeting Needs, Adding Value” Center for Food and Agricultural Business


Custom Services for Crops• Approximately 65% use custom fertilizer app.• Balance, Convenience, and Service have highest

use of custom pesticide application (~60%) while Price has lowest use (46%)

• Approximately 25% use custom harvesting• Convenience uses the most custom seeding (15%)

and custom row tillage (7%) while Performance (9%, 2%) and Price (8%, 2%) use the least


The Value Bundle: Product – CropsStatement Balance Performance Price Convenience Service

I am loyal to brands of expendable items

3.2 3.1 2.9 3.3 3.4

Generics offer a good trade-off between price and quality

3.1 3.2 3.4 3.3 3

Will increase use of generic items over next 5 years

3.2 3.3 3.5 3.3 3

For expendable items, most brands are more or less the same

2.6 2.5 2.7 2.8 2.7

I think suppliers should charge separately for products and information

2.2 2.3 2.3 2.1 2.2

*Average responses on Likert Scale of 1-5


The Value Bundle: Product - Livestock

Statement Balance Performance Price Convenience Service

I am loyal to brands of expendable items

3.2 2.9 2.8 3.2 3.3

Generics offer a good trade-off between price and quality

3.1 3.1 3.3 3.2 3

Will increase use of generic items over next 5 years

3.2 3 3.3 3.2 3.1

For expendable items, most brands are more or less the same

2.7 2.7 2.7 2.9 2.8

I think suppliers should charge separately for products and information

2.4 2.2 2.3 2.4 2.4

*Average responses on Likert Scale of 1-5



Custom Services for Livestock• Performance and Balance have the highest

use of custom livestock waste handling (~35%) versus only 23% of Convenience

• 17-21% use custom livestock finishing• Performance has the highest percentage of

custom raised breeding stock replacements (28%) while Price and Convenience have lowest (19% and 15%)


The Value Bundle: ServiceCustom Services for Crops

01020304050607080

FertilizerApplication

PesticideApplication

Seeding Harvesting Row CropTillage


The Value Bundle: ServiceCustom Services for Livestock

05

10152025303540

Livestock Waste Handling Livestock Finishing Raising Breeding StockReplacements


The Value Bundle: Service - CropsDesirable Salesperson Characteristics

Characteristic Balance Performance Price Convenience Service

Is honest 62 66 58 56 58

Has a high level of technical competence

50 52 44 48 48

Provides good follow-up service

33 30 30 41 34

Brings me the best price 24 21 36 20 17

Is a good communicator 11 7 7 14 8

Is a consultant to my operation

9 14 6 10 10

Calls on me frequently 7 4 8 5 13


The Value Bundle: Service - LivestockDesirable Salesperson Characteristics

Characteristic Balance Performance Price Convenience Service

Is honest 60 61 57 64 54

Has a high level of technical competence

51 53 47 40 45

Provides good follow-up service

40 34 28 32 39

Brings me the best price 25 22 36 17 16

Is a good communicator 10 10 13 20 11

Is a consultant to my operation

8 12 5 13 18

Calls on me frequently 6 3 5 9 9


The Value Bundle: InformationOutside Influences - Crops

0%

20%

40%

60%

80%

100%


Independent, Paid Consultants Local dealer/ dealer personnelManufacturer sales/ tech rep Other


The Value Bundle: InformationOutside Influences - Livestock

0%

20%

40%

60%

80%

100%


Independent, Paid Consultants Local dealer/ dealer personnel

Manufacturer sales/ tech rep Other


The Value Bundle: InformationOutside Influences - Crops

0

10

20

30

40

50


Independent, Paid Consultants Local dealer/ dealer personnelManufacturer sales/ tech rep Other


The Value Bundle: InformationOutside Influences - Livestock

05

1015202530354045


Independent, Paid Consultants Local dealer/ dealer personnel

Manufacturer sales/ tech rep Other



Communications Media• The best sources of information for all segments

were general farm publications and crop/livestock specific publications– Agricultural newspapers and agricultural newsletters

provides some good information

• All segments responded negatively towards telephone contacts and agricultural TV programs– Agricultural websites and agricultural radio programs

were also identified as providing little useful information



Computer Usage• Performance has the highest use of the computer

for communications while Convenience and Service have the lowest use– Livestock use is higher than that of crops

• Performance and Balance use the computer for information gathering while the Convenience segment uses it significantly less for this purpose– Livestock use is higher than that of crops



Internet Usage• Approximately 75% of the Balance, Performance,

and Price segments use Mr. Gore’s Internet while only about 65% of the Convenience segment does

• Three primary uses of the Internet are:– Obtain product/technical information– Obtain price information on inputs– Locate sources of products or dealers

• Performance and Price are most likely to have ordered an agricultural input over the Internet


The Value Bundle: InformationInternet Use - Crops

Practice Balance Performance Price Convenience Service

Use the Internet in my farm business

75 74 72 63 70

Obtained product / technical information

64 67 58 50 56

Obtained price information on inputs

47 54 46 38 43

Located sources of products or dealers

54 57 42 43 38

Placed an order for agricultural inputs

14 22 18 11 10


The Value Bundle: InformationInternet Use - Livestock

Practice Balance Performance Price Convenience Service

Use the Internet in my farm business

71 77 78 65 70

Obtained product / technical information

57 65 66 52 59

Obtained price information on inputs

41 49 51 34 47

Located sources of products or dealers

51 59 56 39 53

Placed an order for agricultural inputs

14 17 19 9 16


reconfiguring the value bundle: product? service? information? dr. corinne alexander dr. christine...

Documents

value center

value bundle

value trends

national conference

commercial producers

meeting needs

agricultural business

value market segmentation