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Evolving large-scale land operators require ever-evolving service
Oct. 13, 2009

If high-rolling investors find a long-term future in land ownership, (see "Rise of the Large Operator"), it will undoubtedly speed the ongoing evolution of full-service ag retailers. If, as Kevin Dhuyvetter, professor and Extension economist, Kansas State University, projects, U.S. crop production sees the type of vertical integration and consolidation experienced by the livestock industry, it will be mirrored by equally rapid consolidation among service and input providers.

"At the end of the day, it means fewer players farming and fewer supplying inputs," said Dhuyvetter. "People in the supply chain are going to have to figure out how they will be part of the game."

Focused on Growers

Many retailers have already had to adapt to the growth in farmer-owned application equipment. Although on-farm spray rigs are nothing new, AGCO, John Deere and other industry players are increasingly promoting their high volume, high power, multi-use systems specifically for the large operator market. At an introduction of new RoGator models this summer, David Webster, director of sales, AGCO Application Equipment Division, described growers as representing 60 percent of the market for RoGator, double that of five years ago. Growers also represent 25 percent to 30 percent of the market for the company's Willmar equipment line and are buying TerraGators as well.

"When equipment manufacturers focused on the grower market and came out with high volume applicators, they did a great job leveraging that relationship," admitted Mark Sharitz, director of marketing, AGCO Application Equipment. "As growers continued to get larger and more and more recognized the benefits of ownership, they began looking to AGCO for machines, so we expanded our approach to reach them. Serving the grower market helps ensure we have the critical mass needed for continued research and product development."

Mike Pitzer, John Deere, noted it is not surprising that the same equipment would appeal to both market segments. In fact, as the company's offering has expanded, some growers are choosing Deere's 1,200-gallon sprayer as some retail customers are ordering the new 600-gallon sprayer and 2510 nutrient applicators.

"A lot of these large growers have almost the same needs as our ASP (Ag Service Providers) customers," said Pitzer. "As each gets larger, they both are looking at how to leverage equipment and labor to cover as many acres as they can in a narrow time window. Our Expert Series Training is a joint Web-based and hands-on training using dealer and factory experts to help both customer segments learn how to use their investments, get questions answered and get familiar with operations and adjustments."

Retailers Need to Adapt

Michael Swanson, agricultural consultant, Ag Industries Group, Wells Fargo Bank, said the ability of agricultural retailers to recognize what large growers need and to meet it is key to their success, whether consolidation continues as it has historically or speeds up significantly under expanded off-farm equity relationships.

"Retailers need to make sure large producers want to pick them for the services and inputs they need," said Swanson. "These operators value lowest price, but service is important. If they are paying $325 an acre for cash rent, success is all about timely planting and application of fertilizer and other inputs. The guy who charges more, but always hits the window and puts on what he said he would, when he said he would, is the guy they will want. It is critical to get things done on a timely basis."

Dhuyvetter suggested that fear of not getting work done in a timely way and having costs that are comparable, or even lower often drive large operators to buy their own application rigs, as well as bring other services "inside." One large operator described looking to local farm equipment mechanics, agronomists and application operators when considering adding employees. Another described a desire for on-farm fertilizer and other input storage.

"He said his goal was to bypass the local dealers and take more control of his destiny," recalled Dhuyvetter.

If too many full-service ag retailers hadn't, in effect, encouraged their customers to get their own equipment, fewer growers would feel that need, suggests marketing consultant Don Pottinger. Pottinger has worked both sides of the application business, serving in senior management roles in retail, fertilizer industry and application equipment industries. Now an independent consultant, he tells clients the key to retaining business, application or otherwise, is how you approach it.

"The retailers who are doing well and continue to do well are in the information and decision support business and happen to have products and services to go with it," he said. "The trick is to keep in touch with the changing needs of the grower. As the business evolves and becomes more sophisticated, there is a pile of opportunities for those on the ball."

Pottinger said retailers need employees with skill sets at least equal to that of the grower. "Break out sales and customer contact people to match the customers they call on based on the need of the customer, not the geography they are in," counseled Pottinger. "Treat the customer as a producer, not as a consumer. Remember, all you are is someone who makes it easier for them to produce, not just easier for them to buy."

New Training is Available

As companies anxious to make it easier for their customers to produce, not simply easier to buy, both John Deere and AGCO cite their operator training, dedicated sales and service and back office programs, including mapping, fleet management and other agronomic services, to help retailers be in the information and decision support business.

AGCO has taken that effort a step forward with a new 4 1/2-hour Web-based training program being introduced in mid-October. Sharitz said it is geared specifically to ag retailers and designed to help new equipment operators do their job better. He said the need for it was voiced by members of AGCO's annual retail customer summit.

"Operator expertise is what's important to the expanding grower. This program covers basic things the operator needs to understand before starting in-house training," explained Sharitz. "The final chapter is on customer service and how to listen to the customer and handle concerns. Beta version response from retailers has been very good. They tell us it is exactly where they want to go."

Sharitz said the training program is not AGCO specific, but will fit the needs of any new operator. Initially available to national account customers, it will eventually be made available to others on a fee basis. The interactive design includes quizzes and self-testing with a final exam, explained Tim Miller, AGCO Academy. He oversaw development of the training program and sees it as a business building and retention program.

"It really emphasizes how important the customer is and how every time you are in front of the customer, it's an opportunity for the company," said Miller. "We are hoping it really helps our customers and their operators."

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