The Buzz About Outcome-Based Pricing

The Buzz About Outcome-Based Pricing ( Darrell Smith )

Imagine taking the risk out of buying inputs — especially risk associated with trying an unfamiliar product. Would it make you willing to try non-familiar products or practices?

Bayer’s testing it. Last summer, the company announced a new approach, called outcome-based pricing. Farmers, retailers and others have many questions; here are a few clarifications.

1. This is still a pilot program.

No final decisions on the new business model have been made.

“We piloted outcome-based pricing in 2019, and we will continue to pilot it in 2020,” says Chad Bilby, North America commercial innovation experimentation lead at Bayer Crop Science.

Outcome-based pricing, he says, can provide tailored solutions and risk sharing through customized prescriptions, Bayer’s integrated portfolio of products, innovative pricing and yield-based guarantees.

2. This is not the only way to do business with Bayer.

Outcome-based pricing is currently being pursued as one option for farmers to do business with Bayer — not the only way forward.

Bayer’s Seed Advisor laid the groundwork for the testing of outcome-based pricing, and seed will be a focus of the pilots.  

3. Bayer does not see this as displacing trusted advisers.

Farmers want choices and seek tailored solutions, Bilby says. As a result, the role of ag retailers as trusted advisers has grown as Bayer has seen digital transformations.

“Trusted advisers — whether that be a seed dealer, crop consultant or agronomist — will continue to play a key role in helping deliver customized solutions and localized service to growers,” Bilby explains. “These trusted advisers can begin using these new tools to help anticipate grower needs.” 

A Farmer’s Take

Ben Riensche, owner of Blue Diamond Farming Company in Jesup, Iowa, says outcome-based pricing could drive vital changes in farming.

”Paying for ag inputs is not a straight line,” he says. ”There are incentives for packages and programs, zero interest for pre-payment, and there are a lot of sticky linkages that have to be cleaned up.”