Knowing your customer is basic to agribusiness survival, regardless of your company's size.

“There's no room in the market for a one-pricing, one-service attitude,” says Phil Brewer of IMPACT Co-op, Frankfort, IN. IMPACT, even with 2,600 voting members, has seen farm consolidation create a situation in which 10 to 20 big-acreage customers can now tip the scale of success for several of its 11 retail locations. “Meeting their needs requires adopting the hottest new technology we can to collect, store — and analyze — the information it takes to micro-manage every acre they farm,” he says.

In contrast, smaller farms form the core of Brad Mikelson's west central Wisconsin market base. Countryside Co-op custom applicators range over 91,000 acres of Chippewa Valley hilltops and valleys with an amazing average field size of fewer than 8 acres. In 1998, he started segmenting customers by salesperson and type of operation — dairy, crop or beef.

“We needed to know if we were spending the right time in the right places, asking the right questions of the right people. Now, about 25 percent of the acreage is GEO-referenced so we can quickly pull up maps of product use and other data. It was amazing how many hours we were spending with our ‘friendship’ customers who represent a small percentage of our income. All call reports for the co-op's five retail locations are posted on a central server, so I can see at a glance the frequency of key customer calls,” he says. One result: Countryside seed sales jumped 75% last year largely because the hottest prospects dotted throughout its fragmented market area were identified and targeted first.

Mikelson says the program has helped him target more business in areas where the co-op had a concentration of custom application. “It's a lot easier to fill in the holes when you have it on a map in front of you,” he comments.

With 4,000 customers served from 15 agronomy outlets in eight counties, WFS Cooperatives, Truman, MN, strives for equitable, not necessarily equal, customer treatment. “We try to generate the same amount of margin from each grower whether he's large or small,” says general manager Ed Bosanko.

To stay competitive, WFS combines a volume discount program with a financing subsidiary. Big customers who commit 80 to 100% of their input buys to WFS get the best local price and, if they choose, an operating loan at an interest rate up to 3% below prime rate. The financing division was started in 1996 to fund hog barns. With those accounts now paid down, loans are targeted to fertilizer, chemicals and fuel at rates lower than local banks. “We've really always been in the financing business through open accounts receivable, like any company offering agronomy services. With our finance division, we can put some collateral behind it,” Bosanko explains. Loans are secured with first-crop liens.

A lot of note-taking and intimate knowledge of his 250 customers allow Charles Krietemeyer to schedule around their “personalities and perceived needs” on about 50,000 acres of custom application from Royster-Clark in Ottawa, OH. The retail center is one of about 350 in the firm's 23-state FARMARKET division. “Listening closely to what your customers say and how they say it can tell you a lot about what they need and want and how you can convert that information into better service. We take every request for information seriously,” says Krietemeyer.

While size is an indicator of some things, it's not an indicator of all things, at least in northwest Iowa, says Don Harbert. Harbert heads up a seven-person agronomy sales staff and is location manager at Doon, one of Farmers Elevator Company's six area facilities. To get a better fix on each customer's specific needs, Harbert has grouped them into four categories — weekend hobby farmers, smaller part-time operators, traditional full-time farmers with strong co-op loyalties and the businessman grower who knows return on investment on every field and is a most likely target for grid sampling and other site-specific services. “Our customer meetings and new-technology introductions are based pretty much on these segmentations. Rifle target marketing helps keep us competitive,” he says.

When crop prices tumbled three years ago, so did a lot of interest in precision farming. Still, nearly every customer who bought into variable-rate fertilizer and herbicide application and other site-specific technology at WFS is sold on precision farming and eager to give testimony, says Bosanko. “What we have encouraged them to do is divide a quarter-section and farm half with precision ag and half conventional practices. Typically, they see a 4- to 5-bushel-per-acre advantage by maximizing fertilizer placement, which encourages them to expand site-specific programs.”

WFS recently partnered with three other co-ops to build a combined agronomy center and soil testing lab at St. James, MN, with the expectation that consolidating field sampling and lab tests under one roof would boost precision ag adoption.

IMPACT Co-op, one of the first to offer precision ag services to Indiana growers in 1994, sells site-specific technology under the GrowMax trademark. “Probably the biggest benefit of variable-rate technology is that it lets us sell in terms of agronomics rather than just economics,” relates Brewer. His philosophy has never been to tell a grower that precision ag would save money or call for less total fertilizer. But, after several years of grid sampling, they can go back to the same point source and identify over- or under-application. Because area soils are typically high in P, many growers had been over-applying P and under-applying K. The co-op was able to make the corrections and in the long run boost yields. Success like that has made it easier to introduce variable-rate soybean seeding, and evidence gathered by analyzing soil test and yield monitor results has led them to also experiment with variable-rate micronutrients, Brewer says.

Last year, IMPACT achieved big-time savings by running field boundaries on custom application acres before the season. Now when a grower calls in an order, the data disk shows exact field locations and acreage. Brewer estimates having this information on hand saves about 15 minutes per load, which can quickly add up to three or four hours a day in saved time for each applicator.

The environmental side of precision ag isn't lost on innovative producers either, he adds. “We have several large hog producer customers and others who buy municipal sludge. We've developed variable-rate programs that pinpoint the most profitable and environmentally sound placement of these natural nutrient sources.”

Many Ohio farmers have put the brakes on precision ag adoption, even though there's plenty of proof to support it. “We're currently niche-marketing variable-rate fertilizer and lime to our most progressive corn and soybean farmers and vegetable growers. Once they see the benefits of better lime placement, they're sold,” Krietemeyer says.

Variable-rate lime has also been a good precision ag sales booster in Wisconsin. But, Mikelson warns, you'll have to commit to invest first, and sell its merits one customer at a time. “We broke into it six years ago by retrofitting a spinner spreader, and now we have five spinner units and three airflows equipped for variable rate. It really gets their attention when they start to see consistency across a field, where in the past they might have had trouble spots where variable pH was causing poor herbicide activity.”

It's hard to separate equipment management from people management. “When we put an operator into a sprayer or spreader at the beginning of the season, that's his machine for the rest of the year. Each operator even handles routine maintenance chores. It gives them a sense of ownership and pride, and they take care of the equipment like it was their own property,” says Ohio retailer Krietemeyer. All operators are full-time employees; no part-time personnel are allowed to operate field equipment.

“We expect our operators to do their own routine maintenance and keep their machines clean. We set high standards as to how that machine looks when it heads for our customer's farm. A little psychology usually works — the operator who shirks his duty on equipment maintenance rarely gets assigned to a new rig,” adds Mikelson.

Harbert is so sure that rig “ownership” works, the co-op provides a modern, brightly lit maintenance garage where equipment is washed daily after it leaves the field. “I recently worked up a three-year accountability plan for equipment that helps them understand that good maintenance has a direct correlation to longevity of equipment. Our long-term goal is to tie accountability and maintenance together and compensate accordingly.”

Brewer concurs. “My philosophy is that the manager and sales force represent only 50 percent of our success. The rest comes in the field. The people applying the product have to feel they have been incorporated into the decision-making process of the entire plant. Nothing works better to instill pride than a plan laid out in the shop. Our most critical time is in early February through the end of March, when we figure out what we've got to do and how we're going to get it done. Frankly, if we waited until April or May, we would have a big problem.”

Equipment efficiency has become a specialty for WFS. The co-op positions equipment pods of three or four applicators at sites throughout the co-op system during peak application. They're moved between locations daily depending on weather and order origin. “It's an advantage of size,” Bosanko admits. “We might have a rain shower and sunshine several miles apart, and we can shift manpower and machines to take advantage.”

Equipment sharing is also part of the WFS strategy. For the past five years, two liquid applicators have been shipped between Minnesota and Farmers Co-op at Alva, OK. The Oklahoma firm keeps them busy between November and March, and they're back at work for WFS from April through October. Last year, WFS shipped a dry fertilizer unit to Mid-Kansas Co-op at Moundridge, KS, where the company used it on a per-hour charge. “They liked the program so well that next year they want us to send two dry units down,” Bosanko says.

“We like to think there's training, and then there's our training. We do things different than a lot of companies,” comments Don Harbert. “Our philosophy is that training should not focus on fixing weaknesses. You should focus on building strengths.”

Harbert takes advantage of extensive training programs offered on-site and online by Agriliance, but also seeks nontraditional materials outside the ag industry. One of the most successful sessions he recalls used personality-profiling materials from Saturn Corporation. The Agribusiness Group and Myers-Briggs Insurance Company were other sources. “We try to match employee personalities as closely as possible with their assigned customers,” says Harbert.

Training at Royster-Clark starts right in the shop. “A new hire doesn't go out of here on a machine alone until several experienced operators have ridden the field with him and signed off on his reliability. It takes more time at first, but this system has really paid off,” says Krietemeyer.

Investment in learning per employee at the five firms averages four to five days. “When you get spread out like we are with 45 employees over a hundred-mile radius, it helps to bring them all together in March for training and to fire up company spirit. It might be the only time of the year when many of them actually see each other,” comments Mikelson.

“We've tried to notch up training throughout our plants to keep up with technology,” says IMPACT's Brewer. “Typically, an applicator or shop person will get active in soil testing, and because they're doing that they learn to operate the software programs. Before long, they understand how fertility and pest control programs all work together, and they can take on more responsibility. Several of our applicators have taken it upon themselves to become certified crop advisors on their own time.”

At WFS, all manufacturer reps deal solely with the agronomy manager, who in turn chooses the four companies that he feels offer the best product portfolios and co-op profit potential. “We risk some chance of losing business because a producer might want a herbicide we're not handling; on the other hand, we move a lot of business through the four companies who make the cut. That in turn results in passing on some really good prices, and that keeps us very competitive,” Bosanko explains. “If I have a discomfort with the current distribution system, we end up pricing at levels that leave little or no margin, thus putting a lot of pressure on rebates being a part of our overall year-end profits. I'm not comfortable putting my future in the hands of any manufacturer, but that's the way our business is done.”

Krietemeyer is even more selective. He usually runs two herbicide programs on corn, with one conventional pre-emergence soybean offering in addition to Roundup Ready, now nearing 90% of their total bean acres. “We look for a herbicide that has a good fit over our marketing area, and there are plenty of those available. The final decision is based on the company rep. Our customers take our word on who they should deal with.”

“We like to focus on two or three manufacturer programs, but with widely variable soil types, we have to be ready for anything,” says Mikelson. To help pinpoint agronomic recommendations, he hired a private researcher to set up 33 replicated crop protection test plots.

“I don't want manufacturer programs that promote ‘cheap’ first and agronomics second. Better to hear customers grouse for three weeks in the spring about a little extra herbicide cost than all winter about weeds in the combine,” comments Brewer. “In the past, too many programs have focused on getting onto the field at any cost. Respray programs really aren't much value because it's usually too late to stop yield loss.”

Brewer is also concerned about losing ownership of the farm gate. Company reps who have traditionally sold chemicals are now representing seed companies and are calling on IMPACT's big seed accounts. “The grower will have to decide which of us is providing the best information. It will make the next couple years interesting,” he says.

Michael Boehlje, noted Purdue agricultural economist, draws four conclusions from the new business climate in agriculture:

While we usually think of the downside of uncertainty, don't ignore the reward side and how to manage it. Boehlje suggests approaching uncertainties with the mind-set of minimizing risk of downside exposure while still capturing value. Investing in precision farming services, for example, can be risky, especially in the present farm economy. Yet if you don't venture into high-tech, you might lose your local market leader image. Advice: Consider outsourcing equipment and data analysis until you've tested the water enough to justify the investment it takes to ready an applicator for site-specific services.

“Consider the same approach to test e-commerce, another new technology not yet delivering as much value as we thought it might,” Boehlje continues. “The downside risk would come in tying up a major Internet investment to interface electronically with customers, with no guarantee of success. Why not learn e-commerce basics with a lower-cost Intranet system linking the people within your company? You'll be ready to go when e-commerce opportunities look brighter.”

Boehlje urges exploring the past to figure out why things happened and how those historic drivers of change can be applied to the future. What you're trying to do is predict what causes change rather than just predicting change itself. Example: Look historically at your farmers' responses when new technologies (Roundup Ready, Bt, etc.) were introduced. Were they willing to pay more, switch brands? Make a chart showing the adoption rate, the type of farmer who purchased the product, the criteria you think they used to make the buying decision — and if possible, their names. This is your roadmap for introducing your next new product or service. These are the people to target first with a price you think they're willing to pay.

Key questions: Are you in a position to shape what the market is going to look like? Or should you conclude that someone else has the power, position and size to shape the market and you're better off to position yourself in a “very fast second-mover mode”?

Each position has its rewards. E-commerce is a good example. “We've seen a whole set of companies, many outside of agriculture, who thought they were in a position to be first movers and really shape this market. Many have since backed away with big losses. Others, like amazon.com, are thriving. Meanwhile, we've seen other companies who have used Internet and Intranet technologies to make themselves more customer responsive without betting the whole company trying to reshape buying habits,” Boehlje says.

Take calculated risks. “What I'm suggesting here is that in periods of fast change, an options mentality is a way to test several new things without risking the company. Rather than making a single big-dollar investment in one new business enterprise, spread a similar amount over three or four alternatives with the idea that these are the dues you pay to figure out which ones deserve a second cycle of funding. It's no different than venture capital companies who know that some of their ventures will be worthy of more investment and some will not. It certainly merits consideration compared to waiting until all uncertainty is gone, because at that point most of the profit potential will also be gone.”

Check these “out of the box” tips for trimming costs and/or gaining new business, from ag economist Brent Hathaway, chair of management and marketing at the University of Wyoming. Before becoming an educator, Hathaway managed businesses and developed business strategy at Case Corporation and Honeywell International.

How fast do you react to changes in the business climate? “When I was recently working with GE on the proposed merger of our two companies, a senior executive leading the integration efforts made it very clear the quickest way to lose your job was through indecision. They didn't mean we should be making uninformed or costly decisions, and neither should you to get new ideas quickly into practice,” Hathaway says. He suggests employee think tanks as a good way to “expend your imagination before you spend your money.” Think tank activity not only reenergizes employees but can create true profit centers ahead of the competition. Assign each group a different area — ag chem, custom application, precision ag, seed, fertilizer, etc. — and ask for a proposal/plan of action that will boost sales, improve service and up profits. Keep in mind, however, that rejuvenated employee energy won't last unless you actually pull the trigger and deploy some of their ideas. At some point you need to say, ‘Okay, we've got enough evidence to act; let's do it.’

Who says the rules can't change? More important: Have the rules changed and you don't know about it? Think of ways to respond faster to customer needs, to deliver services or balance demands for peak-season help. “One major change in business management is the trend toward contract employees. The temporary worker will be the norm for most firms sooner than we think,” Hathaway says. He foresees a day when many businesses will have a core group of about 30% full-time salaried employees, with other staffing needs filled with contract employees during high-demand periods. While this might seem radical for some, it can have distinct advantages. Contract employees often become extremely competent at specific skills and enjoy the variety and opportunity to apply those skills with several firms, yet have no expectations about longevity or benefits.

“At some point, prudent reduction of your sales force or other operating group is a necessary task. In fact, I would argue that if they haven't done so lately, most companies could eliminate 10 percent of their sales force tomorrow and actually improve their bottom line by at least 10 percent,” says Hathaway. He points out that however uncomfortable it might make you feel, it does a couple things: You will motivate those who are performing well with more customers, and you will be sending a message throughout the organization that you are willing to make hard decisions with sub-par performers.

Another tip: “When we had to eliminate 50 percent of the sales force at one of my industry jobs, we found that our decisions were made easier by interviewing customers about the salespeople they dealt with. That information actually carried a lot more weight than what their peers or supervisors said about them,” he recalls.

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