A Tipping Point is when a clear trend has developed, and there is a distinct break from the past. The lead up to Tipping Points can be turbulent and foggy. It's hard to get a read on which road to take, which decisions to make, and which strategies to deploy. At the Tipping Point, the change becomes obvious, and a large advantage goes to companies that have correctly judged the direction of the change and are prepared to capitalize on it.

Ag retailing is approaching a large and important Tipping Point. Some think the reduction in retail steel caused by farm consolidation is a Tipping Point. While this is an important trend, I believe this is not the larger change happening at the strategic vs. the operational/structural level in ag retailing. Down the road we will realize retail consolidation was just the first wave of the Tipping Point. We are not in deep water yet.

For at least 15 to 20 years, ag retailers have implemented a strategy based on operational excellence and technical knowledge (The Strategy). In the early years of The Strategy, retailers who were leaders in providing technical knowledge to their customers and ran a tight operation captured market share from competitors. Not surprisingly, as all serious retailers implemented The Strategy, growers saw fewer meaningful differences between retailers. Most retailers agree there are now only minor differences between themselves and competitors.

After many years of implementing The Strategy of technical knowledge and operational excellence, few additional “wins” can be squeezed out of it. Since this is the major strategy most retailers employ, this is perhaps one reason the price segment among growers is increasing. The old Strategy is delivering declining benefits to customers. Continuing to deploy this strategy will produce more of the results many retailers are facing today: slow growth, declining margins and weakening customer loyalty.

Ag retailing will inevitably change from a technical to a more customer-centric strategy focused on developing solutions to customer problems. The “sameness” among retailers today creates a need for a new type of ag retailer. The education levels of commercial growers and their ability to access information from multiple sources mean the support traditionally offered by retailers for growing the crop is declining in value. Put differently, the problems customers face today generally are not the problems they faced 10 years ago. Continuing to supply old strategy solutions to problems that are not major issues (growing the crop) is not a viable long-term strategy.

Commercial growers today want to do business with a retail organization that has excellent technical and operational skills, but is highly skilled at identifying and solving customer problems. Old strategy skills are a requirement to play the game, but they are not sufficient for winning it. (This may not be true in every case, but it is the way to bet.)

AgKnowlogy is fortunate to work with some retail leaders who have read the writing on the wall. These retailers are implementing new approaches based on customer knowledge to deliver the value customers expect today. This new strategy of Customer Asset Management is drastically different from the technical and operations focus practiced by most retailers. Customer Asset Management takes retailers away from a largely cookie-cutter approach of dealing with customers. The focus is on identifying the customer's Pain or Business Problem and then using all the technical and operational resources of the retail organization to develop solutions that the customer believes will solve his problem.

To implement a Customer Asset Management strategy, retailers must deepen their understanding of customer needs and develop solutions to those needs. The major stumbling block for many retailers in gaining this understanding is the incorrect belief they already “know” their customers. In many cases, what passes for knowledge is only a vague sense of the customer's business goals, issues and strategies.

I am concerned the first wave of retail consolidation will pale in comparison to the one we are approaching. This consolidation will be driven by growers' expectations that retailers will earn their business through a demonstrated ability to solve business problems, as opposed to simply selling products and discussing benefits.

At the Tipping Point, retailers who cling to the old strategy of agronomic and operational excellence risk being swept aside as the full impact of their sameness to customers becomes apparent. Much of the change retailers have been experiencing is driven by consolidation among growers. Undoubtedly this has taken out the weakest players in the market. The survivors who emerge are stronger than those who fell first, but there is potentially as much sameness (from a grower's point of view) as before. To survive the first wave of consolidation and not make the changes that will drive Wave 2 success will be tragic. Remember working hard is not a business plan, and hope is not a strategy.

Bill Keogh is the owner of AgKnowlogy Inc., a company focused on helping retailers reach their potential sales, profits and customer loyalty. If you have a success story to share or an idea for a future column, e-mail Bill at info@agknowlogy.com, call 905/868-9953, or visit www.agknowlogy.com.

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