Ten ways to effectively manage your margins in today's marketplace.
September 9, 2008
In this article, some of the marketing experts from Agriliance offer their advice on how to mind, and maybe boost, your company's sales margins.
1. Don't just sell seed; promote the package. Biotech traits in the major crops are now available from nearly every seed company, so more emphasis is being put on identifying advantages in yield and genetics that are part of a solid seed package, says Peter Peerbolte, director of seed traits and seed treatments. "When the next generation of biotech traits arrives, such as drought tolerance and greater nitrogen efficiency, there will be competition to offer those traits exclusively for a year or two, but overall competition in seed will continue to center around who can provide the best package of products and information," says Peerbolte.
2. Sell the value of seed treatments. Seed treatments offer dealers a way to create new revenues while offering producers early-season seed and seedling disease and insect protection. The key to generating revenues with a seed treater is to be dedicated to selling the value of seed treatments, says Nathan Wright, business manager for seed treatments and grain protectants. "The dealership may have purchased the seed treater for use primarily on soybean or cotton seed, but they should also be looking for other crops to use it with, such as fungicides on wheat," says Wright. "The more units you treat, the quicker the payback."
3. Mix in more products. Another way to boost margins on seed treatments is to add other products to the treatment mix, he says. "Is there benefit in adding a seed-applied insecticide, fungicide, or inoculant into the mix? Is there value you can market to the producer? Often the answer is yes," says Wright.
Other seed enhancement products, such as micronutrients, can be delivered via the seed coating to boost early season plant growth. "Agriliance's new Advanced Coating Zn is a good example," says Wright. "Field tests on corn the past two seasons have demonstrated a noticeable response to the addition of Zn, with faster emergence and better stands."
With spray adjuvants, you need to sell on value, not price, says Bob Herzfeld, adjuvants business manager. "Farmers are certainly price conscious, but they will pay for something that works, so show them how these products will make their herbicides or insecticides more effective," says Herzfeld. "A good example is how a water conditioner such as Alliance will help their glyphosate work better, especially on tough weeds and in dry conditions, or if they have hard water."
Deposition agents offer great value in making insecticide and fungicide applications more effective, he notes. "InterLock, for example, actually increases droplet speed by as much as 40%, which delivers it down below the crop canopy for much better control, and keeps up to 20% more active ingredient in your field," says Herzfeld.
4. Don't miss opportunities in stored grain. Grain protectants are another product area that hold a lot of promise for boosting profitability this coming season, says Wright. "With the expected increase in corn acres, and more of it going into on-farm storage, there is a real opportunity to sell the benefits of grain protectants," he says. "Actellic, for example, can protect against key pests in corn up to 18 months, and there are no shipping restrictions after use. And a typical 4- to 8-cent-per-bushel cost to the producer seems like a fairly affordable form of grain storage insurance."
5. Charge enough for applying product. Field applications services are often under-valued, usually because the dealer doesn't have an accurate sense of the costs, says Jeff Speckman, equipment marketing specialist. "You should be using the custom application segment of the business as a revenue stream and not subsidizing it with product margins," says Speckman.
6. Take advantage of new technologies. Larger sprayer equipment with auto-boom technology may be worth the investment if you have enough acres to cover, says Speckman. "The new technologies solve many of the challenges of running a wider boom, and help reduce operator stress," he says.In fertilizer applicators, the latest upgrades in spinner technology provide great accuracy for a smaller investment and less maintenance cost than air-powered applicators, he notes. "They're not a replacement for air technology but give you a lower-cost way to apply dry fertilizers on more acres, just as accurately," says Speckman.
7. Spread fertilizer buying risk. With major supply changes occurring in the fertilizer markets over the last two years, dealers and growers need to take a longer view of their purchases, says Bruce Vernon, director of crop nutrient marketing and risk management services. "They need to consider buying product at least eight months out to ensure adequate supplies, but that can leave them vulnerable to price volatility," says Vernon. "That's why they need a risk management plan."
To meet this growing dealer need, Agriliance has developed the Risk Management Service for Crop Nutrients, which provide dealers with market analysis and position-track software, access to a secure Web site that provides constantly updated global market intelligence, and customized consulting with a dedicated risk management advisor.
8. Train your people. Good service is key to retaining customers and winning new ones, but providing a high level of service requires well-trained people. "The level of technical knowledge that employees need to have today is very high, and regular training is essential," says Jim Tiedke, agronomy production manager. "We try to meet that need by offering many types of training, including classroom, in-field, and online formats."
9. Know your sales productivity. Tracking the cost-to-return ratios of your sales force, individually and as a group, can help you to make the best use of each person, says Tiedke. "It's not just about accountability but about finding ways to help your sales force do the best that they can."
10. Market your expertise. If you're not making money on the services you offer, maybe you need to focus more on selling your expertise, and adjusting your rates to account for it, Tiedke says. "Agriliance provides great technical training for agronomists, applicators, and salespeople. If your dealership takes advantage of that, then you can use it to differentiate your services from those of the competition" he says. "When you talk about service, it's all about the people and their level of knowledge and training, so emphasize that."
Zenk is a freelance writer working for Agriliance.