Battle For Hearts And Minds

Keogh Chart

Economies of scale and the increasing size of a grower’s operation are driving retail consolidation. Several of our clients recently merged with other companies, and others are thinking about it. Recently, I was speaking with the general manager of one of these ag retailers about how they approached the whole merger process.

In this case, the two companies were co-ops, so after the various phases of negotiation and due diligence, both memberships voted on the proposal. Everything went smoothly and the project was completed in a timely fashion. Management has anticipated the challenges of merging two different sales cultures and operational styles and is actively building the new team. 

The companies I am thinking about are quite customer-focused. So I was surprised to learn that after months of due diligence, the general manager I was speaking to hadn’t quantified the customer equity of the other company. Agribusiness can learn from leading companies such as Shell, Home De­pot, and Nokia, who are becoming deeply involved in quantifying customer loyalty and the economics of word of mouth from their Promoter, Passive, and Detractor segments. We briefly discussed these segments in my last column.

Customers are the most important assets of any company. And while most components of a business are either depreciable or replaceable, the value of loyal customers actually appreciates over time. Loyal customers tend to give you a greater share of their business, are less costly to service, and sometimes will even pay a premium.

Let’s imagine the due diligence process of a company merger from an atypical perspective, assuming all the standard and valuable methods of company evaluation are in place. If you are involved with a merger or beginning to evaluate one, I suggest one additional component be implemented to deepen the analysis. By using Net Promoter customer segmentation at both companies, or at least at the junior partner, you can gain insight into how customer experiences of the company will likely impact your future cash flow.

Customers And Mergers

The above diagram shows that after a Net Promoter Analysis the senior company has found the junior company’s customers are comprised of 48% Promoters, 34% Passives, and 23% De­tractors. Their Net Promoter Score is fairly low at 25%, which is the percent of customers who are Promoters less the percent who are Detractors. We would now want to examine how each of these customer segments are behaving in terms of sales, share of business, loyalty, etc.

Net Promoter segmentation and analysis is a leading indicator of how your business will likely perform in the future. Because Promoters rate you favorably on the experiences that drive customer loyalty, they generate positive word of mouth and are financially attractive in their own right. Detractors are actively disengaged with their supplier based on their experiences and generate negative word of mouth. 

When you examine your customer database following Net Promoter segmentation, patterns in your customer behavior become clear. Questions get answered. Referencing the diagram again, the Promoters of a typical company will spend more, be more loyal, and give their retailer a greater share of business than Passives or Detractors. If I was involved in a company merger I would want to know at least the following about the potential new customers:

•  What is the percent of Promoters, Passives, and Detractors among the customers? You are potentially buying a distressed asset if the company Net Promoter Score is lower than 20%.

•  Has the percent of Detractors been going down or is it increasing? If Detractors are increasing, the company may be been trading off customer equity for short term gain on their books. Remember, Net Promoter is a leading indicator of profitability. 

•  Are the segments equally spread among all customers? Or is there a problem with, say, larger growers at the company?

•  What is the defection rate for each segment? Passives and Detractors will defect at a higher rate than Promoters. You can expect this to continue until a thorough Gap Analysis is conducted among each segment to identify areas where the company’s performance may have impacted loyalty. A repair plan involving all employees who connect with customers will need to be successfully implemented to reverse the damage being caused by Detractors.

•  What are the new customers worth to you? Typically, one Detractor cancels out the good recommendations of more than one Promoter. What is it worth to repair the gaps in service delivery to create more Promoters?

The Benefits Of A Merger

Because agribusiness is one of the few markets where the targeted customer base is not increasing, it makes sense for retailers to consider potential mergers with former competitors to increase efficiency.

Customer experience management is one of the new high-value areas in business today. AgKnowlogy has developed the Customer Experience Monitor to measure how customer experiences impact loyalty and the willingness to recommend your company. As part of the due diligence process, the Customer Experience Monitor can sharpen your analysis during or before a potential merger. Net Promoter analysis can become part of your competitive advantage.                                     

Leave a Reply

Management Stories
ManagementMACA 2014: The State Of The Agricultural Industry, And Then Some
October 9, 2014
The trade association’s annual gathering featured speakers from across agriculture and beyond. Read More
StewardshipA Multi-Layered Approach To Water Quality
October 6, 2014
Illinois event highlights research and technology designed to better monitor and improve water quality — and the benefits of cooperative, coordinated effort. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
ManagementRussia Bans U.S. And EU Ag Product Imports In Ukraine Sanctions Battle
August 7, 2014
Russian President Vladimir Putin has banned the import of agricultural goods from countries that have imposed sanctions on Russia. Read More
Top 100 Articles
CropLife 100The Andersons Acquires South Dakota Plant Nutrient Manufacturer Kay-Flo
May 20, 2015
The Andersons, Inc., ranked No. 22 on the CropLife 100, has purchased Kay Flo Industries of North Sioux City, SD. “This Read More
CropLife 100North Central Farmers Elevator, Wheat Growers Unification Approved By Board, Still Awaits Member Approval
May 13, 2015
The Boards of Directors for North Central Farmers Elevator (NCFE) and Wheat Growers (WG) have voted to approve the Unification Read More
CropLife 100AgGateway’s Barcoding Initiative Progressing Nicely
May 8, 2015
According to legend (or Wikipedia), the first step towards modern bar codes came back in 1948, when Bernard Silver, a Read More
CropLife 100Pinnacle Agriculture Acquires Minnesota Retailer
April 14, 2015
Pinnacle Agriculture Holdings, LLC, ranked No. 6 on the CropLife 100,  has successfully acquired Liebl Ag, LLC in Ada, MN.  Read More
CropLife 100CHS, Aurora Cooperative Complete Fertilizer Storage, Grain Shuttle Loading Facility
April 13, 2015
CHS Inc., the nation’s leading cooperative and ranked No. 5 on the CropLife 100, and Aurora Cooperative (ranked No. 21) Read More
CropLife 100GROWMARK Acquires Missouri Refined Fuels Terminal
April 2, 2015
Bloomington, IL-based GROWMARK and Magellan Pipeline Co. have entered into an agreement in which GROWMARK will acquire the refined fuels Read More
Latest News
Waterhemp in soybean stubble
HerbicidesEPA Signs Off On Monsanto’s Warrant Ultra Premix
May 27, 2015
Soybean and cotton growers looking for new tools to manage weeds will have a new, first-of-its-kind option in 2016 with Read More
Palmer pigweed seedhead in cotton
HerbicidesSTUDY: Weed Diversity Primarily Influenced By Geography
May 27, 2015
The potential long-term impacts of glyphosate-resistant crops on biodiversity of the agricultural landscape have been the subject of controversy. A Read More
Seed/BiotechAgrilead Forms Distribution Alliance With Kansas-Based …
May 27, 2015
Agrilead, Inc. announces the formation of a strategic alliance with KALO, Inc. of Overland Park, KS. Through the alliance, KALO Read More
EquipmentPrecision Tank Announces A&B Welding Acquisition
May 27, 2015
Precision Tank, a specialized tank and equipment manufacturer, announced today the acquisition of A&B Welding of Thompson, IA, a manufacturer Read More
Allied Cooperative Grain Plant
ManagementTraining Program Gives First Responders Skills For Grai…
May 27, 2015
When stored grain forms hard bridges, columns and other irregularities, those working to correct it find themselves at risk of Read More
Industry NewsBASF Sponsors Space Farming Research Project
May 26, 2015
Is it possible to produce large quantities of high quality vegetables on a space station, about 320 kilometers away from Read More
FertilizerTexas Ammonium Nitrate Bill Passes Senate, Heads To Gov…
May 26, 2015
The Texas State Senate gave final approval last Thursday to new regulations for ammonium nitrate, reports The Dallas Morning News Read More
Young corn plants
Industry NewsArysta Europe Details New Organizational Structure
May 26, 2015
Arysta LifeScience Europe recently announced a new organizational structure to leverage its scale and accelerate the company’s growth in this Read More
Syngenta Sign
Eric SfiligojMonsanto-Syngenta Could Hinge On A Judgment Of Solomon …
May 26, 2015
In the bible, the reputation of King Solomon’s wisdom in matters of despite comes from a tale of one child Read More
ManagementA New Sprayer Company & UAV Research In The Spotlig…
May 21, 2015
CropLife’s Paul Schrimpf and Eric Sfiligoj talk about a Dutch sprayer manufacturer entering the U.S. with a super-sized entry and Read More
HerbicidesFirst U.S. Sale Of Enlist Duo Herbicide Made By Dow Agr…
May 21, 2015
Dow AgroSciences has recorded the first U.S. sale of Enlist Duo herbicide with Colex-D Technology. This marks the first commercial Read More
CropLife 100The Andersons Acquires South Dakota Plant Nutrient Manu…
May 20, 2015
The Andersons, Inc., ranked No. 22 on the CropLife 100, has purchased Kay Flo Industries of North Sioux City, SD. “This Read More
EquipmentNORAC Options Coming To TerraGator
May 19, 2015
Utilizing NORAC’s Standard Control technology, boom height control is now available for TerraGators with Airmax Precision 2 and Benson Booms. This Read More
Crop InputsHelena Introduces New Soil Health Product
May 19, 2015
Helena Chemical Co. is helping agricultural producers maximize yields and efficiency with the introduction of Liquid Chisel, a new product Read More
Stewardship4R Nutrient Management Planning Certification Now Avail…
May 19, 2015
The American Society of Agronomy (ASA) and the International Certified Crop Adviser (ICCA) program announce a new specialty certification in Read More
Environmental Defense Fund logo
Paul SchrimpfEnvironmental Defense Fund: Appreciating Partners
May 19, 2015
I WAS deep in the throes of preparation for the Commodity Classic meeting that took place this past February, trying Read More
WebinarsUpcoming Webinars
May 19, 2015
Register for one of our upcoming Webinars or access our archive of past Webinars to view recordings of presentations that may be of interest to you. Read More
Syngenta Sign
Seed/BiotechSyngenta Responds To Lawyer’s Victory Claim In Vi…
May 18, 2015
A plaintiff’s lawyer has issued a public statement claiming that damages have been awarded in the Agrisure Viptera corn lawsuits Read More