Calculating The Value

Studies across many industries have shown that approximately 80% of customers who defect are actually satisfied. Over the past few months, I have introduced the idea of customer experience being the best predictor of future customer purchases. I believe this is increasingly true for ag retailers.

Consider the situation. Although the industry is highly technical, and agronomic knowledge or grain marketing moxie is vital, this knowledge is widely shared among competitors. In fact, the whole agribusiness industry is a perfect example of a tide of increasing competence lifting all boats. How do retailers create a long-term differentiated advantage in this situation? I believe the only sustainable approach is to deliver customer experiences that are perceived by customers to be superior to what your competitors offer.

As customers interact with a company they segment themselves into Promoters, Passives, and Detractors based on how effectively they believe the retailer has delivered a quality experience. Promoters are actively engaged with your company, and are highly willing to recommend you. Passives are not engaged, and will only give you a weak recommendation. Detractors are actively not engaged with your company and based on their perceptions and experiences would never recommend you. They are a toxin that destroys your profitability.

Most of the real value in a retail operation is created through word of mouth economics. Growth comes when the positive word of mouth from Promoters exceeds the  negative word of mouth from Detractors. Passives aren’t talking about you, which, of course, is another problem. In this column, we’ll compare top line sales behaviors of each customer segment which will get us ready to look at word-of-mouth economics next month.

Crunching The Numbers

Here are some recent numbers my company, AgKnow­logy, has found through our Customer Experience Monitor with a leading retailer. The pie chart shows the breakdown of Promoters, Passives, and Detractors within their business. Their current Net Promoter Score is 33%, based on subtracting the percent of Detractors from Promoters. Just as various medical diagnostics measure the health of a patient, a companies Net Promoter Score (NPS) is an excellent leading indicator of the health of the business based on future customer loyalty. An NPS of 33% leaves room for considerable improvement.

I am often asked what a company should do first regarding its customer segments. We’ll return to this in more detail, but my best advice is to “stop the bleeding.” What is causing customers and prospects to form Detractor perceptions of your company? Guessing at this will not be helpful, as the reasons are typically not immediately apparent. However, the effort required should not delay identifying areas of detraction and focusing on them in order to create some quick operational wins. Over time, however, you will need to strategically move from repairing customer experiences to focusing on creating more Promoters. This is the only way of achieving long-term success. Let’s look at some numbers that support why this is. The bar chart shows key differences in sales for the above retailer this year for his Promoters, Passives, and Detractors. We found Promoters purchased more than 4.5 times as much as Detractors, and almost two times the value of Passives. Farm size was not a factor.

The numbers stare at you, don’t they? I can’t convince myself it is not mission critical to increase the numbers of Promoters and reduce the Detractors for a business. In fact, there are four behaviors that clearly identify the benefits of Promoters in your business.

  1. They repurchase at a higher rate.
  2. Promoters are your most loyal segment.
  3. They are fairly immune to competitive attack.
  4. Promoters tend to purchase across your product categories.

AgKnowlogy has repeatedly shown that category penetration is itself linked to customer loyalty. As a cautionary note, most retailers have a long way to go in this area, particularly when it comes to seed. Promoters tend to be most active in referring you to other prospective customers. They create extensive positive word of mouth that is vital to your business. On the other hand, your sales or marketing efforts can fall on the deaf ears of prospects who have heard about the problems of your Detractors.

Finally, Promoters will offer you constructive feedback that is useful in improving your business. 

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

Trending Articles

HerbicidesAdjusting To The New Reality Of Weed Control
November 4, 2014
Even with new cropping systems being readied for market introductions, weed control will remain a challenge for many. Read More
StewardshipResponsibleAg Begins Auditor Training
October 31, 2014
ResponsibleAg auditor training is now underway at the Ford B. West Center for Responsible Agriculture in Owensboro, KY. Read More
InsecticidesNew Research Study Shows The Value Of Neonics
October 29, 2014
The study evaluated seed treatment, soil and foliar uses of neonicotinoid insecticides in the U.S. and Canada. Read More
Crop InputsPlatform Specialty Products To Acquire Arysta LifeScience
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechMonsanto Offers New Support For Ferguson, Area Communities
October 8, 2014
Monsanto Co. has committed $1 million in new support for several collaborative efforts in Ferguson, MO, and surrounding communities in North St. Louis County. Read More
Seed/BiotechUnapproved Genetically Modified Wheat Found In Montana
October 3, 2014
USDA reports that one year after discovery of Monsanto's unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has again been found in Montana. Read More

Latest News

soybean field
Crop InputsABM Patents Microbial R&D Technique
November 25, 2014
Focused Microbial Diversity (FMD) is a newly patented technique employed by Advanced Biological Marketing (ABM) to research and develop microbials that will be used in ABM products Read More
Crop InputsStorage Options Help Grain Growers Go To Market
November 24, 2014
While on-farm storage in a traditional upright storage bin is one possibility for storing grain, it may not be for everyone. Read More
Eric SfiligojGiving Thanks For Another Great Year
November 24, 2014
As Thanksgiving Day 2014 arrives, agriculture has plenty to be thankful for. Read More
Crop InputsSyngenta Cost-Cutting Program To Affect 1,800 Jobs
November 24, 2014
The company's Accelerating Operational Leverage program will result in job reductions and relocations totaling around 1,800 across the company, the majority of which will occur in 2015. Read More
EquipmentAGCO Announces Operator Of The Year Finalists
November 20, 2014
Four custom applicators have been selected by AGCO Application Equipment as finalists for 2014 Operator of the Year, an honor that recognizes them as being among the top professionals in their industry throughout North America. Read More
MicronutrientsH.J. Baker Expands Tiger-Sul Business
November 20, 2014
H.J. Baker has created and filled two strategic positions in business development and sales within its Crop Performance Division. Read More
soybean field
FertilizerGeneral Mills Honors United Suppliers For Nitrogen Opti…
November 19, 2014
United Suppliers winning proposal detailed SUSTAIN, a consulting network that provides customized products and services for farmers using a needs-based system approach. Read More
EmployeesOhio AgriBusiness Association Awards $25,000 In Scholar…
November 19, 2014
Each year, the Ohio AgriBusiness Association Educational Trust scholarship program awards scholarship dollars to students enrolled in an agriculture-related field attending several state colleges. Read More
ManagementServi-Tech Names New CEO
November 17, 2014
Servi-Tech has named Greg Ruehle its new president and CEO. Read More
CropLife 100Pinnacle Ag Acquires Colorado Aerial Application Outlet
November 17, 2014
Ft. Lupton, CO-based Reck Aviation — a full-service chemical application company providing aerial crop applications of fertilizers and crop protection products — will operate as part of Pinnacle's AgOne Application Services brand. Read More
Eric SfiligojMcDonald’s Message: Biotech Crops Scarier Than Cancer
November 17, 2014
Despite their potential health benefits, one of the world’s largest potato users will pass on a new biotech offering. Read More
MicronutrientsWinField Releases 2014 NutriSolutions Results
November 14, 2014
A number of significant regional and national crop deficiency trends emerged from the 2014 WinField NutriSolutions tissue sampling program. Read More
FertilizerH.J. Baker Opens Chinese Production Lines
November 14, 2014
The occasion was the official launch of the Tiger-Sul sulphur Bentonite production line of two much anticipated fertilizer products in China, T90CR sulphur fertilizer and TZinc micronutrient enhanced sulphur fertilizer. Read More
ManagementOhio Certified Crop Adviser Program Accepting Nominatio…
November 14, 2014
The award recognizes an individual who delivers exceptional customer service for farmer clients in nutrient management, soil and water management, integrated pest management and crop production in Ohio. Read More
HerbicidesSyngenta Announces Acuron Trial Plot Results
November 14, 2014
Acuron was tested at 167 trial locations across 35 states. Trials included 95 Syngenta locations, 54 university locations and 18 distributor locations. Read More
Crop InputsVerdesian Expands Sales Force
November 13, 2014
The new sales representatives will work with growers, retail partners and distributors to oversee technical training and product education. Read More
EquipmentAGCO Raises $100K For Wounded Warrior Project
November 13, 2014
AGCO Corp. partnered with local AGCO dealers across the U.S. and Canada to raise nearly $100,000 in support of wounded service veterans. Read More
HerbicidesDow AgroSciences Announces Launch Of Enlist Duo Herbici…
November 12, 2014
It will be launched in conjunction with a stewarded introduction of Enlist corn, and seed production of Enlist soybeans in 2015. Read More