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
Top 100 Articles
CropLife 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer Warehouse
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
CropLife 100Wilbur-Ellis Move To Colorado Complete
January 20, 2015
Wilbur-Ellis Co. announces the opening of its new Agribusiness Division location in the Denver, CO, Metro Area. The new facility will host key personnel as the company shifts the base of its Agribusiness operations from California to Colorado. Read More
CropLife 100United Suppliers, McGregor Co., Five Others To Form Aligned Ag Distributors
January 20, 2015
These companies will continue to operate as independently owned and operated businesses, however, their crop protection divisions will now be formally aligned under the umbrella of Aligned Ag Distributors. Read More
CropLife 100Bozeman Named SEEDWAY Chief Operating Officer
January 16, 2015
He succeeds Donald Wertman, who will retire at the end of August 2015 after 40 years with the GROWMARK subsidiary. Read More
CropLife 100Wilbur-Ellis’ Craig Bair Honored For Safety Contributions To Ag Aviation
January 14, 2015
The William O. Marsh Safety Award recognizes significant achievements in safety, safety education or an outstanding operational safety program. Read More
Latest News
CropLife 100The Andersons Starts Venture Capital Subsidiary
January 26, 2015
The Andersons has established Maumee Ventures, a venture capital subsidiary designed to foster promising innovations that strategically align with the company’s core businesses. Read More
Exclusive state-of-the art Stueve Construction designed “Vista View” Elevated Control Room.
Eric Sfiligoj2015 Agricultural Market Read: Mixed
January 26, 2015
The agricultural market could look radically different this year, profit-wise, depending upon which segment you do business in. Read More
Edward Chell Biosafe
Crop InputsBioSafe Systems Names Ed Chell California Territory Man…
January 26, 2015
BioSafe Systems has announced the recent addition of Ed Chell as California Territory Manager for the agrichemical division, supporting the crop protection, water treatment and food safety business segments. Read More
InsecticidesBayer CropScience Introduces Sivanto Insecticide
January 26, 2015
Sivanto precisely targets key damaging pests at multiple insect life stages to prevent damage to plants and help minimize the spread of diseases from insect carriers. Read More
ManagementRetail Collaboration, Communicating Agriculture’s Good …
January 23, 2015
Editors Paul Schrimpf and Eric Sfiligoj discuss the recent creation of Aligned Ag Distributors, and the US Farmers and Ranchers Read More
FertilizerOSU Expert: Toledo Water Crisis A Turning Point For Ohi…
January 23, 2015
The August 2014 water crisis in Toledo, OH, impacted Ohioans’ views of Lake Erie algae problems by increasing the attribution of blame of algae growth on agriculture. Read More
FertilizerH.J. Baker Launching TIGER XP
January 22, 2015
Tiger-Sul introduces this next generation sulphur-bentonite product with a proprietary activator – ensuring farmers have a well-balanced nutrient replacement program. Read More
Crop InputsH.J. Baker Expands China Sales Force
January 21, 2015
Global Agricultural firm H.J. Baker announced that sales veteran Shi Dongshen has joined their Shanghai office in China. This newest hire follows the recent opening of their Lianyungang Sulphur Bentonite Plant. Read More
CropLife 100CHS Partners With Northern Partners Coop On Fertilizer …
January 21, 2015
In addition, the two companies will form a joint venture to build and operate a grain barge loading facility that will handle corn, soybeans and wheat for export through the CHS terminal at Myrtle Grove, LA. Read More
Matt Hopkins5 Bold Predictions For Ag Retail In 2015
January 21, 2015
This past year was filled with ups and downs for the nation’s top ag retailers, but what will 2015 have in store? Read More
SoftwareDeere Launches App Center
January 20, 2015
The John Deere App Center provides users the ability to search and find apps most useful to their business or operations. Read More
Crop InputsNew Syngenta Herbicide Approved In Soybeans, Sunflowers
January 20, 2015
Syngenta will sell BroadAxe XC herbicide in 2015 for use on soybeans, sunflowers and dry peas Read More
CropLife 100Wilbur-Ellis Move To Colorado Complete
January 20, 2015
Wilbur-Ellis Co. announces the opening of its new Agribusiness Division location in the Denver, CO, Metro Area. The new facility will host key personnel as the company shifts the base of its Agribusiness operations from California to Colorado. Read More
Crop InputsNovozymes Sales Figures Up For 2014
January 20, 2015
Novozymes announces its sales growth in 2014 was in line with expectations as sales grew by 7% compared with 2013. Read More
CropLife 100United Suppliers, McGregor Co., Five Others To Form Ali…
January 20, 2015
These companies will continue to operate as independently owned and operated businesses, however, their crop protection divisions will now be formally aligned under the umbrella of Aligned Ag Distributors. Read More
Eric SfiligojGMO Or DNA? LOL Or WTF?
January 19, 2015
A new survey finds the American public seems generally confused when it comes to any three-letter descriptor for their food. Read More
FertilizerAGROTAIN Wins No-Till Product Of The Year Again
January 19, 2015
This marks the 10th straight year AGROTAIN nitrogen stabilizer has been named the top product in this category; no other product has matched this honor Read More
FertilizerTFI President To Give Update On Nutrient Management Eff…
January 19, 2015
The Fertilizer Institute President Chris Jahn will give the keynote address at the 2015 Ohio AgriBusiness Association Industry Conference February 4. Read More