Seed Money

In my September column, I discussed data from AgKnowlogy’s Customer Ex­perience Monitor showing full-service retailers often have a lower Net Promoter Score (NPS) for seed vs. farmer-dealer seed specialists. While a full-service retailer might have a NPS in the 25% to 35% range, a Pioneer or DeKalb seed specialist could often have an NPS in the range 55% to 70%.

Retailers ask us what is a good NPS. Each industry is different based on customer expectations and the performance of companies in the sector. For companies in the banking and cell phone businesses, low scores are common. To date, we are not seeing the high scores in ag retailing that retailers assume. There is much work to be done. This column discusses some of the financial impact of Passives and Detractors on your seed business.

Setting The Table

In our work with retailers to uncover their local drivers of loyalty, the concept of “consideration set” is useful. Imagine its time to replace your family car. What manufacturer is your first choice and who else would you consider? Is there a maker you would not consider based on your past experience or comments you have heard from friends? Growers also have a first and second choice of retailer for their crop inputs. Whether you are in the Primary or Secondary position in their Consideration Set has serious consequences related to loyalty and profitability.

The graph compares the total share of business a retailer has received from customers with his Net Promoter Score by category. The highest share of business is in fertilizer (86%) from customers who consider the retailer to be their Primary supplier for this category. Notice the total share of business drops to 49% in fertilizer for customers who consider the retailer to be their Secondary supplier.

In every category, the retailer receives less share of business from growers who don’t consider him to be their Primary retailer. Some readers believe the sales split in a category between Primary customers and Secondary customers is driven by distance from the plant or other easily understandable factors. While these play a part, we believe share of business (for example, the split between Primary and Secondary) is mostly driven by the experiences customers have with you and conversations with other growers.

The retailer’s Net Promoter Score is highest for fertilizer at 29%. The share of business in each category clearly follows the Net Promoter Score. Looking at seed, we see the retailer’s share of business is only 41% among customers who consider him to be their Primary seed supplier, and only 23% among customers who consider him to be their Secondary supplier. This low share of business is a result of the retailer’s low NPS of 15% for seed. A Net Promoter Score is calculated by taking the percent of Promoters for a business minus the percent of De­trac­tors. Customers and prospects in the Passive segment are not included in the calculation of an NPS. In our example, an NPS of 15% means there are not that many more Promoters vs. Detractors. To demonstrate how large the financial impact is from Passives and Detractors, I will use our findings in seed from the same retailer.

I have shown how the spending lag caused by reduced share of business in the seed category is leaving significant revenue on the table for the retailer in question. The retailer’s Net Promoter Score in seed is 15% (percent of Promoters minus Detractors). The average acres for each customer segment is shown, which allows us to estimate the total acres for each customer segment. Passives on average spend $16 less per acre on seed with the retailer as a consequence of their reduced share of business.

Detractors on average spend $21 less per acre on seed with the retailer. The estimated impact for Passives and Detractors is calculated by multiplying the spending lag times the acres from these customers. The total estimated impact in seed alone from Passives and Detractors is approximately $1.5 million from the 177 customers we studied.

A Big Impact

Across all the retailer’s customers, this financial impact would be much larger. Clearly, this potential upside won’t be captured in one year. Perhaps a reasonable target would be 50% of the upside over two years. Remember — this will drop directly to your bottom line because this increase in share of business is with current customers.

I am attempting to give you a sense of real-life impact and urgency for measuring customer experiences and quantifying their impact. Full-service retailers are struggling to grow their business against local farmer-dealer seed specialists. Based on our work using the Customer Experience Monitor, it appears the local seed specialist offers his customers a superior experience vs. the full-service retailer. Compared to a farmer-seed specialist, a full-service retailer appears to have more Passives and Detractors among his customers.

I say this because so far, full-service retailers have lower Net Promoter Scores for seed than their seed specialist competitors. To break through this glass ceiling, full-service retailers will have to pay more attention to what seed experiences drive loyalty and share of business. They then must put this learning into their strategic planning and assign a manager to be accountable for it. Finally, the resulting refinements to service delivery must be monitored on an ongoing basis if there is to be any hope for the improvement required to catch competitors.

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 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
CropLife 100BRANDT, Verdesian Ink Distribution Agreement
December 9, 2014
The agreement grants BRANDT the exclusive right to sell and market Verdesian’s patented Steric chemistry in the Turf and Ornamental and eastern U.S. ag markets under the BRANDT Reaction product line name. Read More
CropLife 100CropLife 100: The Colors Of Custom Application
December 5, 2014
Although many color spray rigs are in the yards of the nation’s top ag retailers, the majority of them still come in only a few shades. Read More
CropLife 100Pinnacle Invests In Meridian Agriculture Distribution
December 4, 2014
Meridian will provide retailers with supplier-branded products and numerous opportunities to differentiate themselves from their competitors. Read More
CropLife 100CropLife 100: Entering A New Seed Era
December 4, 2014
The seed category has been re-vitalized during the past few years, and more good news (and varieties) are headed the industry’s way in 2015. Read More
CropLife 100CropLife 100: The Depressed State Of Fertilizer
December 3, 2014
Following downright giddy growth earlier this decade, fertilizer sales have fallen back down to earth the past two years. Read More

Latest News

Seed/BiotechKaren Arthur Joins AgriThority As Seed Treatment Produc…
December 19, 2014
Prior to joining AgriThority, Arthur directed research and development programs, overseeing laboratory and field research, to build the Valent U.S.A. seed treatment portfolio. Read More
EquipmentJohn Deere To Sell Crop Insurance Business
December 19, 2014
Deere & Co. has reached a definitive agreement to sell its crop insurance business, subject to regulatory approval, to Farmers Mutual Hail Insurance Co. of Iowa. Read More
Crop InputsNufarm Fills Regulatory VP Position
December 18, 2014
Nufarm announced today that Rob Schwehr has been promoted to the position of Vice President of Innovation & Regulatory Affairs for Nufarm Americas. Read More
Seed/BiotechReport: China Approves Viptera Corn, U.S. Officials Awa…
December 17, 2014
Chinese authorities have informed some agriculture industry officials the government has approved U.S. imports of a type of genetically modified corn developed by Syngenta. Read More
FertilizerMonty’s Plant Food Brings In New Sales Rep
December 16, 2014
Monty's Plant Food Company has hired Warren Kearns as its newest Sales Representative for the South Carolina area. Read More
EquipmentHagie Wins 2014 CropLife IRON Product Of The Year Award
December 15, 2014
The self-propelled sprayer maker has a hit on its hands with the new STS Series model. Read More
Syngenta
Seed/BiotechSyngenta Sees China Approving Contentious GMO Corn Soon
December 15, 2014
Syngenta will make an announcement when it receives official documentation from China that Agrisure Viptera corn, known as MIR 162, has been cleared for import. Read More
Crop InputsVerdesian Life Sciences Names Vice President Of Communi…
December 15, 2014
Amy Bugg will oversee the execution of all promotional strategies for the corporate brand and the complete product portfolio. Read More
StewardshipFarmers, Retailers Attend 4R Certification 4U Workshop
December 15, 2014
More than 160 farmers and ag retailer attended the “4R Certification 4U” workshop December 12 to learn more about the 4Rs of nutrient stewardship, water quality research in the area and cost-sharing opportunities. Read More
Matt Hopkins10 Best New Agriculture Apps For 2015
December 15, 2014
These new agriculture apps are certain to help ag professionals do their jobs more efficiently in 2015 and beyond. Read More
ManagementARA Learnings, Retail Buying Intentions: Welcome To Cro…
December 12, 2014
This informal video program puts news and events effecting retailers into context, and features Editors Paul Schrimpf and Eric Sfiligoj. Read More
Seed/BiotechMonsanto Herbicide-Tolerant Technology Closer To Commer…
December 12, 2014
The final EIS moves Monsanto one step closer to the introduction of Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybeans, paving the way to provide access to dicamba-tolerant soybeans and cotton. Read More
Seed/BiotechUSDA Issues Final Environmental Impact Statement On Her…
December 12, 2014
The USDA Animal and Plant Health Inspection Service (APHIS) is issuing a final environmental impact statement on varieties of cotton and soybeans that have been genetically engineered for resistance to several herbicides, including the one known as dicamba. Read More
CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
LegislationARA Applauds CFATS Passage Prior To Holiday Adjournment
December 11, 2014
The streamlined bill provides a four-year authorization of the CFATS program and guidance to DHS on key issues of chemical facility security Read More
Seed/BiotechBayer CropScience’s ILeVO Approved By EPA
December 11, 2014
EPA has approved ILeVO, the only seed treatment that protects the root system against infections caused by the Sudden Death Syndrome fungus and has activity against dangerous nematodes. Read More
Biologicals in Emerging Markets Map.
Crop InputsBiocontrols Could Quadruple By 2025; Will Regulators Pl…
December 11, 2014
The European experience with GMOs offers caution — and a promise — for biologicals. Read More
Crop InputsBASF Donates $75,000 To Feeding America
December 10, 2014
The donation will support Feeding America’s National Produce Program, an initiative that helps with planning, transportation and logistics to ensure fresh produce deliveries to the 200 member food banks around the country. Read More