A trip to the corner farm supply store still works for some, but more farmers are basing their seed, fertilizer and pesticide product purchases on factors other than convenience, a Purdue University study reveals.
Purdue's Center for Food and Agricultural Business conducted the study, which compared data from farmer surveys in 1998 and 2003. About 2,100 farmers nationwide with annual sales of at least $100,000 participated in the 2003 survey.
The study found that farmers place greater importance on price, product performance and customer service than on ease of purchase when making agricultural input buying decisions. The study identified five distinct ag input market segments, or buyer types. Previous market research identified only three.
The five buyer groups the study identified include price, performance, convenience, service and balance, says report author and Purdue agricultural economist Christine Wilson. Traditional ag input market segments include business, or value-oriented, buyers; economic buyers, who focus on low cost; and relationship buyers - those farmers who purchase from the same dealer year after year.
"Among the five buyer groups that we found, the price group places the most importance on cost," Wilson says. "The performance group is most interested in product performance. The convenience buyers prefer to purchase locally. Service buyers are very relationship-oriented. And those farmers in the balance group tend to place equal emphasis on the other four factors."
Most farmers in both the 1998 and 2003 surveys placed themselves in the balance group, at 34.5% and 34.2%, respectively. The price group was next highest at 18.5% in 2003, up 1.5% from 1998. Service buyers were the third largest group in 2003 at 17.3% (up 0.5%), followed by performance buyers at 16.3% (up 1.5%) and convenience buyers at 13.8%.
"The convenience group is declining rapidly," explains Purdue agricultural economist Corinne Alexander. "In 1998 that group made up 16.8% of our sample. The 3% that was lost by 2003 was about evenly split among the other four groups."
Demographics are behind the decrease of convenience buyers and the rise of service buyers, Alexander says. "The convenience group tends to be the group of producers that is the oldest, they are nearing retirement and they aren't concerned about growing their farming operations," she says. "The service group tends to be much younger farmers who are very ambitious and who want to grow their operations. So the traditional relationship buyer isn't disappearing, it's just changing dramatically from a convenience buyer to a service buyer."
The Purdue survey also found that some input buyer groups are more brand loyal than others and that interest in e-commerce is varied. "A price buyer is not generally very brand loyal but a service buyer is generally very brand loyal," Wilson says. "Many ag input dealers may carry multiple brands or they may only carry one brand but there are certainly marketing implications either way.
"Another interesting component that relates to the demographics is the use of computers. Price buyers are going to use computers quite a bit. They are technologically capable, they are looking for a better price and they are on the Internet. Service buyers are not using the computer to the extent that price buyers do, so if an ag input dealer is focused on price buyers they definitely want to have an Internet presence."
The 2003 survey also found that:
- Forty-six percent of price buyers are college graduates - the highest percentage among the five groups. Only 31% of service buyers hold a college degree - the only group under 40%.
- Balance group buyers are most likely (44%) and convenience group buyers least likely (38%) to utilize the services of independent crop consultants.
- Between 88% and 91% of farmers in every buyer group indicated they hire someone to handle fieldwork or other on-farm jobs, commonly known as custom services.