 Where have all the
margins gone? A question posed numerous times in
today's U.S. marketplace, especially in the seed business.
Developers, producers, processors, wholesalers, and
retailers are asking this pertinent, penetrating question.
Two commonly heard,
frustrated, pointblank statements are: “What we are
being asked to live on is getting less and less” and “I
can't continue business with these current low margins”.
The low margin scene prompts the question: “Is there a
remedy?”
Historically a newly
introduced proprietary variety gave some margin breathing
room, even if temporary. In the corn and soybean seed
markets farmers are now mostly oriented towards purchasing
traits, not genetics, somewhat eroding the real germplasm
value. However, quality genetics can still drive increased
market share and margins.
Experience shows that
plant technology traits are critical for one's product
lineup, but don't necessarily enhance margin. The
technology trait values are very competitive and that can
limit margins. Most of the broadly used plant
technology traits will not afford significant margin
enhancement.
One excellent way to
improve margins is to differentiate your business.
Companies that are deft at brand marketing are keeping or
improving their margins. A very successfull major
regional seed company reported that 2004 spring soybean seed
sales greatly exceeded expectations, and sales of targeted
higher margin varieties were up significantly. Both were
accomplished despite an aggressive pricing strategy.
Improving margins is being successfully done.
Most farmer surveys show
farmers place value on the very best of year round services,
appropriate genetics and plant traits and for that, will pay a
fair price. It becomes incumbent on a seed company to
positively respond to the purchasing demands of today's business
oriented farmer.
Farmers often indicate seed
sales people are only interested in selling the seed companies
latest and hottest variety that won the local yield contest.
Farmers are more responsive when the seed sales person shows
significant and honest interest in their farming business.
Asking good questions, learning about their production issues
and needs and clearly explaining how the seed company products
can help improve their field production efficiencies or
marketplace strategies will improve opportunities to increase
margins.
It is said that it is the
small things teams do that makes them winners. The best
coaches are in premium demand. The best seed company
managers, marketers, and sales staffs are also in premium demand
because they work on the small things, that makes successful
companies. In today's low margin climate, many seed
companies are just trying to do the basics. However, doing
some small things well has proven successful for many companies.
Consider what some of the companies have done to significantly
increase their sales, and more importantly, margins
-
Establish year around
customer relationships
Good farmers don't want to be “bugged”, but they sure want
to feel informed.
-
Train, train, train
and train some more
Not what many companies do well but crucial for improving
margins. One independent company indicated they stepped out
of their norm and adopted an aggressive sales rep and dealer
training program. Their training takes place often, monthly
or bi-monthly depending on the season. Yes, taking people
“off the road” is paying dividends for this company.
Increased sales and margins are the results.
-
Sort out farmer's
production and marketing needs
Screening potential farmer client website, being an
investigative sales person and understanding client's
marketplace are some small ways that will be effective.
A high yielding variety not compatible with the farmer's
market strategy will not get the business you want.
-
Know your product
Seed sales people needing to read the company seed catalog
to answer client questions or to properly place a variety
isn't in the sales or margin improvement business. Is
one a seed salesperson or a seed order taker person? Farmers
want the seed company to be the seed expert. This is a small
thing but, in many instances, is the difference between a
sale and not a sale, especially if ones price is a little
higher. It is said that that the best coaches know exactly
how to get the most out of a player by knowing when and
where to play him. The same goes for genetics and plant
traits. Knowing ones product seems simple enough but knowing
where and when to place it to improve the farmer's financial
return is a real key to sales and margin improvement.
-
Manage inventory well
Excessive production always leads to “dumping” which leads
to lower margins. Maybe selling a little less totally but
focusing on the right products with more margins will, at
the end of the year, prove more beneficial. This has
been a successful margin increasing method for several
companies.
There are many things one can
do to help improve margin. Most may take a new way of
thinking, changing the pattern, being creative, taking some
ingenuity risks and just being different. This seed
industry is a wonderful industry with outstanding people.
Both the seed industry coaches and players will achieve because
we are good enough to make the right play at the right time.
It's time to go on the
offense. |
