Channel Challenges: Redefining Roles and Structure

1
Channel ChallengesRedefining Roles and
Structure?

• Dr. Maria Marshall
• Dr. Jay Akridge

2
Channel Challenges Redefining Roles and
Structure?

• Our focus
• Will be on the dealer level of the channel
• What does the Commercial Producer Project tell
  us about
• Current position of dealers
• Role of services and information
• Future opportunities/challenges

3
Channel Challenges Redefining Roles and
Structure?

• Current Position of Dealers

4
Dealer Influence on Purchase Decisions

• How important are dealers as influencers of
  input decisions?
• How do commercial producers view dealers as
  sources of information?
• How have these attitudes translated into
• Loyalty to dealers
• Value of dealers

5
Influence Outside the Farm on Purchases of
Expendable Items (by size)
Significantly different at p 6
Influence Outside the Farm on Purchases of
Expendable Items (by use of consultants)
Based on consultants specified in 2003
questionnaire
Significantly different at p 7
Influence Outside the Farm on Purchases of
Capital Items (by loyalty to capital brands)
Significantly different at p 8
Influence Outside the Farm on Purchases of
Expendable Items (by year)
Significantly different at p 9
Influence of Dealers on Input Decisions

• In general, commercial producers rate dealers
  the most important off-farm influencer of input
  decisions
• Larger the producer, the less important
• More important to crop producers, relative to
  livestock producers
• Less important to those hiring consultants
• More important to brand loyal producers
• Relative position little changed since 1998

10
Usefulness of Information Sources(by size)
Livestock only
All significantly different at p 11
Usefulness of Information Sources(by use of
consultants)
Livestock only
Significantly different at p 12
Usefulness of Information Sources(by year)
Significantly different at p 13
Usefulness of Dealer Information

• In general, commercial producers rate
  dealers/dealer personnel their highest quality
  off-farm (personal) source of information
• Producers who use consultants rate all sources
  of information higher
• Rating of dealers very stable over time

14
I consider myself loyal to my primary local
suppliers of expendable items (by size)
Significantly different at p 15
I consider myself loyal to my primary local
suppliers of expendable items (by expendable
brand loyal)
Significantly different at p 16
I am willing to pay slightly more to buy my
inputs from locally owned suppliers (by size)
Significantly different at p 17
I am willing to pay slightly more to buy my
inputs from locally owned suppliers (by local
expendable supplier loyalty)
Significantly different at p 18
Dealer Loyalty and Value

• There is a group of commercial producers who
• Consider themselves loyal to their local
  supplier
• The larger the producer, the lower the
  self- reported loyalty
• Dealer loyalty related to brand loyalty
• Are willing to pay more for locally owned
  suppliers
• Larger the producer, less likely to agree
• Younger producers less likely to agree than older
  producers
• Strong link to loyalty to local supplier

19
Channel Challenges Redefining Roles and
Structure?

• Providing Services and Information

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Providing Services and Information

• How much difference do commercial producers see
  in the quality of services dealers provide?
• How is the use of custom services by commercial
  producers changing?
• How much difference do commercial producers see
  in the quality of information dealers provide?

21
There are often significant differences in the
quality of services from one local supplier to
another (by size)
Significantly different at p 22
Custom Hired Fertilizer Application (by size)
Crops only
Not significantly different at p 23
Custom Hired Pesticide Application by Commercial
Crop Producers (by year)
Significantly different at p 24
Custom Hired Livestock Waste Handling (by size)
Livestock only
Significantly different at p 25
Providing Services

• Commercial producers see important differences
  in the quality of services provided across local
  suppliers
• Larger producers most discriminating
• Custom services important to all sizes of
  producers
• Custom fertilizer application trends stable,
  some reduction in custom pesticide application

26
There often are significant differences in the
quality of information from one local supplier to
another (by size)
Significantly different at p 27
I often know more about many input products than
my local suppliers (by size)
Significantly different at p 28
I often know more about many input products than
my local suppliers (by year)
Significantly different at p 29
Providing Information

• Commercial producers see differences among local
  suppliers in quality of information
• Larger producers most discriminating
• Larger producers tend to believe they know more
  than local suppliers
• Trend towards stronger feeling on this issue

30
Channel Challenges Redefining Roles and
Structure?

• Future Opportunities and Challenges

31
Future Opportunities and Challenges

• How much time is invested in input purchase
  decisions?
• How do commercial producers view single source
  supply strategies?
• How does Internet use affect attitudes toward
  dealers?
• Do commercial producers want a more direct
  relationship with manufacturers?

32
I am spending more time evaluating new technology
for use in my farming operation than I did five
years ago (by size)
Significantly different at p 33
Opinions About Time Investment and the Buying
Process (by year)
Significantly different at p 34
I prefer to buy most of the expendable items I
need from one supplier (by size)
Significantly different at p 35
Usefulness of Information Sources (by Internet
use)
All significantly different at p 36
I am willing to pay slightly more to buy my
inputs from locally owned suppliers (by Internet
use)
Significantly different at p 37
In the next five years, I want a more direct
relationship with manufacturers of expendable
items (by size)
Significantly different at p 38
In the next five years, I want a more direct
relationship with manufacturers of expendable
items (by planned growth)
Significantly different at p 39
Opportunities and Challenges

• Time invested in input decisions represents an
  on-going opportunity
• Larger producers less likely to pursue
  single-source supply strategies, BUT
• Rewards to generating loyalty apparent
• Internet users value information, BUT
• Find dealers less important
• Larger producers want a more direct relationship
  with manufacturers, as do high growth operations

40
Channel Challenges Redefining Roles and
Structure?

• Dealer Summary
• Many positive signals, commercial producers see
  dealers as value- adding, BUT
• Many signals point to on-going pressure
• Size, growth, Internet use, technology

41
Channel Challenges Redefining Roles and
Structure?

• Additional Charts

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Influence Outside the Farm on Purchases of
Expendable Items (by age)
Significantly different at p 43
Influence Outside the Farm on Purchases of
Expendable Items(by loyalty to expendable brands)
Significantly different at p 44
Influence Outside the Farm on Purchases of
Capital Items (by size)
Significantly different at p 45
Influence Outside the Farm on Purchases of
Capital Items (by year)
Significantly different at p 46
Usefulness of Information Sources(by age)
Significantly different at p 47
I consider myself loyal to my primary local
suppliers of capital items (by size)
Not significantly different at p 48
Custom Hired Fertilizer Application by Commercial
Crop Producers by Year
Significantly different at p 49
In the next 5 years, I want a more direct
relationship with manufacturers of capital items
(by size)
Significantly different at p