Purdue News

January 18, 2006

Study shows fewer farmers are ag input 'convenience' buyers

WEST LAFAYETTE, Ind. - A trip to the corner farm supply store still works for some, but more farmers base 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 latest 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.

Purdue agricultural economists Corinne Alexander and Christine Wilson wrote the study report.

"Agribusiness professionals are concerned that there's been a decline in the number of farmers who make purchases based on their longstanding relationships with businesses," Alexander said. "Our study shows they are correct and provides insight into how today's farmer makes those decisions."

The five buyer groups the study identified include price, performance, convenience, service and balance, Wilson said. Traditional ag input market segments include business, or value-oriented, buyers; economic buyers, who focus on low cost; and relationship buyers, defined as 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 said. "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 percent and 34.2 percent, respectively. The price group was next highest at 18.5 percent in 2003, up 1.5 percent from 1998. Service buyers were the third largest group in 2003 at 17.3 percent (up 0.5 percent), followed by performance buyers at 16.3 percent (up 1.5 percent) and convenience buyers at 13.8 percent.

"The convenience group is declining rapidly," Alexander said. "In 1998 that group made up 16.8 percent of our sample. The 3 percent 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 said.

"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 said. "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."

Meeting the needs of service-oriented input buyers requires more effort from agribusinesses, Alexander said.

"They've got to work a little bit harder to serve the service group," she said. "Service group buyers want more information, and they want more interpretation of that information. They hold any input salesman to a higher level of technical competence, but they are a relationship buyer that is high value."

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 said. "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 percent of service buyers hold a college degree - the only group under 40 percent.

• Balance group buyers are most likely (44 percent) and convenience group buyers least likely (38 percent) to utilize the services of independent crop consultants.

• Between 88 percent and 91 percent of farmers in every buyer group indicated they hire someone to handle fieldwork or other on-farm jobs, commonly known as custom services.

As farmers' buying habits evolve, so, too, must the marketing strategies agribusinesses employ, Wilson said.

"Customer relationships are extremely important," Wilson said. "If you can tailor your products to the customers, if you are designing products that customers want and you are providing customer value to them, they are going to remain customers - even if you have to bargain with them a little bit.

"Farmers are, in many ways, no different than other consumers."

Writer: Steve Leer, (765) 494-8415, sleer@purdue.edu

Sources: Corinne Alexander, (765) 494-4249, cealexan@purdue.edu

Christine Wilson, (765) 494-4299, wilson1@purdue.edu

Ag Communications: (765) 494-2722;
Beth Forbes, forbes@purdue.edu
Agriculture News Page


Note to Journalists: Other farm-related story ideas are available at Purdue Agriculture's Farming 2006 Web site.


Related Web site:

Purdue University Department of Agricultural Economics


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