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Study looks at farmers' evolving buying habits

More farmers are basing their seed, fertilizer and pesticide product purchases on factors other than convenience, according to a study from Purdue University's Center for Food and Agricultural Business. The study compared data from farmer surveys in 1998 and 2003. Price, product performance and customer service trump ease-of-purchase when making agricultural input buying decisions, the study found.

The study also identified five distinct ag input market segments, or "buyer types." Previous market research had identified three buyer types: business/value-oriented buyers; economic/low-cost buyers; and relationship buyers, who purchase from the same dealer year after year.

The buyer groups the new study identified include price, performance, convenience, service and a "balance" group that considers several factors, according to Purdue agricultural economist Christine Wilson, who wrote the study report along with fellow agricultural economist Corinne Alexander.

"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."

"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."

"The convenience group is declining rapidly," Alexander said. "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."

The traditional relationship buyer is changing dramatically from a convenience buyer to a service buyer, she 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 said. "The service group tends to be much younger farmers who are very ambitious and who want to grow their operations.

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."

"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."

Here are some findings from the study:

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%)

Performance buyers were fourth at 16.3% (up 1.5%).

Convenience buyers were the smallest group, at 13.8%.

Between 88% and 91% of farmers in every buyer group indicated they hire someone for custom services.

46% of price buyers are college graduates - the highest percentage among the five groups.

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 use the services of independent crop consultants.

About 2,100 farmers nationwide with annual sales of at least $100,000 participated in the 2003 survey.

More farmers are basing their seed, fertilizer and pesticide product purchases on factors other than convenience, according to a study from Purdue University's Center for Food and Agricultural Business. The study compared data from farmer surveys in 1998 and 2003. Price, product performance and customer service trump ease-of-purchase when making agricultural input buying decisions, the study found.

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