Equipment dealers told to target customer needs
Sellers of farm machinery will need to strengthen their game as growers tighten their purse strings, according to an industry expert.
Farmers are more receptive to salesmen who try to solve specific problems rather then overload them with data, said Scott Downey, a professor at Purdue University who studies farmer buying decisions.
“I don’t want to hear about capabilities, I want to hear about what works for me,” Downey said, summarizing the growers’ perspective.
“We need to talk to customers about the things they care about, not just the things we do,” he said during the recent annual meeting of the Pacific Northwest Hardware and Implement Association.
Farm machinery manufacturers and dealers are coming off of several years of stellar sales.
Total unit sales were up 9 percent for tractors and nearly 10 percent for combines in 2013, according to the Association of Equipment Manufacturers.
“When farmers have cash in their pocket, they tend to spend it,” said Adam Fleck, a machinery industry analyst with the Morningstar investment research firm.
However, lower commodity prices and a projected decrease in farm incomes is expected to restrain their buying habits, Fleck said.
The volume of machinery sales is likely to drop by 5 to 10 percent in 2014, he said.
It remains to be seen whether growers will be willing to take on more debt to pay for machinery, he said.
Debt levels are currently low, but farmers also have fewer reasons to invest in new equipment, Fleck said.
Tax incentives for new purchases have been curbed and machinery is more expensive due to stricter emissions standards, he said.
Farmers who need replacement machinery will still buy it, but the overall U.S. fleet is relatively new due to heavy buying in recent years, Fleck said.
In this more challenging sales environment, dealers are more likely to be successful if they tailor their message to individual circumstances, said Downey.
Since it’s not possible to craft thousands of different messages, the answer lies in categorizing farmers, he said.
“How do we segment effectively?” Downey said.
While dealerships are often organized around geography, segments should be focused on more distinctive attributes — such as farms that are highly interested in new technology, he said.
Survey data shows that farmers view managing production and controlling costs as the top factors in success, Downey said.
Very large farms are more likely than others to say that managing people is also a top factor, he said. That knowledge could help dealers connect with large buyers.
“It allows you to tailor your message a little bit,” Downey said.
The good news for dealers is that farmers see them as highly valuable sources of information about machinery, he said.
The technical staff tops the list, followed by the local sales staff — these two categories are more trusted than lenders, other farmers, manufacturer representatives, independent consultants or extension agents, he said.
Farmers also reported that price is their top consideration when buying machinery, followed by performance.
The relationship with the dealer was ranked lower than those two factors, but farmers may give it more decision-making weight than the survey indicates, Downey said.
Roughly 60 to 70 percent of farmers say they have not changed their primary retailer in the past five years.
“They’re more loyal than they like to admit,” Downey said. “They don’t like to admit this loyalty because it perhaps puts them in a weaker negotiating position.”