Rising debt and major investments over recent years, increasing interest rates, rising land prices, soaring input costs, particularly difficult weather conditions, and a crisis in the swine sector... The perfect economic storm seems to be looming for many farms in Quebec.
Producers are reassessing their priorities, which may lead to greater price sensitivity and reduced loyalty to suppliers. As a supplier, how should you respond to the impending revenue declines?
Here are several pitfalls to avoid.
Pitfall No. 1: Putting All Current and Potential Customers in the Same Basket.
It cannot be emphasized enough: adapting to the agricultural market means adapting to the different groups of produers.
Research has shown that consumers react in four ways to a shaky economy:
The Cautious: Anxious and insecure, they cut all their spending.
The Concerned but Resilient: The economic situation hurts them, but they remain strong and save moderately. This is often the largest group.
The Selective Affluent: They maintain their purchasing level but become more selective.
The YOLO: Living day by day, they are ready to spend as before, even if it means paying for longer.
By working closely with your sales staff, you can likely identify farms that fit into these groups.
Pitfall No. 2: Adapting Your Short-Term Tactics Based on the Targeted Group Profile
Depending on the profiles targeted, adapt your tactics. Here are some ideas:
The Cautious: Focus on customer retention.
If you offer essential products like animal feed, farmers will continue to buy but will try to reduce their bills. Be proactive and offer solutions before they ask questions (or shop elsewhere).
If you offer products that can be postponed or seen as non-essential, refer to pitfall No. 5!
The Concerned but Resilient: Reduce their anxiety levels.
Consider promotions with immediate rewards (discounts, reduced-rate financing) to retain them, but avoid overusing them to not devalue the regular price.
For a dealership, this might involve focusing communication efforts on equipment repair and used sales, which are less expensive than new machinery.
If possible, separate your product into a modular offer, such as selling a basic milking robot with accessories that can be added when the economic situation improves.
The Selective Affluent: Enhance their value.
Target them with enhanced offers, where they get more value for their money.
The YOLO: Solicit them actively.
Sales should actively solicit these producers (while ensuring their ability to pay).
Pitfall No. 3: Not Taking Advantage of the Situation to Help New Clients
Sales will tell you that times are tough, and they are right. However, the strategies you implement for each client profile—enhanced offers for your Selective Affluent clients, for example—can certainly help competitors' clients.
Darwin's theory of evolution doesn't just apply to species:
"The [companies] that survive are not the strongest or the smartest, but those that best adapt to changes."
Adapt better to market needs than your competitors! The mentioned tactics are also valid for prospects!
Pitfall No. 4: Cutting Sales & Marketing Budgets Grossly
Eliminate non-performing elements surgically (underperforming products that require resources, tactics with doubtful returns, etc.) and reallocate these budgets—wholly or partially—to proven ones.
Investing in product development to improve profitability for the producer or reduce the purchase or usage cost of your products could also be considered.
Pitfall No. 5: Focusing Solely on Short-Term Strategies
Adapting to the situation better than your competitors also means anticipating the recovery.
Many farms will simply postpone purchases of non-essential products. It is crucial to stay close to these potential clients, consolidate personal relationships with them, and nurture them. Make them dream and highlight your company's unique selling points. If you offer the best ROI for example, emphasize that as much as you can. When the producer is ready, they will likely validate this criterion with the 2-3 companies they might consider.
If you can, continue tactics that have a long-term impact, especially if your sales cycles are long (e.g., machinery). Advertising, trade shows, and brand investments should not be neglected. If you can increase your budgets in this regard, even better. The same goes for preparing to launch a new innovation: be ready to act when the time is right.
The idea is to be perceived as more attractive than the competition when producers start spending again.
Pitfall No. 6: Altering the Brand Message
Maintaining a recognized brand that producers trust is one of your best assets for reducing business risks and perceived risks for your loyal customers. Continue to emphasize your unique selling proposition, focus on emotional connection and empathy (e.g. "with you, through thick and thin").
Focus on loyal customers who seek your brand and competitive advantages. Now is not the time to panic and change your high-end brand to messages emphasizing low prices or to reduce the quality of your products and customer service. That's a no-no! As they say in politics, keep pleasing your base!
While it is wise to control costs, failing to support brands and evolving customer needs can compromise short- and long-term performance. Companies must adopt an agile approach, adjust strategies in response to changing demand, and remain true to their value proposition. Closely monitoring customer needs is crucial for thriving during and after a recession.
Want to discuss this? Contact us!
* Source : QUELCH, J. et JOCZ, K., “How to Market in a Downturn”, Harvard Business Review, https://hbr.org/2009/04/how-to-market-in-a-downturn-2.
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