1. How Multi-Generational Farming Operations Make Major Purchase Decisions By: Mark Smither and Heather Covrig

2. To meet the rising global demand for food, todays modern farming operations must continually explore ways to improve production. For some farms, that means acquiring more acres or upgrading to larger pieces of equipment. For others, it may mean selecting a new hybrid or adding the latest precision ag system. The challenges that come with increasing productivity also create a compelling need to make the right purchase decision. Adding to these challenges are three important factors: 1. Most agricultural land is currently owned by older producers. It is estimated that 70 percent of all farmland will change hands in the next 20 years.1 2. As an older generation of farmers prepares for retirement, a younger generation of sons and daughters is becoming more involved with the day-to-day responsibilities of running a family farm. 3. Many of the important purchase decisions are usually made by more than one person.2 1 Overview 3. 2 This creates a unique decision-making dynamic that has many agri-marketers asking, How do multi-generational farming operations make major purchase decisions? To answer this question, Paulsen Marketing conducted 14 different interviews with farm families in Iowa, Kansas, South Dakota, Minnesota, Missouri, Illinois and Nebraska. We spoke with two different farming demographics: older row crop producers, ages 46 to 70, and younger row crop producers, ages 25 to 45. These demographics represent a typical father-son(s) or father-daughter(s) farming operation. The purpose of these interviews was to gain insight into the purchase patterns of multi-generational farm families and identify ways agri-marketers can effectively reach this important audience. 1 Source: FarmLASTS, University of Vermont 2 Source: 2010 Farm magazine Readership Study 4. 3 Key Observations Each multi-generational farming operation is different; however, there are similar factors that ultimately shape most major purchase decisions. Older producers bring a unique historical perspective and a lifetime of personal networking to the purchase decision, while younger producers bring a new point-of-view and sense of energy to the process. Together, older and younger producers are creating their own purchase philosophy based on the specific needs and goals of their operation. When it comes to deciding upon major purchases such as equipment, crop inputs or technology upgrades, three key themes emerged: 1. There is a high degree of brand assimilation in multi-generational farm operations. 2. The generational gap associated with online usage is closing. 3. The consideration cycle leading up to a purchase can last well over a year. 5. 4 Observation #1 There is a high degree of brand assimilation in multi-generational farm operations. Marketers like to speak in terms of brand loyalty. However, brands are more likely to be assimilated into a farming operation from one generation to the next. Certainly, there are farm families that say they will only buy a certain color of equipment or a particular bag of seed. Just like general consumers, producers prefer to buy brands they already know based on four categories: familiarity, integration, consistency and relationship. 6. 5 Familiarity Most producers will purchase the same brand of equipment simply because they are more familiar with the capabilities and control system of the product. Taking the time to learn how to operate new equipment is considered too time consuming. 7. 6 Integration Both older and younger farmers agreed that, in most cases, an integrated equipment system (i.e. tractor, planter, sprayer, attachments, etc.) is important to maximizing operating efficiencies and improving production. 8. 7 Consistency With so many unknowns from one growing season to the next (i.e. moisture, heat units, pests and disease, etc.), producers need a compelling reason to switch brands and add another variable. 9. 8 Relationship If a specific brand is represented by someone who has earned the farmers trustusually through a consistent pattern of exemplary customer service, proven results and fair pricing practicesthere is a much greater chance of brand exclusivity for the farming operation. In many cases, farmers are more loyal to the relationship than the actual brand. 10. 9 Preferred brands are built over a long period of time and passed from one generation to the next. Both older and younger producers expressed a willingness to consider a new brand if certain barriers could be minimized or eliminated. Marketing Take-Away #1 Break through brand assimilation with free trial offers and on-site demonstrations. 11. 10 Familiarity Often times, a younger producer will bring a new brand consideration to the family in an effort to invite discussion (aka kick the tires). It is important to help producers feel comfortable with the physical, economic and emotional attributes associated with the product. 12. 11 Integration Older producers are relying on the younger generation to make important technology and agronomic decisions that impact the entire farming operation. This is a perfect opportunity to showcase how a particular brand will fit with the farms existing equipment line-up, technology systems and agronomic strategies. 13. 12 Consistency Producers need to have their operational habits challenged in a positive, engaging way. Relevant side-by-side comparisons over a long period of time instills trust and confidence in a new brand. 14. 13 Relationship The old adage, trust is earned holds true for both older and younger producers. Take the time to understand the familys operational needs and provide solutions that appeal to both generations. 15. 14 Observation #2 The generational gap associated with online usage is closing. All producers rely on a combination of information sources to help them make important purchase decisions. However, we did notice two emerging themes regarding online usage. 16. 15 Older producers are spending more time online Several producers in this demographic reported that they are going online more often and for longer periods of time. More importantly, they are engaging in more advanced online activities such as following blogs, contributing to message boards, subscribing to specialized content, participating in online auctions and making online purchases. 17. 16 Younger producers are creating their own peer networks Younger producers are reaching out to other young producers and cultivating their own trusted networks of peers, including those formed in online communities. They often seek and provide advice online using organized forums and ag-related social media channels. Ag-related social media channels include online communities developed by trade publications, commodity groups and issue-orientated organizations. These are considered to be more work related by young producersand therefore more relevant to their needs as a producer. Conversely, they tend to view Facebook and Twitter as non-work related. 18. 17 Marketing Take-Away #2 Continue to increase online marketing efforts, but not at the expense of traditional ag-media outlets. Todays producer has access to a wide variety of information sources and media outlets. Each has an important role throughout different stages of the purchase process. Our observations indicate that, while online marketing efforts are gaining significance with both older and younger producers, they have not displaced traditional ag media as a trusted source of information. Agri-marketers need to increase their online marketing efforts not just to generate name awareness, but also to offer relevant advice and build relationships. Be online when and where producers are seeking advice, discussing issues and participating in conversations. 19. 18 The right combination of pay-per-click (PPC), search engine optimization (SEO) and social media optimization (SMO) ensures that producers are exposed to the brand. A cohesive content development strategy (articles, news releases, blog posts, video posts, webcasts, photos, reviews, user generated content, etc.) connects producers to the brand. 20. 19 Observation #3 The consideration cycle leading up to a purchase can last well over a year. The need to increase production is a continuous cycle. This is why farmers seem to be in a constant state of consideration. According to a recent media survey, 63 percent of producers gather tractor, machinery or parts information throughout the year; 44 percent gather crop protection products information throughout the year; and 27 percent gather seed information throughout the year.3 Further examination of this prolonged consideration cycle reveals two important findings. 3 Source: Successful Farming, 2011 Farmers Use of Media Study 21. 20 Major purchase decisions require several different perspectives Traditional ag media is still highly valued between both demographics, especially when it comes to creating awareness and identifying a purchase need. Online channels are becoming more important for comparing, evaluating and affirming possible purchases. Peer recommendations and positive word-of-mouth from a neighbor are the most significant influencers when it comes to actually making a decision. 22. 21 Younger producers may be willing to take more risks than older producers to a degree. This is not meant to be a sweeping generalization that applies to all young producers; however, this demographic seemed more willing to adopt a new piece of technology or try a different planting strategy if the costs or profit potential could be justified. The most noticeable difference in purchase philosophy between older and younger producers is this: younger producers are more comfortable making a purchase decision based on maximizing return or profitability; older producers seem to be more comfortable making purchase decisions based on minimizing costs. 23. 22 Marketing Take-Away #3 Brands have more opportunities to be inserted into the producers consideration cycle. A prolonged consideration cycle gives agri-marketers several opportunities to create awareness, invite trial and offer incentives for their brand. Based on our observations, as well as several ag-media usage studies, one of the most effective ways to insert a new brand into the consideration cycle is to receive a referral or recommendation from a trusted information source. This observation was also reported in the Paulsen Marketing Spring 2011 thought paper, which recognized the importance of micro and macro influencers. 24. 23 Older producers tend to value referrals or recommendations from known entities. A positive word from a trusted agronomist can prompt a producer to start thinking about a purchase. An unbiased recommendation from a neighbor can lead to evaluation and comparison. An article in a leading trade publication or a blog entry from a key influencer can help affirm a purchase choice. 25. 24 Younger producers are more likely to try something new. An unbiased recommendation from peers at a farm show may initiate the need to consider a new brand. Positive comments following an online article or unsolicited recommendations from other farmers in a forum can lead to further evaluation and comparison. And, of course, a good word from a neighbor can go a long way to affirm the purchase decision. 26. 25 We did not notice a significant difference in the way older and younger producers engage in neighbor-to-neighbor networking. Younger producers seem to value neighborly advice to the same degree that older producers do. The key is to reach older and younger producers at every possible touch-point in the consideration cycle. Every marketing tactic must work cohesively to provide relevant advice, sustain meaningful conversation and generate positive word-of-mouth for the brand, offline and online. 27. 26 Each multi-generational farming operation has a slightly different purchase philosophy based on the specific needs of the operation, as well as the unique dynamics of the father-son/ daughter relationship. We observed very little variance in opinions between older and younger producers. Just as many brands are assimilated into a farming operation, so is the methodical, day-to-day approach to decision making. The channels used to reach producers continue to change. Producers are spending more time online and becoming more comfortable with sharing ideas in social media, posting video, participating in forum discussions, following blogs and using mobile apps regardless of age. The key is to build a brand presence in these emerging channels long before producers arrive. With preferred brands and a disciplined decision-making process already in place, agri-marketers need to be open to reaching producers in new and innovative ways. Summary 28. the ag and rural lifestyle specialists www.paulsenmarketing.com 605.336.1745 3510 S. First Ave. Circle Sioux Falls, SD 57105 Follow us: We welcome you to continue referencing this study at www.agribranding.com A special thanks from Paulsen to all who participated in this study.