Chances are, you don’t do business with every farmer out there. In fact, depending on your company, your target market may be extremely narrow.
For example, if you sell high-end equipment that’s only suited to larger farms, smaller farmers aren't going to be a good fit.
The same goes for retail locations. If you sell physical products from physical stores or distribution centers, you’re limited in which farmers you serve based on their proximity to your point of sale.
Unfortunately, the market share is commonly done in agriculture often doesn't allow for this level of specificity. The USDA, which serves as a major source of market data to the industry, puts out very generalized figures that cover the entire U.S. and then region and state.
Market share analysis based on the total available market won’t give you a clear picture of your performance, nor will it get you closer to your business goals.
That’s why basing your market share on your addressable market -- the farmers that you actually have a shot at doing business with -- is critical.
This post will walk through some of the key distinctions between the total market and your addressable market, and how to base your strategy, marketing and sales on the latter.
1. Define Your Market
Defining your addressable market is just as important as determining the product market fit. Generally, whether a farmer fits in that market is a function of three different factors:
- Geography. You can only sell to farmers that you can deliver the product to or are in an area where you have a sales infrastructure in place.
- Product. You will only sell to farmers who have a need for your products. So if you’re a corn dealer, then wheat farmers aren’t in your market.
- Price point. If a farmer can’t afford you, they won’t buy. Getting a clear sense of the spend potential of your market will help you understand who is a good fit for you.
Identify key areas where you have a greater density of your ideal customer.
It ultimately comes down to this: you don't want to look at your share as a percentage of a market that includes customers, products and services that you don't sell today you won't sell in the near future.
When defining this market, keep the Goldilocks principle in mind. You don’t want to bite off more than you can chew. This would dilute your message and impact. But on the other hand, you shouldn’t be too targeted that you aren't moving the needle.
If you are so thinly targeting people that are your current customers, you may be only finding people exactly like them. Then it becomes a self-fulfilling prophecy. If you're always marketing to people that have 500 acres of corn, you're probably going to have a high percentage of 500-acre corn growers in your customer database. But that doesn’t mean those are the only group of people you can work with.
So it’s all about finding that right balance, and determining the audience that's just right.
Defining your market is the first step to shifting from a total view of the market to focus on your addressable market: the market that you have the ability to sell to today.
2. Find the Actual Opportunity
Within your addressable market, each farmer has a limited amount that they’re able to spend on your product. This applies to both your prospects and current customers.
That’s why you don’t want to look at the entire amount they spend on all products when determining price point or spend potential.
If you're a seed company, you only want to really look at what they spend on seed. More specifically, if you're a corn seed company you really want to look at what they spend on corn seed.
For example, USDA has some stats that they put out there on spend per acre for the various inputs -- and not just inputs. Through their surveys, they capture the total amount spent per acre on all kinds of different costs including labor and others.
Understanding your addressable market will help you when you go to consider your market share strategy. Generally speaking, market share is calculated by dividing total sales by total market potential:
You're always going to have a solid idea of the numerator -- your total sales. It's the denominator that can make or break the calculation.
To turn this standard market share calculation into a total addressable market share calculation, use your total addressable market as the denominator.
The wrong denominator is going to lead you to make wrong decisions and and misconstrue what your true market share is. The right denominator, on the other hand, can help provide a path forward for your marketing and sales teams to realize your revenue growth.
When you define the figure this way, and looking at it over time, you begin to see clearly how much of the market you actually have based on reasonable figures.
3. Start Making an Impact by Going After Low-Hanging Fruit
Let’s say your market share is at ten percent. How do you go get the other ninety?
Since you can’t take your marketing budget and spread it universally over the entire market, it’s important to ask yourself: where can get the best ROI based on my budget?
In a simplistic breakdown, that unrealized potential is held either by customers who are spending on your products but not with you, or people who are in your addressable market who you aren’t currently doing business with.
The former presents an easy opportunity to gather some low-hanging fruit.
Increasing your business among your current customers -- who have already seen the value you have to offer and have a relationship with you -- is easier than going out and finding someone new. That’s why when we work with customers on growing their addressable market share, the conversation very quickly turns toward wallet share.
But with the right data, you can get even more specific and targeted than that.
Let’s say that your overall wallet share is 20 percent. You can look at your current customers and eliminate the ones who are spending 50 percent or more with you; the idea there being that you may be getting all you can from those people.
By asking these questions, you’re starting to isolate where those areas of high revenue potential may exist -- and then go after those areas of opportunity.
This means market share isn’t simply a reporting metric or something that sits on a PowerPoint slide. It’s something actionable.
4. Be Precise in Marketing and Sales Communications
When you have a highly targeted market, you can be highly targeted in your message.
In a time when farmers are inundated with ads and messages, the communications that are going to most resonate with them are the ones that speak specifically to their needs and context.
This involves a precisely tuned message for a specific product that they will immediately see the value of -- or at least immediately want to learn more about. This is true with your current customers, but it’s especially true when messaging your prospects.
This is an area where a buyer persona comes in. Use a buyer persona -- derived from actual customer data -- as a template to better understand your prospects and find people that look like your customers in your target audience of prospects.
This goes beyond crops and acres and geography:
- Where they are on their lifetime of farming
- How they view risk
- What they think about technology
- What they think about trying new hybrids
- Whether they are risk adverse
- Whether they own the land that they farm
- And much more
The more insights you have about the farmers in your target market, the better you can message them and, in turn, increase your likelihood of doing business with them.