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    Narrowing in on Your Geographic Target Market for Strategic Analysis

    Posted by FMiD Team on Apr 27, 2020

     

    Narrowing in on Your Geographic Target Market for Strategic Analysis

    When it comes to market share analysis, the more you focus on your addressable market -- the farmers that you actually have a chance at doing business with -- the better chance you have at acheiving success.

     

    The customer base in the ag market doesn't shift as frequently as in other industries. And because there's a limited amount of farmland, the market is a zero-sum game. Market share for your agribusinesses means that you need to take it from a competitor.

    To end up with the largest share in this highly competitive landscape, you need to be able to do the following things well:

    • Understand the needs of both current and potential customers down to a specific, granular level
    • Target communications to those farmers so different segments receive customized and tailored messages
    • Address their specific needs in sales conversations by offering highly personalized and targeted products and services so the farmer receives exactly what they need to solve the problem, and make adjustments based on farmers' responses in real time

    There are a number of factors that go into defining your target market. These include price point and product-farmer fit.

    But one that's especially relevant to ag is geographic location. And here are some tips and best practices for identifying your target market based not only on the location of the farmer, but of their fields as well.

     

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    Focusing on the Farmers' Geographic Limitations

    Let's say that you have a market footprint in the State of Illinois, but it only covers one third of the state. You wouldn't want to waste two-thirds of your marketing spend by marketing to the entire state.

    On the other hand, if you focus on your target customers in that one-third of the state, you're able to triple the impact and reach with your target market.

    Farmers who aren't able to buy your product because of proximity or other geographic limitations simply aren't a part of your target market:

    • Are they close enough to your physical dealerships that you can deliver the product to them?
    • Are they within a geographic territory that your salespeople can make a trip out to the farm to talk to them (this is less important while we're in the middle of COVID-19 social distancing, but will become important again once the crisis passes)?
    • Are they located in a region that aligns with the product you provide (corn seed for Midwest states, cotton for South, etc.)?
    • Are their fields part of a contiguous operation, or are they spread out across fifty miles of land?

    Different seed varieties are going to be more important to the grower depending on their location. Since weather conditions and planting dates vary from region to region, knowing the geographic impact helps you select the right product.

    There are also certain products or services that are sold based on where the farmer is located. For example, finance and insurance companies have different regulations and requirements in different states.

    All of these factors impact whether a grower fits in your target market. Geographic segmentation helps you ensure that you're communicating to the right growers, and not communicating to the wrong ones.

    Here are a couple of examples to help illustrate this point and show how knowing the geographic location of fields is just as important in defining your market -- if not more important -- than the farmer's homestead or mailing address.

    Example: Grain Origination

    Let's say that you're looking to purchase grain from farmers within a 25-mile radius of your elevator. Limiting yourself to this radius will help to limit transportation costs.

    You may start by geolocating farmers based on their mailing addresses. There's an inherent weakness to this approach, however.

    There may be a farmer whose homestead is 60 miles away. However, if they have a grain bin that's 15 miles away, they could be a potential fit for you, even though looking at name and address could have led you to think otherwise.

    It's important to look not just at the farmer is located, but where the various parts their operation are located, as well as related growers with whom they may co-own and co-operate the land with. Geographic analysis can help you find the right farmers, even thought they weren't the obvious first choice.

    fieldleveldataiamges-1

    Example of a single grower's operation that's spread out across multiple counties.

    Example: Ag Retail

    Ag retailers face a similar conundrum. When you're selling a particular seed product, for instance, you face a similar geographic constraint that's driven primarily by transportation costs. It's simply not cost-effective to transport seed, chemicals and especially fertilizer 50 miles down the road.

    Many ag retailers may look at state and county to help figure out their radius. But consider this: you could have a farmer who has property within a county close to your retail location, but their primary operation is a hundred miles away. Even though that farmer technically resides in your county, you aren't going to be able to serve them.

    While you could figure all of this out through conversation and anecdote, why spend a significant amount of time with farmers who aren't going to be a customer for you? There's certainly the value of the relationship in terms of getting to know key farmers in the community, but even so, you want to prioritize who you spend the most time with.

    The conversations with potential customers will be the ones that lead to a better return on your investment. Geographic segmentation is a key factor to take into account when defining your addressable market and prioritizing who you're going to spend the most time with.

    Geography Isn't Limiting. It's Liberating.

    At first, geographic limitations may seem like just that: limitations. But when you sit and think about it, geography isn't limiting. It's liberating.

    Rather than trying to serve a massive, unaddressable market, your geographic limitations place real guardrails on your targeting and messaging. When you have a narrow market, you're liberated from having to "go out and hunt" as much. Instead, you can spend time really digging in and getting to know your current customers better.

    You and your team have limited energy and spend. When you focus that on a highly specific group of farmers, you can match your messaging to entice them to buy more effectively than if you did a "spray and pray" approach.

    The more you can narrow down your target customer, the more you can invest in that relationship and conversely, end up not wasting money on people that really don’t have a chance of becoming your ideal customers, and that certainly aren’t going to be profitable.

    FMiD_MarketView V4

     

    Prevent lost revenue potential - talk to our sales team.