Pictured Above: Precision farming dealers are using precision service as a tool to alleviate in-season volume, forecast future staffing needs and provide another revenue stream for their dealership. Photo courtesy of Case IH
Each day, precision farming specialists are bombarded with service calls from confused or frustrated customers. It comes with the job, and most dealers admit the technology they sell is only as good as the service they provide.
Unlike yield monitors and GPS receivers — tangible hardware that customers easily associate with a price tag and make dealers money — precision service is a tougher sell because there isn’t an industry template for turning a profit.
A common frustration voiced by precision dealers is that even after a successful product sale, the time they inevitably spend servicing and maintaining the systems is largely given away for free.
On the other hand, there are dealers who have determined precision service fits their vision and mission as a business. They’ve managed to add the specialists necessary to please their customers and boost income.
These dealers are using precision service as a tool to alleviate the in-season “crush” of customer demands, help forecast future precision staffing needs and provide another revenue stream for their dealership. Many launch their precision service plans with pre-planting meetings and field days aimed at educating growers and their employees on precision tool use and calibration.
Making the Commitment
“You are going to end up losing customers if you don’t have some sort of plan in place because you won’t be able to cover the amount of business that’s coming in the door,” says Adam Gittins, general manager of HTS Ag in Harlan, Iowa. “But you have to provide something of value to the customer in order to get them to spend money on it.”
It’s been nearly 7 years since HTS Ag implemented its precision service plans and Gittins considers himself a bit of pioneer in this area.
What HTS Ag began in 2007 bears little resemblance to what the company is doing today. Gittins admits that at first, the precision service component of the business was a proactive way to reduce phone calls from frustrated customers during the growing season.
“We knew if we could get a customer to have firmware loaded before the season and check some basic things — electronic and mechanical — they would be more productive and our phone would ring less,” Gittins says.
Like other successful stand-alone precision farming companies that sell their services and dealerships with their own precision departments, HTS Ag has evolved its precision business into layers of service designed to fit the needs of the grower, while covering the cost of providing precision service personnel and support.
In 2007, HTS Ag had a half a dozen precision service customers. Today, 200 growers are enrolled in the firm’s service plans. The dealership has 12 employees dedicated to precision farming support and is looking at hiring 3 interns for planting season along with another full-time employee or two through 2014.
The dealership began with two plans — 1 visit from a precision technician, per year to the farm, or a spring and fall visit if the grower had a planter and combine included. The service calls included updates of firmware, yield monitor, a check up on precision systems, backing up the monitor, downloading data and looking over the entire system.
“We use a checklist of items and determine the necessary recommendations from a diagnostic inspection, which was also included in the plan, along with phone support and discounts for billable labor during the year,” Gittins explains.
Tiered packages are a popular way for dealers to offer multiple price points and a range of precision service for customers to include auto-guidance support, on-farm visits and software updates. Photo courtesy of Case IH
Initially, the plans were priced at $400 and $600 respectively, and included any location within an hour of the dealership.
To market the plans, HTS Ag now uses them as an incentive. For instance, if a grower comes in and asks about a planter system in February, the service plan on that equipment is included in the purchase price — covering the customer throughout the rest of that year with service visits the following spring, and phone support throughout the following year.
Phone and remote support now start at $600, with a Gold and Platinum tiered offerings that go up from there depending on the number of displays and number of on-site visits. The chart on page 33 shows current pricing for all of HTS Ag’s service plan offerings.
Responding to Customer Demand
In Crookston, Minn., precision service technician Russell Delzer says Titan Machinery, a Case IH/New Holland dealership, got into precision service 6 years ago prior to becoming a part of the Titan Machinery network because of customer demand for support.
“We have always had a winter service program for equipment general repair. Customers with their machines in the shop would ask about service for their precision equipment. As a dealership, we were on our own,” he explains. “So, I and the parts department selling precision equipment came up with a plan of our own. We developed Bronze, Silver and Gold plans, then kicked around pricing and took it to some of our better customers to test.
“When we merged with Titan 4 years ago, they had their own plan so we incorporated ours into theirs,” he said.
Titan now offers four plans. A and B are mainly phone support at different rates — one includes regular store hours and the other is extended store hours, meaning for an additional charge to the service plan, the customer can call after hours and isn’t billed the extra cost.
“The C plan includes diagnostic support, extended hours, but customers can bring a piece of equipment to the store and we’ll do the upgrades,” Delzer explains. Then, Plan D, the most popular of Titan’s plans, provides in-field support and pretty much “the whole ball of wax,” he says.
Make It Your Own Mission to Succeed
Dr. Tom Krill of Precision Strategy LLC., and the Kenn-Feld Group, a network of John Deere dealerships in Northwest Ohio, brings an MBA, an Ag Ed Ph.D and experience as a crop consultant to his precision service work. In looking at why some precision service enterprises thrive and others die on the vine, Krill brings his MBA lessons to the forefront.
“Too many times dealership owners react to demands from frustrated precision equipment owners, or the salesperson says he has to have help setting up this new gear, and they hire a specialist to help out,” Krill says. “The specialist is assigned to no one and he becomes overhead. He has no budget, no revenue source.
“He’s just there and he has trouble figuring out to whom he answers. Is it the shop foreman? Is it the salesman who just sold something he needs installed? Is it the customer? He looks around and says ‘How do I prioritize my time? What should I be doing?’ ”
This is just a mistake, says Krill. If you’re planning to add a precision service component to your business, do some soul-searching, he continues.
“Ask yourself, does this enterprise fit into my company mission and vision of what it is supposed to accomplish? If you can answer yes to this, and you’re comfortable with increasing the scope of your business financially and from a management standpoint, then make the new component a profit center, rather than just overhead, and determine its revenue source so you can manage it.”
Krill says once you’ve determined precision service is a money maker, pin down where it is going to generate income. Is it from sales? Is it from installation? If it’s from sales, then the sales department has to share the income with precision services. If it’s from installation, the shop has to share income with precision services.
“Get it in the accounting system so you can track it,” he urges. “This way accountability is in dollars and cents. If not, it has to be based on hours and hourly rates so precision technicians know what they’re supposed to be doing. Otherwise, the technicians are at everyone’s beck and call and their presence is impossible to manage.”
Other questions one needs to consider in this rapidly changing set of opportunities, is the definition of precision farming, Krill says.
“Precision farming is not bells and whistles in the cab of a tractor. It’s more than that. It’s prescriptions to ensure a plant grows in the most economically efficient manner it can. So, are we going to write prescriptions? Are we agronomists? Do we need to hire an agronomist?
“In most cases, agronomic prescriptions are not in the mission statement or vision of an equipment dealership, but the ability to make certain those agronomic prescriptions run on our customer’s equipment is well within that mission,” he says. “You need to be in the position of saying, ‘Mr. Farmer, you or your agronomist bring me the prescription and we’ll make it run on your equipment. That’s ‘precision service’ ” he says.
“In the D Plan, customers have extended hours, can call any time of the day and get help. Products are covered, including yield monitors, mapping, water management, rate controllers and auto-steer,” Delzer says. “We also do on-farm support with rate controller set-up, implement set-up for zone control and variable-rate. We also help get maps from agronomists and transfer them into the right format for the individual farm operation’s computers,” he explained.
Delzer says Titan currently has two levels within each of the plans.
“It depends if the farmer has a single machine or a fleet operation of two or more pieces of equipment,” he says. “Right now it’s $250 per year for phone support for a single machine. For multiple pieces of equipment, it’s $375.
“For in-field support, a single machine is $1,500 per year and for a fleet, the price is $2,000,” he says, noting Titan is currently reworking the support plans and their pricing.
In his second year as “the precision service” department for Marks Machinery, a Case IH and Trimble dealer in Yankton, S.D., Tom Kronaizl, says the dealership uses a four tier system for 10% of the customers serviced by its 2 stores.
“We determined how long it took to run a calibration. The first year customers usually have a lot of questions and calls,” he says. “We kept track of the calls and how much they cost and based our prices on that.”
Tier I costs $500 for auto-guidance support only and includes two visits, phone calls and consulting and updating software. Tier II includes Tier I services plus two more visits and a service plan for up to three pieces of equipment for $750. However, if problems are wiring related or mechanical, it becomes a service call and is billed at shop rates,
Tier III is called the Harvest Bundle and includes seven visits per calendar year, not including planting season, along with yield calibration and harvest guidance for about $750. “At the end of the year we’ll print out yield maps for about $200 based on the acreage involved,” Kronaizl explains.
Tier IV costs $1,250 and includes all the previous tiers along with auto-guidance, planting and harvest visits and support, map generation and integration of yield data into the combine to give variety yield performance maps.
So far, precision service prices are separate from equipment purchases, but Kronaizl says the business is considering including a service plan of some kind with new purchases.
In addition, he writes reference guides for the equipment his customers are using as an additional benefit of doing business with Marks Machinery.
“We’re in our second year and we have 10% of our customers signed up, with a goal of pushing that to at least 50%,” he says, noting very little “pushback” for the tiered support system. “We also work with the agronomists to make sure their data and prescriptions run on our customers’ machinery.”
A La Carte Services
Hurst Farm Supply in Lorenzo, Texas, has a slightly different structure for its precision service plan, based on traditional shop costs. Kelly Hurst says the John Deere dealership offers field training for its customers on Deere’s RTK, StarFire2 and StarFire1 guidance systems. These customers currently farm about 1.8 million acres in the area under RTK service.
“We offer multiple precision service packages. This is our first full year of the program and we’re looking forward to a good take rate,” he explains. “There are two of us on the precision side and we cover a lot of ground with 7 stores. Because of that, we try to give our customers options in our value-added service packages.
“From day one, we’ve always charged out labor and mileage just like we’re the shop. We never gave away the labor rate if we’re going to a farm to fix something,” Hurst says. “Even if we’re not physically repairing or adjusting something, but teaching a customer how to operate something, we’re billing for that.
“But, we’ll give them the option that if they have additional equipment, they can consider a service package in which we’ll teach them twice a year to clean up the system before a certain start date.”
Hurst says the precision service is written up just like a service order in the shop and billed at $90 an hour. They manually write out the customer complaint and cause and repair. Then they record the serial numbers so they can track the history of the equipment.
Currently, phone support is still free for Hurst customers and serves as somewhat of a public relations tool. Also, Hurst says phone support that yields results for the customer makes for a return customer, “or a new customer if the caller hasn’t gotten results elsewhere and turns to us.”
Today, Hurst offers a $250 plan for a specified number of hours for training. After that, it’s an additional $90 per hour, he explains. “We also do a guidance inspection for sprayers in the shop for $115 and on the farm for the same price plus mileage.”