Pictured Above: For data management partnerships to succeed, dealers say it takes a top-down commitment and an understanding that it will take time to turn a profit.
Data management remains a buzzworthy topic in precision farming, ripe with potential for those companies willing to invest the time and money to make it a part of their business.
One of the ongoing challenges for farm equipment dealers is defining their role in delivery of these services to customers. Some have chosen to stick with sales and service of tangible technology — at least for now — while other dealers have brought agronomic services in-house to offer a one-stop shop for customers.
But an emerging trend, which could be the most efficient and profitable option for dealers to offer data management services, are partnerships with local seed or fertilizer retailers, co-ops or consultants.
“I think everyone in the precision industry is realizing they need to play to their strengths,” says Steve Cubbage, founder of Prime Meridian, a precision consulting and management firm based in Nevada, Mo. “We’ve seen some dealerships try to be all things to all customers, but at the end of the day, I think the formation of business partnerships between input retailers, dealers and other third parties is where data management is going to make the most sense for everyone.”
A Changing Mindset
Given the agronomic expertise needed to analyze gigabytes of field information — and make sense of it — retailers or precision consultants are often called on to crunch data and provide planting or fertilizing recommendations.
But precision farming dealers also realize they can play a role in the delivery of data management services to customers. As the industry evolves from a hardware-driven business, collection of precision data starts with those technology tools installed in the combine and tractor cab. The foundation of data management begins with the producer, and those owning a copy of desktop software so that they can play an active role in the entire process, says Heath Conklin, precision farming specialist with H&R Agri-Power in western Kentucky and west Tennessee.
Although still an emerging trend, precision farming dealers are beginning to partner with retailers, co-ops or consultants to deliver data management services to farm customers. This approach can open the door to new customers and potentially lead to another source of recurring revenue. Photo courtesy of WinField
“Data management is the backbone and foundation piece to everything manufacturers are trying to accomplish in precision agriculture,” he says. “They can make all the precision equipment in the world, but if they aren’t put to use, we as specialists are going to work ourselves right out of the market.
For H&R Agri-Power, a 14-store Case IH dealership group with locations in Alabama, Illinois, Kentucky, Mississippi and Tennessee, farm equipment sales have traditionally driven dealership profits. To evolve into data management, Conklin says, it will take willingness to commit to a collaborative business model.
“The problem is we’ve gotten into data management, but we’ve been unable to make money on it,” Conklin says. “We’re known as an iron dealer and we don’t write prescriptions. I know some other dealerships have tried different models bringing in agronomists, but then you’re not going to make any friends with your local seed and fertilizer retailers.”
Working with those entities toward a common goal to provide a complete data management solution to customers makes sense, says Ken Diller, precision farming manager at Hoober Inc., a Case IH dealership group based in Intercourse, Pa. He’s been evaluating the best entry point for data management service for the last 3 years.
“I keep coming back to the thought that as a dealership, data management is not our strength, and why would I think we could provide customers with more or better service than they are already getting from other sources?” Diller says. “I could go out and hire people and put them in place and start a mapping program or soil sampling, but I’m probably going to struggle for 5 years and who knows if I’ll even be viable after 5 years.”
Meeting in the Middle
Striking an alliance with local input retailers is what Diller hopes to accomplish to carve out Hoober’s piece of the data management pie. He’s been researching partnerships with a handful of co-ops to be the “data courier” that collects and stores information from the farmer, then makes it accessible to agronomists to analyze and write prescriptions.
“Is there a piece in this puzzle where we can play a little bit bigger role, because when we start dealing with 3 or 4 different fertilizer dealers, is there a piece in the middle that is missing?” Diller asks. “Can we be the entity that stores the data in the cloud, and then disseminates it to whoever needs to see it? Can we be that middle guy? I’m not sure I have that question answered yet.”
Diller admits there are considerations for how to effectively nurture these third-party partnerships. Since Hoober is a supplier of farm equipment and precision hardware to multiple retailers, Diller can’t afford to align the dealership with just one company.
“The next thing I know is we’ll have a fertilizer dealer from down the road coming to us saying, ‘I’m not going to buy sprayers from you, I’m going to another dealership,’” he says. “There’s a very fine line and I’m not sure where that line falls, but there has to be some common ground for all of us.
“On the flip side, that fertilizer dealer is in the same shoes. They can’t form too tight of an alliance with us, because then they make their customers mad if they are working with a John Deere dealership, and also aligned with us.”
In order for these partnerships to be viable, it takes flexibility to be able to work with a variety of companies, always keeping the best interests of the customer in mind, says Dave Gebhardt, director of agronomic data and technology with WinField, a crop protection and seed company. WinField works with both input retailers and farm equipment dealers on tailoring data management solutions for customers.
“Providing these agronomic decision support services is a very local situation,” Gebhardt says. “We work with a John Deere dealer who partners with a progressive co-op working with common customers to enable each others’ business. But in other areas, those opportunities don’t exist and it’s fair for either the dealer or co-op to be the data management service provider.”
Structured for Success
One of the keys to a successful data management partnership is defining the service roles each party will play, says Jeremy Wilson, technology specialist with Crop IMS, based in Effingham, Ill. The precision consulting company works with several farm equipment dealerships providing data management service through their precision farming departments.
“The first and most important thing is that if a dealership is going to partner with us, we need to retool their mechanics because the first two partnerships we tried failed miserably,” he says. “The dealership’s salespeople sold the customer a tractor and helped set up A-B lines, but didn’t worry about helping that farmer enter the right crop or hybrid. That can have a huge impact on the value of data collected at the end of the season.”
Wilson’s expectation of a dealership looking to partner with Crop IMS is that at least one precision specialist needs to be trained on properly setting up planter or combine technology to record usable data. While precision specialists may have the skills to sell data management services to the grower, the work of creating recommendations, doing the analytics and understanding how to explain them is probably better farmed out to another company, Wilson says.
“To manage more than 100,000 acres of data you need two people to do it. You need an agronomist and you need a data management professional,” he says. “I don’t think the dealerships, at least in the Midwest, are staffed or wired or have the desire to move to that level of data management on their own.”
Crop IMS offers several tiers of data management service to suit a dealer’s preference for pricing and partnership level. The first option is that dealers can essentially be a data management referral service for Crop IMS. Dealers receive a commission for each referral and aren’t involved with collection or storage of customers’ data.
In the second scenario, a Crop IMS staff member accompanies a precision specialist — designated by the dealership as the data management point person — to visit a customer to discuss the scope and price of data management services offered, which can include creation of yield reports.
“This is a situation where the customer wants to get into data management and it’s a tag-team approach to explain the services,” Wilson says. “We set the pricing and it’s still branded Crop IMS, but the dealership earns a larger commission.”
The third partnership option is the most complex, and potentially the most lucrative for dealers. A Crop IMS specialist works in a consulting role with the dealer to provide a suite of data management services to customers.
Pricing for these services range from $5-$20 per acre, depending on the level of involvement for Crop IMS. The basic package includes planter setup, a planting report and crop insurance reporting. The next level includes yield data analysis and reporting, along with the basic package services.
The top level includes fertility recommendations, hybrid analysis and weekly crop scouting reports. For each package in the top level partnership, Crop IMS offers a suggested pricing for dealers.
“The dealership can set its own price for the packages and they are the ones selling the service, based on what they are paying Crop IMS,” Wilson says. “We’re more of a facilitator than anything and the data management services are all branded through the dealership.”
Piecing the Puzzle Together
While dealers can rely on third parties for the framework of data management services, there is also the potential to develop an in-house program, which can be sold to retailers. This is a model that H&R Agri-Power is exploring with a local co-op. The dealership plans to set up a pilot program in 2015 partnering with the retailer to serve its customers in parts of Kentucky and Tennessee.
“The goal is that the retailer will be responsible for writing prescriptions for customers and our job would be to make sure those are stored and uploaded properly into the displays, and more importantly, ensuring their use in the field. Without this, it’s all for nothing,” Conklin says. “This could be fairly lucrative for us, potentially charging a couple dollars per acre to the retailer, who offers this service to their customers. It would then be up to the retailer to decide how they want to price this to their customers.
“Not only would this potentially generate revenue through the service, but it could also broaden our customer base and lead to some additional equipment sales.”
If successful, Conklin hopes the dealership can eventually evolve into the role of a “data clearinghouse” for several retailers, where specialists would upload prescriptions, set A-B lines and field boundaries before farmers went into the field.
One of the reasons Conklin likes this approach is because it doesn’t force precision specialists to work outside of their comfort zone.
“There’s no reason for us to be something we’re not,” he says. “We don’t want to be agronomists, write prescriptions or analyze data. It’s going to be our relationships with those retailers and co-ops that will be the boots on the ground for us with data management. My position has always been, let our specialists do what they do best.”
Conklin says the goal for H&R Agri-Power is to become a trusted advisor to their customers, and an integral cog in the “management team” that puts the data management puzzle together.
Cubbage agrees that dealers don’t need to do it all to have success with data management service. He says some are understanding that they can play a critical role in being the delivery or storage option for farmers who want to make their information accessible to retailers.
“Co-ops need iron dealers, because ultimately, they want the data, but it has to be good data,” Cubbage says. “There is value to the idea that retailers will pay for a package of services that help them get quality data delivered back to them, because that’s the key to helping customers be more profitable.”
‘Bacon’ of Data Management
While there isn’t a universal blueprint for forging a successful data management partnership, Diller says it comes down to doing your homework before diving in. One of the first questions he’s asking potential partners is, “What is your business philosophy?”
“If their philosophy and business statement don’t match the same core values as ours, as far as customer service, that’s probably going to end the conversation,” Diller says. “At the same time, as a dealership, we can’t go into these partnerships thinking if we don’t make money in 3 months, we get out. That’s the wrong approach, because it takes time to nurture these. We may go 2 years before we see any kind of return or profit margin, but I’d still like to see us take steps to get there.”
Wilson admits that the appetite for data management partnerships between dealers and third parties is still developing. This is due in part to dealers deciding to what extent they want to be involved in data management, if at all.
A scenario Wilson encounters is a precision specialist working with a customer who is interested in paying for data management service, but the dealership doesn’t have a business model to capitalize on the interest.
“We’ve got such a disconnect with salespeople who meet with their manager or the dealership’s owner saying, ‘Customers are killing me because we don’t have that service and we don’t know what to do with their data,’” he says. “So management decides to just get into data management without any real plan and then when it doesn’t make money that first year, they abandon it.”
It takes a top-down commitment to make it work, Wilson says, and an understanding that there will be an initial expense, whether it’s training staff or marketing the services to customers.
He likens data management to being the bacon of breakfast to be totally committed to the business. “You are raising the hog, killing it, creating the pork bellies and are totally invested in the what comes from that animal,” Wilson says. “It’s the same with data management. If you don’t have upper management commitment, it’s not going to be a profit center in the beginning and it may not be a profit center in 3 years.
“Dealers have to commit to the idea that this is an investment in the future of my dealership, my customers and realize there is an expense tied to this. But we’re not there yet in the industry.”