Introducing a new business plan into an established model can be complicated, risky and expensive. The direction precision farming business is evolving toward, however, is presenting farm equipment dealerships with a chance to innovate and diversify offerings with agronomic and data management services.
The opportunity for added revenue from a well entrenched customer base is undeniable. Also, as more precision equipment components become stock parts on new equipment, individual hardware sales may continue to stabilize or decline.
This feature will be the first in a series of 3 that tracks the inception, implementation and progress of 3 multi-store farm equipment dealerships’ investment in agronomic and data management services. Look for the continuation of the series in subsequent Precision Farming Dealer print editions.
Reynolds Farm Equipment
Since Reynolds Farm Equipment opened the doors of its first location in Fishers, Ind., they’ve always sought to back up their products with quality service. This mentality has resulted in the John Deere dealership group stretching out to 7 locations across 3 states. Although it’s one of the newest components of their legacy, their agronomic and data management services are equally a part of their commitment to their customers.
In 2012, Reynolds Farm Equipment, a 7-location dealership group noticed a movement toward analysis of data collected from precision technology and a year later hired its first agronomist to begin offering data management services.
Reynolds’ precision farming department began to find its legs in 1997 when the company designated a specialist to handle all yield monitor installations and service. Growth was slow and steady, but the dealership had the advantage of its locations being clustered in a radius that made sharing a few specialists possible.
However, in 2012, Reynolds started to notice two things — the precision equipment they’d been installing was collecting an enormous amount of data that was being underutilized by their customers, and the market was starting to tip toward solutions based off that collected data. The effort to reevaluate their precision department’s approach was, in part, spearheaded by Craig Benedict who joined the dealership in 2002 and became the integrated solutions manager in 2012.
Bridging the Gap is a series of articles and webinars that tracks the inception, implementation and progress of several farm equipment dealerships' investment in agronomic and data management services. For the latest additions to the series, visit our Bridging the Gap feed.
“We’d been helping customers with their Apex farm management software, and charging by the hour, but we needed to look ahead to where the market was going,” says Benedict. “The transition in a dealership from being hardware focused to more data driven isn’t easy. Hardware is a physical object with margins and set prices — data services are a different business model.”
The first step in the transition was with manpower. Benedict knew he needed to open the schedules of the precision staff to accommodate more data driven work, and bring on new staff better versed in data analysis. In 2013, Reynolds added 3 more specialists for a total of 5 and started shifting the technical precision workload over to the service department.
“Wiring issues, bad screens or harnesses and even software issues now go over to the service department,” says Benedict. “Also, we’ve started pushing the sales department to focus on selling precision hardware with most new combines, tractors and planters to take some of that sales pressure off as well. That’s becoming easier anyway because so many more features are coming equipped from the factory.”
“The transition from being hardware focused to more data driven isn’t easy. Hardware is a physical object with margins and set prices — data services are a different business model…”
In addition to new precision specialists, Reynolds has also hired 2 full-time agronomists — the first in 2013 and the second in 2015. Although Deere had encouraged the dealership to bring someone with a CCA (certified crop advisor) license onto their staff, Benedict says the main reasons the agronomists were brought on was to service their customers directly and supply agronomic training for all of the dealership’s staff.
This training is done through one-on-one sessions as the agronomists distribute their time among the 7 locations and also though general sessions in their 50-person training center with stadium seating.
“We want specialists to know what kinds of things will impact farmer outcomes like sidewall compaction, improper spacing or depth control,” says Benedict. “It’s important to have agronomic knowledge across the whole organization because it gives us all a better idea of what the grower is trying to accomplish so we can devise better solutions. Learning how different types of closing wheels perform in certain soil types will help staff make the right recommendations.”
Seeing Return on Investment
To help further recoup the investment it took to bring on new staff, the agronomists are made available to the dealership’s customers for a fee. From soil sampling, variable-rate prescription writing, tissue testing, zone creation and soil mapping, services are available in an à la carte fashion.
“The agronomy service is independent, meaning we can work on red, yellow, blue or green farms,” says Benedict. “And we don’t have programs where farmers are locked in for several years, they can opt out at any point.”
With the rate at which its customers were gathering data on their farms, expanding service offerings to include data management is something Reynolds saw perhaps more as inevitable rather than a choice and this tempered early expectations. Initially, the dealership didn’t set any hard growth earmarks for their new agronomy and data services, but it did have certain revenue expectations to justify the expansion.
“We set a goal of $250,000 of added revenue per agronomist,” says Benedict. “One of our agronomists is more senior than the other and he’s already surpassed that mark. As our customer base grows, we see the goals being easily attainable and then some.”
Torgerson’s, an 8-location Case IH dealership network in Montana, has a century of service to their customers behind them. Changing with the times is imperative for a dealer with that much history and it responded to the prospect of data management service.
Torgerson’s has moved much of its precision hardware installs, diagnosis and repairs to the service department so its 2 precision specialists can focus on customer service across all their locations. Their precision department, which got its start in 2005 when their Trimble EZ-Steer sales were taking off, experienced a surge thereafter with guidance equipment, rate controllers and other aftermarket solutions.
Although he was pleased with the sales, Vice President of sales and marketing Jed Bengston knew it wouldn’t last forever.
“I would say some time in 2012 we were forecasting these sales would start to peak in the near future — especially on the equipment side when we were seeing cash receipts for our producers so high that a lot of the equipment we were banking on servicing was refreshed overnight because of new purchases,” says Bengston “We could see that the niche for the aftermarket equipment was definitely going to start to narrow.”
Launching into Agronomy
To meet the need for agronomic analysis that Torgerson’s anticipated was coming next, they partnered with Agri-Trend, an independent agricultural network headquartered in Red Deer, Alta.
“Agri-Trend is a service network that specializes in everything from agronomy to marketing,” says Bengston. “The basic business model is that we’d bring on Agri-Trend certified coaches and they’d act as joint employees. We employ them, but the training and billing is done by them and the dealership gets a portion of the billing to cover the costs of the coach.”
In late 2013, Torgerson’s hired 3 Agri-Trend coaches to share across its locations. Getting together a group of initial farmers willing to participate was fairly straightforward as some of Torgerson’s customers had already sought the service out.
“Some customer data actually came from Agri-Trend itself, and we had actually had some inquiries from our own customers who had expressed interest in the company,” says Bengston. “We were able to leverage those relationships we already had and add another layer to them.”
The first step Torgerson’s, an 8-store dealership group in Montana, took toward introducing agronomic services to customers was to shift some precision hardware support responsibilities to its service department. Photo Courtesy of Torgerson's
Bengston notes that having over 100 years of history and deep customer confidence made encouraging early customer participation easier. But getting broad uptake still took time.
“It’s slow, but the results have been really encouraging,” says Bengston. “As with everything, farmers aren’t going to jump in with both feet, especially with something where it’s hard to measure the results until 6-9 months later.
He says customers started in a limited capacity, but 12-15 months later they’ve gotten much deeper into our program.
“I haven’t had a single customer say they weren’t seeing a return on their investment and so far with 25 different producers, involved at some level, we’ve had 100% retention,” he says.
Customer confidence is one thing, but as a marketer, Bengston wants to stand behind the agronomy service as well.
“The 4 owners of Torgerson’s also own and operate 2 large scale dryland farms and we test all the new technologies and ideas that pop up on those farms,” he says. “We’ve got 14 months of running out Agri-Trend’s agronomy services behind us and we’ve had some really great success with it. From our side, we’d have a hard time marketing something we weren’t doing ourselves. It gives us a track record to present our customers with as well.”
Justifying the Expense
Bengston originally looked at bringing an agronomy service into the dealership as more of a customer service than a new revenue-generating endeavor. Having a century-long business relationship with farmers in the region, Bengston says gauging customer interest was as simple as having a few conversations with branch managers about the prospect.
“We were told to shoot to break even on the agronomic service investment in 4 years — but we’ve revised that down to 3 years and so far, we’re tracking on target…” — Jed Bengston
With the understanding that the high level of consumer trust Torgerson’s maintains often leads the majority of their long-standing customers to at least try the newest technologies and services they offer, they’re expectations were optimistic. However, they strove to pin down specific goals in terms of the investment adding value to the dealership.
“Our farmers are producing an enormous amount of data and we want to see them making the most out of it,” he says. “If we can do a little bit more to actually help them use it — I think that’s our job. Agri-Trend has told us that we should shoot to break even on the investment in 4 years — but we’ve revised that down to 3 years and so far we’re tracking on target.”
Greenway Equipment Inc.
For 30 years Greenway Equipment Inc. has brought its brand of service to farmers all over eastern Arkansas. Now, the 27-location John Deere dealership’s reach stretches into southeastern Missouri. In 2009, the dealership saw a growth spurt after acquiring several new locations, which brought them from 12 stores to 21.
The move caused proportional growth in their precision department, which at the time was only 4 specialists strong. That number has been on the rise ever since and now includes 19 specialists.
The spark that initiated the dealership’s foray into data management services was the hiring of farm tech manager Jeff Barnes in 2010. With a background working for John Deere and doing independent data management for growers, he used his experience as a template to take the precision department in a new direction.
“The first step toward introducing new services was to start transitioning staff toward more involvement in agronomy and handling data,” says Barnes.
The dealership brought on 3 geographic information system (GIS) data analysts and set up a support call center where growers across their customer base could reach out for assistance. The call center is manned by 10 employees of the precision department and supported by 9 more specialists who are in the field performing a mix of sales, precision farming training and one-on-one farmer consultations. These services are available to their customers for a per acre fee.
“The call center can help growers over the phone, but we’ve also introduced remote display access service too so we can actually view a farmers display remotely and walk them through any issues,” says Barnes.
Greenway Equipment’s data management services are split between offering equipment optimization and agronomic analysis. For example, using SeedStar Mobile to monitor farmer’s planters remotely, Greenway is able to help farmers understand how their planters are operating during the first few days of planting so they can get them properly calibrated for the rest of the season.
“On the agronomy side, we don’t do soil sampling or make recommendations, we just process the data and point out things that it’s showing us,” says Barnes. “In our area, water management is one of the biggest things that affect the variability in fields. We’ll look at yield data and help farmers get to the bottom of an issue when we’re doing field level profitability checks. At that point we can suggest next steps to solve the variations.”
Greenway Equipment Inc., a 27-store dealership group based in Arkansas, hired 3 geographic information system (GIS) data analysts in 2010 and established a support call center for equipment optimization and data analysis.
Photo Courtesy of Greenway Equipment
Introducing Data Services
During the launch of their agronomic and data management services there were 4-5 growers in the initial paid pilot programs.
“When we started the pilot programs, we did charge them a per acre fee. We felt that, from past experience, when customers don’t pay for a service, they don’t always put the time into it that might be necessary to get the most back,” says Barnes. “We didn’t get any pushback from that either and our producers were eager to try this.”
When it came to billing, Barnes thought that a per acre fee was the best suited and most accurate way to bill their customers because hours invested per acre was often consistent across their customers.
Greenway was careful to make sure they had comprehensive data privacy and security in place at launch as well. Barnes has found that being upfront with the dealership’s policy has the dual effect of protecting them and heading off any concerns that their customers may have.
“We worked with our attorney and put a data security policy together that we’ve had in place since 2012,” says Barnes. “It’s really just the precision ag team that is working with farmers’ accounts that will have access. We really haven’t run into any issues yet where customers were concerned with that because we try to tackle that at the beginning.”
“When we look at the total for precision ag though, hardware plus services, it’s easy to see that they will feed each other...” — Jeff Barnes
Goals & Uptake
Barnes says Greenway’s primary goals weren’t 100% revenue focused. For a dealership group as large as theirs, authority and dependability are values that they live by to strengthen their brand. For Barnes, offering data management services helps ensure that Greenway Equipment remains the first resource their customers turn to.
“Of course, positive revenue is the goal, but it’s not the overriding factor,” he says. “The teamwork with our customers is probably the most important goal. When you look at the total for precision farming though, hardware plus services, it’s easy to see that they will feed each other.”
Across their customer base Barnes has already seen significant uptake and broadly positive response. When the data management pilot programs launched initially in 2011 there were 4 to 5 growers with a total of 30,000 acres that participated. That number has since ballooned to 65 growers with a total of 250,000 acres enrolled in the program.
“We’re developing offshoot services as we go, but at this point, the renewal rate for our core data services is somewhere in the 90% range,” says Barnes. “This tells us we have a very large ratio of our customers who have been satisfied and want to take data management a step further.”