To continue where my last article left off (which you can check out here), a precision ag company that specializes in benchmarking and analytics (or at least claims to) is now selling discount chemicals and other ag inputs. I was confused about this move out of left field and I wasn’t alone. How could those two things possibly be connected?
Thinking Like an Internet Marketer
I thought about some of my friends who are Internet marketers and some of the things they do to generate business. One thing they do is they offer a free or low cost product (called a “tripwire”) in order to collect valuable information like a name, email address, and a credit card number. People will willingly submit this information because they get a product or information with a lot of value for a very low cost.
The next step in the Internet marketer’s strategy is to upsell the customer to something higher priced. Since the customer’s credit card information is already saved on the site, the customer usually only has to click one button to purchase the product that is being upsold. This is what is called a “one click upsell” in the Internet marketing world and it is very effective. One friend of mine has made a few million dollars with this strategy.
I don’t have a problem with this strategy and I have purchased products this way that have enhanced my life. However, I can clearly see that this strategy is being used with poorly executed precision ag analytics acting as a tripwire that leads into an upsell into discount chemicals off the Internet.
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I don’t personally have a problem with people buying cheap chemicals on the Internet, but I do have a problem with a company hiding its true intentions by creating a buzz with a precision ag product that is complete garbage. Then they follow up by unleashing their high-pressure salespeople by calling growers with their dirt cheap chemical offerings. The whole thing feels like a bait and switch scheme and I find it ironic that a company that promotes price transparency is not very transparent about what their true intentions are with their low-cost, precision ag analytics tripwire.
So, what would be a more effective strategy for launching a successful business?
One key thing that successful startups do is to offer valuable information or a service for free and then upsell to premium services. By starting off in data analysis then switching to dealing in chemicals, sure this company captured email addresses and payment information for easy one click upsells, but there is one major flaw: it makes zero sense. Sure, they built a customer list from this gimmick, but in the end they are now viewed on the same plane as annoying telemarketers.
Instead of doing that, let’s go back in time and look at an organization that did quite a bit of research on launching products successfully. This organization is an advertising agency called Ogilvy and Mather founded by David Ogilvy, the real-life inspiration for Don Draper on the hit television series “Mad Men.” Here is what Ogilvy made available for free and published in magazines:
Well guess what? This just so happened to be the best ad campaign Ogilvy and Mather ever created for their ad agency. And by best I don’t mean it won awards or any of the stuff that doesn’t matter, I mean that it brought in more clients that wanted to do business with them.
It worked because it was congruent with their business, gave prospective clients valuable insight, and it made sense. Doesn’t that seem like a much better strategy versus a bait and switch scheme? That’s because it’s an actual formula for success.
Selling Inputs Online is Inevitable
I get the big picture in that a lot of commerce is moving online. If you’ve been to a shopping mall recently, then you’ve surely noticed the large number of empty and soon to be closing retail stores. It’s also no big surprise that earlier this month, Jeff Bezos, the founder of Amazon, became the richest man in the world. This e-commerce thing is real. There is a lot of money to be made in that space, and it is inevitable that ag inputs like chemicals will be sold online at least to some degree.
If you want to become the Amazon of cheap chemicals, more power to you, but if you do so be straightforward in what you’re doing.
The insurance industry has a good model to follow for being straightforward in using the Internet to decrease costs based on the consumer’s needs. Many of these online insurance companies can offer consumers lower insurance rates because they can save on overhead by not having overhead costs in every community they serve. They advertise this fact and people generally know what they are signing up for.
While this works for some, others such as myself prefer to go with the traditional insurance agencies. I’ve been with my insurance agent for 15 years now. Sure I’ve shopped around with the online discount insurance agencies, but in the end I feel at ease by going over my policies with my agent to be sure I have the coverage I need. The additional price I pay is worth the peace of mind I get by knowing if I should need my coverage, it’s there for me.
That’s the same attitude my dad and I take when we buy our inputs for our small farm in Northeast Iowa. Sure we could save money buying inputs online, but the expertise and service we get from our retailer more than offsets the additional price we pay. We get more in use value than the cash value we exchange for those goods and services. Like many other growers, we have found that principle to be a far superior strategy to increasing our long-term profitability over trying to save our way to prosperity.
Reevaluating the System
With the current farm economy facing razor thin margins, I don’t feel like a grower is out of line by exploring reducing his input costs by utilizing the power of the Internet. Any good business person in any industry would do the same thing in under those economic conditions. However, let’s not jump to the conclusion that just because you’re paying more for something that you’re being taken advantage of.
It’s true that Brand X herbicide that you buy at your local retailer is the exact same Brand X herbicide that you can purchase online at a lower price, but let’s remember that we are also facing some challenging times with weed resistance and managing modes of action. It’s getting pretty complicated to control marestail, waterhemp, and Palmer amaranth populations. Growers must ask themselves if they can truly be good stewards of chemistry to control their weed populations on their own or if it might be worth it to spend a little more for the access to their local trusted advisors who can use their expertise to help them successfully control their weeds.
I bet the growers down south who had to plow under their fields because of Palmer amaranth wish they would have managed their chemistry better. Maybe if they had they might still be in business today.