By Jorge Abrego
Acres U.S.A. Advertising Director
In agriculture, change has become the status quo. From global mergers and acquisitions, to the rapid emergence of new business start-ups and ag tech innovations, to industry-wide consolidation and digitization, companies of all sizes are responding to new pressures, forced to abandon their old ways to meet the needs of evolving consumer, market and grower demands.
Now that 2020 has passed, no one would have been aware that major change was afoot in our industry—but we could not have predicted just how significantly the pandemic of 2020 would affect our personal and professional lives. Nor could we have foreseen the speed with which agrimarketers would have to adapt to many of the new realities regarding virtual and digital tactics and opportunities
That said, it has been great to see the efforts our fellow agrimarketers embrace the change that was thrust upon them, and proactively address their need for engagement and connection to their audiences. Before getting into the trends, it’s important to mention that agriculture has for years assumed that our industry is so unique that trends and best practices that apply elsewhere don’t fit or reflect our reality. However, as the global pandemic has shown us, agriculture is more similar to other industries than we might care to admit, with ag companies facing many of the same challenges and opportunities as those in other sectors.
Leveraging Brand Equity
When compared to other industries, agriculture hasn’t been as strategic in the development and management of brands, and the lack of strong differentiation and brand stewardship (i.e. brand equity building) has meant that suppliers are leaving value on the table at a time when it is increasingly difficult to generate margin based on product performance alone (given the parity of performance now being achieved between most products in ag).
While the discipline of brand strategy should remain a trend all agrimarketers continue to follow and advance within their organizations, we want to speak more directly to a specific brand strategy emerging/re-emerging in other industries that can also target the farmer customer.
The strategic trend we’re speaking of is brand extension (also known as brand expansion). While this brand strategy isn’t new (it’s been used in the beverage and consumer packaged goods industries for decades), there are some great examples of it in the marketplace today that agrimarketers can learn from and apply to their future brand strategies. To build greater equity in the brands they steward, ag organizations should consider a brand extension when introducing new products and services, and/or entering new markets.
Agriculture generally suffers from having too many brands, and from the tendency to create new brands for new markets when it may not be necessary to do so. Brand extension, in contrast, provides a different strategic approach that offers benefits beyond the leveraging of a name. So if your company is developing a new product or entering a new market in 2021, you might consider making brand extension the core of your strategy, as it may net you the best results.
Consider these two Brand-Extension examples from the auto industry:
Mustang and Hummer. In both instances, Ford and GM have identified key new market opportunity in the electric vehicle market and have made the strategic decision to do so under existing product brands. They each made the decision to use existing product brands that have never been “extended” in both cases they have chosen brands with very rich back-stories and strong consumer equity.
In the case of Mustang, Ford is taking an iconic brand that is best known for defining the sports car market and using it to redefine what consumers should expect from an electric vehicle. Whereas with Hummer, GM is using a brand that signifies rugged, off-road prowess, to show that our electric futures aren’t just relegated to city and highway driving. Even more interesting is the fact that in both cases, one can see that this brand extension strategy isn’t intended to simply leverage brand name recognition and appeal to improve new market entry, but also to significantly grow these existing brands by overcoming some of their strategic weaknesses.
in both cases, Ford and GM are using the brand expansions to reposition not just what consumers should expect from products in the electric vehicle market, but also to reposition what consumers should expect from these iconic brands.
Key benefits to a brand extension are;
- Enhances brand image
- Provides promotional economies of scale as marketing for the core brand and its extension reinforces each other
- Reduces the risk perceived by the customer
- Eliminates the cost of developing a new brand
- Improves the likelihood of gaining distribution and trial
Marketing Budgets are Increasing
As agrimarketing emerges from the global pandemic, the good news is marketing budgets for 2021 are increasing. A quarter of ag marketers are working with 15% or high increase over last year. That’s great news considering the wealth of free and paid digital media options available for B2B marketing.
When it comes to B2B agrimarketers, 76% say they have a formal marketing plan, helping to shape and give direction to their marketing activities. However, this means that nearly a quarter (24%) still don’t have their formal plan in place. This can result in missing opportunities and marketing activities that aren’t integrated. When delivering their marketing plans, most agrimarketers (56%) use a combination of in-house and outsourced expertise, allowing them to make the most of others’ expertise while investing in external resources when required.
While digital marketing is great at driving leads to your website, your site needs to offer the best possible experience in order to convince them to convert. This is likely why 51% of respondents are allocating budget to website development. This tends to be an expensive area, but with search engines judging sites on speed and other factors and people having higher expectations, it is an expense that will pay off.
Digital marketing equates to the biggest marketing spend across all B2B companies, with 56% allocating budget to it. The increase is telling of a real need for agrimarketers to find the appropriate balance of media spending across channels to ensure a truly integrated model they can leverage for effective engagement of their target audiences as they work their way through the marketing funnel.
In terms of marketing objectives for B2B organizations in 2021, the top one probably won’t come as a surprise. Companies leverage various marketing tactics to increase sales leads for their sales departments.
Converting leads into customers is objective number 2, recognizing that lead nurturing is a complex journey with a number of micro and macro environmental factors at play.
Number 3 is increasing brand awareness, and in ag marketing this is primarily staking out brand/product differentiation that ensures a product’s unique attributes and features are understood.
Producing thought leadership is number 4 and is a key for increasing leads and staking out a unique position in the market that is known for the right reasons.
Growing Size of Wallet Versus Share of Wallet
For many years, the primary focus for many agrimarketers has been the quest to grow share of wallet with farmer customers. This led to much of the consolidation we have seen over the years, where some of the largest ag entities in the world have continually acquired stakes in many of the major crop input (i.e. seed, chem, fertilizer) and essential service offerings (i.e. data, marketing, consultation) as a means of providing customers with one-stop business alternatives.
Unfortunately, the “share of wallet” approach has its limitations when the size of the customer’s wallet remains relatively fixed, or even decreases. More specifically, when farmers have relatively the same amount or less to spend year after year, their focus will inherently remain on priority purchases (i.e. the essential crop inputs) meaning that the only way for a single business to grow is to:
- Enter into more of these priority offerings, or
- Steal share from competitors
That said, leveraging your existing brand equity to launch new products is of course an important strategic decision that not all agrimarketers are able to accomplish for a variety of reasons as many of the major players have already diversified their offerings, this leaves them with only the steal share option.
Now, while fighting for market share or share of wallet isn’t a bad thing, when the farmer’s main focus is on priority purchases, it leaves little if any room for growth into value-added offerings such as biologicals and precision agriculture. And as we have seen in our experiences with companies and brands in these value-added spaces, it has likely been the farmer customer’s lack of discretionary dollars over the past few years, and not their questioning of the product’s validity, that has hindered the growth of these markets the most.
As we move through 2021 and beyond, regenerative agrimarketers who wish to grow their value-added products will need to find ways to grow their customer’s overall wallet size. To do so, they will need to make the significant shift of thinking about their customer’s profitability as well as their own and embrace ways of driving down costs—not to simply increase their own margin but to free up customer spending.
A great example of this “size of wallet” approach can be seen in the CRM and sales enablement software industry, specifically with companies such as Salesforce and HubSpot.
While both of these companies provide a significant range of offerings and obviously want a large share of their customer’s wallet, they understand that to continually grow they can’t simply rely on their own pricing and profitability.
Instead, they have both tied their success to their customers’ success, knowing that the more profitable their customers are, the more income they will have to spend on more offerings. And, in turn, these new offerings focus on making the customer even more profitable so that the cycle of growth can continue.
In this approach, there is less of the perceived conflict between the business’s margins and the customer’s profitability that can exist in agriculture, as both parties understand and embrace the notion that mutual growth and success is the best means of ensuring win-win outcomes.
Given the urgently shared need for regenerative farmers to succeed, an increasing number of new and existing agrimarketers look to grow their businesses in innovative and transformative market offerings, to shift from carving off and/or increasing share of a finite wallet to growing the size of the wallet of the framer customer altogether.
Learn more about advertising opportunities with Acres U.S.A. here.
Jorge Abrego is the Advertising Director for Acres U.S.A.and has 26 years of advertising agency and B2B media experience in the agriculture, energy and technology sectors.