Farmers Edge Comprehensive Case

Pricing Precision Agronomy Based on Benefit

No matter how you attempt to define price, in the mind of the consumer it will always be a reflection of value. And logic would dictate that the higher the value, the more willing consumers are to purchase, providing, at least, that its proportionally consistent with price. High price for high benefitno problem. Low benefit for low priceagain, this processes well for a consumer. But high price for low benefit will be rejected, while a low price for high benefit, on the contrary, will be embraced.

Once I figured out that we could provide a true solution to farmers by using field-centric information, weather stations, geo-spatial information, satellite imagery, telematics, and all of this stuff, I next realized that I cant afford to do this, recalls Farmers Edge president and CEO Wade Barnes. At the time, Precision agriculture was always a boutique product. A certain amount of farmers doing a certain amount of acres. Youd charge them as much as you can, and youd make money doing it. But it was never mainstream because the price points for growers were always way too high. It was too risky. The perception among most farmers at the time, says Barnes, was Ten bucks an acre and I dont know if its going to work, and what if it doesnt rain? Once his company took out an investment to prove its strategy worked, it was able to gather all the required information using all the required technology and ultimately provide farmers with true value, which, according to Barnes, was at a lower price than the competition.

Its clear from farmers that they see value in the Farmers Edge product, but farmer Nathan Friesen referred to Farmers Edge people as part of the value equation as well. In describing his regional rep, Friesen said, He treats us like were his priority customers, even though I know he has many. And he doesnt leave us sitting when we need a hand or need some information. Still others consider value as a return on investment. We have seen consistent return year over year, from cleaner fields, less lodging, and better usage of our fertilizer. For us its a no-brainer to continue using their service, claimed Kyle Holman.

Everyone, and every business, including those who run farms, pursues value. It simply makes business sense. Providing value, and making your customers think of that even before they use the word price, is what will keep them coming back.

Questions

1. What are some of the pricing constraints facing Farmers Edge?
2. The value equation is a ratio between benefits and price per product. Without knowing the Farmers Edge pricing strategies, what are some of the benefits you can name?
3. What would price discounts to Farmers Edge products do to its customers perception of value?