What Attracts Customers to a Cooperative?
Phil Kenkel
Bill Fitzwater Cooperative Chair
Almost every cooperative would like to obtain all of their member’s business while attracting nonmembers to become customers and eventually members. Various studies have investigated the
factors that influence producer’s decisions to patronize a cooperative. The factors obviously vary
with the type and geographic location of the cooperative. However there are some common themes.
In general, producers do not perceive that cooperatives offer more favorable prices for commodities.
This is not surprising, given the competitive nature of commodity markets. It is not clear how
producers factor patronage refunds in their price perceptions. Some studies have reported that
farmers perceive cooperatives as offering lower prices on inputs and having superior products.
Factors influencing purchase decisions vary between members and non-members and with the
characteristic of the producer. Price is the number one factor influencing the decision of nonmembers to patronize the cooperative. Members placed a higher emphasis on having a dependable
marketing and/or supply outlet. The quality of the services offered and the interactions with the
personnel are important factors for both members and non-members. Members tend to place more
emphasis on the quality of services, which no doubt depends on infrastructure and equipment, while
the purchase decisions of non-members are more likely to be influenced by their perception of the
personnel. A recommendation by another farmer appears to influence the decisions of both
members and non-members but ranks below price, dependable outlet, quality of services and
personnel.
Producer characteristics also appear to influence patronage decisions. Producers who are younger,
have higher debt loads and are less diversified place more emphasis on price. Older, less leveraged
producers appear to place more emphasis on service and personnel and place a higher value on a
dependable market/supply outlet.
There are several take home messages for your cooperative. First, make sure you communicate the
value of your cooperative difference in providing patronage refunds. Help members understand
how both parts of their patronage refunds (cash and stock) translate into price differences. Second,
your staff’s customer relations skills are particularly important in attracting business from nonmembers. Finally, you should recognize that the value of the cooperative’s presence and
infrastructure is a more long-term factor. It doesn’t appear to influence the decisions of nonmembers and new members but it’s obviously important to maintaining satisfied long-term
members. Like the song says, attract new customers and keep the old, one is silver and the other is
gold!
9-22-2010