Food & Resource
Economics Dept.
Aaron Troyer
Marisa Zansler
2001 AAEA Case
Study Competition
XS Inc.com
“Redefining Agricultural Input Supply”
 XS Ag.com
 Website designed to enable producers, dealers,
and manufacturers to trade agricultural seed,
chemicals, fertilizer, etc.
 Nterline
 Combines the traditional agricultural input
distribution system with up to date
technology that streamlines the supply chain
Problem Statement
?
XS Inc.com must
consider a marketing
strategy designed to
meet its challenges and
allow profitable
operation in the future
XS Inc.com: Challenges
 Competition
 Supply Chain
Inefficiencies
 Market Readiness
XS Inc. Internal Forces
 Core Strengths
 Lower Input Prices
 24 hour availability
 Fills Supply Efficiency
need
 Allows for better price
transparency
 Customer data
management
 Company Weaknesses





Internet Only Access
Service
“Return ability”
Delivery Time
No Personal
Relationships
XSInc. External Forces
 Opportunities
 Participates in large
market
 Internet market is
growing
 Access growers around
US in one location
 Nterline is open
platform
 Pressures
 Traditional markets
turning e-friendly
 Strong service from
traditionals
 Many online ag services
 Compete directly with
manufacturers,
distributors, and
retailers.
XS Ag.com Market Segmentation
Total U.S. Farms Inputs
188.5 Billion
Chemical Sales &
Application
Other Ag Inputs
166.88
8.48 Billion
Seeds & Plants
7.35 Billion
Machine Parts &
Repairs
3.58 Billion
Animal Health
2.26 Billion
Percent of Farms and Land in Farms:
By Economic Sales, U.S., 1998-2000
Farms Reporting Greater Than $100K
60
50
40
Percent of Farms
Land in Farms
30
20
10
0
1998
1999
2000
Source: Farms and Lands in Farms, Agricultural Statistics Board, NASS, USDA February 2001
Alternatives
 Continue on current course
 Address issues of XSag.com and Nterline
pricing and positioning
 Drop either two lines
XSag.com Implementation
 Redefine the target market
 Launch a phone service for producers
 Add enticing information to website
 Increase customer service availability
XSag.com: The Target
 Focus the target to specific users
 Promote planning
 Advertise use for specific crops
 Target mid-revenue not acreage
Target By Region
Mid revenue firm size
by region
Add New Telephone Service
 Hire or contract new telephone customer
service




Allow for orders over the phone
Can provide price information
Access potential new clients
Fits with the traditional method of
communication
Expand Informational Services
 65% of growers with access to the internet
use it to find information




Add news and weather
Crop information
New products available
Commodity Prices and Outlooks
Launch Promotional Campaign
 Advertising: @Agriculture online and in
Successful Farming
 Promote Price
 New Telephone Order Service
 800 number to access XS ag
Evaluation
PROS
 Establish Customer
Loyalty
 Pinpoint Most Likely
Users
 Addressing the needs
expressed by the enduser
CONS
 More capital risk
 Returns are
somewhat unknown
Revenues And Costs XSag.com
 Expected 2001
Revenues 1.44 million
from XSag.com
 Base costs on Ag Services
Powerfarm.com
 They lost .03/share or
$164,000 dollars
 XS ag Costs then could
range +/- 20%
XSag.com Anticipated 2002
Financial Data
2001
2002
Revenues
$1.44
$2.88 + $.600
Costs
$1.43 - $2.05
$2.11-$2.83
Marketing Plan
ROI
Profit or (Loss)
22.5%
$.01 – $(.61)
$1.37 - $.65
Dollars are in millions
Nterline Evaluation
 Core competency
 Software that
anticipates and
analyzes demand for
ag inputs
 Open system
 Coordinates different
users along different
points in the supply
chain
 Challenges
 Competition from
large traditionals
 Many large
distributors already
use some form of
ASP
 Must be compatible
with all users
Source: Gartner Group May, 2001
ASP Market Size
Revs (M) Percentage
USi
$110
7.7
Qwest
$100
7
Interliant
$52
3.6
PeopleSoft
$40
2.8
Corio
$33.5
2.3
eOnline
$25
1.7
Breakaway Sol.
$20
1.4
Agilera
$20
1.4
Surebridge
$17
1.2
Telecomputing
$11
0.8
Nterline Pricing
 Should be based on the level of service
provided
 Three levels of service
 Customized
 Must be competitive with other available ASP
 Must save customers money
Three Levels of Service
 First Level provides transactional assistance
throughout supply chain
 Second Level available provides the first plus
customer data tools and regional anonymous
data
 Third level includes both 1 and 2 plus and
website integration.
Nterline Pricing
 Each level adds additional service, thus
additional price
 First level $2,000 per quarter plus transactional
fees
 Second level $3,000 per quarter plus transactional
fees
 Third level $4,000 per quarter plus transactional
fees plus website maintenance
Nterline Financials
 Cost associated with the development of
Nterline
 $5.0 million + .5M to promote and service
 Long term approach
 Target smaller to midsize firms and Co-Ops
 Set a goal of 125 customers in the first year
 Yields revenue of 1.5 million
Conclusion
 Chose to continue development of both
Nterline and XSag.com
 Nterline
 profitable after 2 years
 Investment recovered after 6 years
 XS ag restructured:
 Fits end-user needs
 Increases service and support