Canadian Marketing Association
(abridged version)
May 2009
www.hemispheregps.com
●
info@hemispheregps.com
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Segmentation Approaches to
Technology in Agriculture
• Hemisphere GPS Overview
– Precision Agriculture Market
• Segmentation Strategy
• Results & Lessons Learned
2
Hemisphere GPS Overview
3
Leader in GPS Precision Agriculture
Revenue Distribution
Leading after-market supplier:
Serving large, mid - and entry segments
15%
(Marine/GIS)
Well recognized and respected brands
10%
Air Agriculture
Building OEM agreements:
75%
Ground Agriculture
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
North America
International
0.0%
2006
2007
2008
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Precision Agriculture Overview
5
Agriculture Market Background
Soybean Prices
1. Macro Agricultural Market:
•
•
•
Grain inventories remain at 30+ year lows despite
record harvests
Grain prices at strong historical levels and
expected to continue; global demand for feed &
bio-fuels (eg China & India)
World food production must double by 2050 to
meet population growth demand – G8
Est. Break Even
US Net Farm Income
2. Farmers:
•
•
Given limited farmable land, more innovation is
needed in fertilizer, seed, and technology
Despite economic caution, end farmer credit
remains healthy (70% of US Farms debt free)
3. Competition:
•
•
Competitive, but not heavily fragmented
A few strong players, a few fringe players
How do we capitalize on this growing
market opportunity and position a
compelling value proposition?
9000
1.4
8000
1.2
World Population (Millions)
7000
1
6000
5000
0.8
4000
0.6
3000
Farmable Land (Acres/person)
0.4
2000
0.2
1000
0
0
1950
1960
1970
1980
1990
2000
2010F
2020F
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Precision Ag: Definition
Precision Ag: Practices & technology to improve growing efficiency and yields
• Use of GPS for
guidance and
positioning
• Steering augmentation
to enable guidance
platform to steer
vehicle
• Correction signals to
dramatically improve
accuracy and
performance
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Enablers & Drivers – The Value Proposition
• Reduce input costs
– Reduced skips and overlap
– Less inputs (nutrients, chemicals,
seed, fuel, etc.)
– Payback effectively one season
Straight
Guidance
• Improve yield
– Precise applications and planting
improve overall yield
– Enables row farming vs. field farming
Contour
Guidance
• Reduce driver fatigue
– Complete field activities even in dusty
or dark conditions
– Less experienced operators required
• Good stewardship
– Precise inputs and enabled precision
techniques limit environmental impact
Circle Pivot
Guidance
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Precision Ag Market Situation
•
Relatively new market with limited penetration but
significant potential
− > 3M tractors / combines in NA today
− International adoption increasing (S. America,
Europe/Russia, China)
•
•
Limited education on what Precision Agriculture is
Very discretionary orientation to Precision Agriculture
investment
– Land, seed, fertilizer, tractors come first
•
Two emerging competitors in the field of GPS for
Precision Agriculture
– Both competitors claimed success with first generation
products
•
Very much a “one size fits all” product / market situation
– Limited portfolios available despite a variety of farmer
types and needs
•
Fundamental segmentation required to drive proper
market strategy
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Segmentation Strategy
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Segmentation Methodology
We determined the segmentation that we would undertake was at a strategic level
1. Macro-segmentation:
typically a market
segmentation view
2. Strategic segmentation:
customer – product
linked segmentation for
long term differentiation
3. Micro-segmentation: a
tactical, action-oriented
tool for immediate
targeting
Used in defining market proposition/s, brand
values, and in targeting mass marketing
activities. E.g. ‘Youth’, ‘Pre-paid’ or ‘Rural’
segments
Used in strategic planning, resource
allocation, Marketing/Sales/Service
optimisation.
E.g. ‘High Value’, ‘Growable’ or ‘BZ’
customers, ‘Technos’, ‘Savers’ or ‘Statussymbol’ segments
Used in day-to-day direct campaigns (crossand up-sell), targeted churn prevention,
acquisitions. E.g. ‘Seasonal roamers’,
‘Bargain hunters during competitor’s
campaigns’, ‘Location patrons’
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How to Segment?
A Customer Requirements - Needs Approach
Large Acre
Farms 15%
(> 500 acres)
Hobby / Lifestyle
Farms 85%
(< 500 acres)
$
Advanced Row
Crop Producers
Broad Acre
Crop Producers
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Segmentation Insights
Size of farm does not = amount of value
Much market attention
(commercial growers)
Marketing ROI sweet spot
HEMISPHERE
$
Profitability
Challenged
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Segmentation Insights
Three distinct mid market segments
Advanced
$
HEMISPHERE
Enhanced
Basic
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Competitive Value Proposition
After focusing on precise customer needs we arrived at simplicity as being the
required value proposition to ensure our competitiveness
Farmer: behaviors, motivators, demographic profiles, lifestyles, etc.
Customer Research Summary
• Give me value-added capabilities at a reasonable price
• Help me to change my practices to be more efficient
• Save me the time and money it takes me to run my operation
• Make it simple to use, install, and operate
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Segmentation Insights
The process helped us establish a broader and very segmented portfolio by
customer need with an upsell path at various price points – all designed around
simplicity
Advanced
Enhanced
Advanced
Mid Market
Product
$
Existing Mid Market
Product (Enhanced)
Upsell
Path
Basic
Basic
Mid Market
Product
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Results & Lessons Learned
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Results - Financial Performance
• 35% compound annual growth in total revenue
– A result of attacking more of the addressable market by segment
• Significant scale in profitability given portfolio synergies
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Lessons Learned
• One size does not fit all
– Do the proper research to determine segments and their needs
• Up market / down market dynamic
– More farms to address down market and less penetrated
– Up market invests more $ per acre but more competitive
• Product cannibalization
– Ensure portfolio doesn’t compete with itself unnecessarily
• Channel requirements
– Don’t assume the same channel can sell to different segments
• Support requirements need to match product offering
• Key marketing techniques
– Web vs. Test Drive
– Database marketing to meet “development” business goals
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Thank You
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