How Are You Quantifying Success?

- Rod Osthus

Most company leaders measure success by whether or not they achieve their sales and profit goals. But in today’s volatile ag marketplace, smart leaders have learned that sales and profit are no longer the most relevant indicators of long-term success. Instead, it’s their customer retention rate.

The seed industry has one of the worst records for retaining customers. The average customer retention rate among ag companies ranges from 60-70 percent. It’s impossible to achieve your goals, let alone stay in business, when there’s that big a leak in the customer retention boat.

The following are reasons for these horrendous customer retention rates:

  1. Companies don’t implement a minimum order size policy. Sales reps often take even the smallest sale, just to advance toward their sales goals. A minimum order size strategy results in a larger order from first-time buyers, increasing the chances of creating a longer-term customer.
  2. Salespeople haven’t been taught that customers only include those who buy at least 51 percent of their needs from them. Until a farmer is buying more than half of his needs from the rep, he is the rep’s competitor. The farmer is more loyal to the competition than he is to the rep. Non-customers leave most often.
  3. Companies reward first-time buyers, while ignoring current loyal buyers. Want to drive off your current customers? Give new buyers rewards for buying the first time and ignore your current customers.
  4. Companies base internal reward programs on achieving sales and profit goals, instead of customer retention rewards. Field sellers should be rewarded for retaining customers.
  5. Company salesforces are too small. Customers (those buying 51 percent or more of their needs from you) are your salesforce. Field sellers need to focus on taking more buyers to the customer level. That is not only the fastest way to increase sales, but also dramatically increases customer retention rates.

The number of farmers continues to decline. Few sales reps or managers spend enough time thinking about the effects of that decline and how it compounds the impact on their business from losing even a single customer. Customer retention rates need to be as close to 100 percent as possible. Not one farmer should leave you unless he dies, quits farming, or doesn’t pay his bill. It does no good to bring new buyers onboard if you continue to lose the current ones.