People Power: Indispensable customers
By Robert Milligan
As I write this column, it’s June Dairy Month. Instead of our usual focus on dairy producers, I will focus on the most indispensable part of the dairy industry – our dairy product customers. No business can exist without customers for its products or services.
Customers and the market
“Any customer can have a car painted any color that he wants so long as it is black” is a famous quote about the Model T from Henry Ford. The quote is representative of his time. Mass production of goods was just beginning; consumers had very little money compared to today. The statement reflects a producer-driven economy. The producer – in this case – Ford Motor Company – determined what it produced. The consumer bought what was produced.
The producer-driven economy existed in the United States through and for a time after World War II. Immediately after World War II, Americans bought whatever was produced in response to the scarcity of the war years.
During this period, though, the seeds of change were sown. Americans were becoming more affluent and diverse; business was becoming more competitive as scarcity-induced demand was met.
American markets changed forever in the 1950s and ’60s, becoming consumer driven. Consumers determined what they wanted – products, colors, styles, etc. – by voting with their pocketbook. Today, consumers are the kings and queens, and successful businesses meet their needs.
Consumers and attributes
Most of the readers (and the author) of this column do not own a Porsche or a Mercedes. Why not? In selecting transportation, most of us seek practicality – cost, mileage, reliability. We do have varying demands for vehicle size, style and features. Why would someone buy a Porsche or a Mercedes? TThe answer might be prestige, extraordinary reliability, and maybe even elitism.
We do not just buy a vehicle; we purchase a vehicle with the attributes we are seeking. A young couple seeking economy may purchase a Corolla or a Focus. A larger family seeking to travel comfortably together may look at an SUV or a minivan.
Similarly, dairy consumers are purchasing the attributes of dairy products. What are some of those attributes? Price and quality remain important. However, other attributes are become increasingly important: convenience; an increasing array of quality and health dimensions; and location of production, including U.S. and even “local.”
As Americans have become more affluent, food price has been augmented by a variety of additional attributes: organic, natural and vegetarian. Some consumers have added attributes focusing on food production practices: animal welfare; hormone-/antibiotic-free; size of the business; and sustainability.
The crucial point: Dairy and food consumers are demanding increasingly diverse attributes. There is every reason to believe this trend will continue.
Consumers and dairy leadership
Dairy owners must place much higher priority on their leadership responsibilities today. Understanding the increasing diversity of attribute preferences is a key part of that responsibility.
Think about the following:
• The leaders of Wal-Mart and Target responded much more quickly to the changing preferences of consumers for “low-priced” goods than did Montgomery Ward, K Mart, JC Penney and Sears.
• Toyota and Honda leadership responded much more quickly (by decades) to the increasingly importance of fuel economy than did General Motors, Chrysler and Ford.
What is the leadership responsibility of a dairy owner? They must determine what to market that is the best match between: a) the vision for and resources – physical, financial, human – available to the farm; and b) the attributes demanded by customers.
Over the last several decades we have seen an increase in the number of farms that have chosen to market to the increasing diversity of attributes – organic, natural, locally grown, open range, etc. A major challenge for agriculture is that the attributes those of us in agriculture tend to look for in food are quite different from those sought by a majority of consumers (see table below).
Farm owners and ag leaders Majority of food purchasers
• Older • Younger
• Male • Female
• White • Ethnically diverse
• Rural • Urban
• Eats home-cooked meals • Eats away from home
• Traditional preferences • Seeks convenience & gratification
The bottom line: We must “listen” to our customers. This means seeking to understand the attributes they demand, and the various opportunities available to meet those demands. It is not “educating our customer” to convince them they should seek our attributes. Remember, we live in a customer-driven world.
By listening to our customers, we may uncover business opportunities. As the diversity of attributes sought by consumers increases, so will the need for diverse products. Your responsibility is to determine what “attribute” market gives you the best opportunity to implement a winning strategy, given the vision for your dairy farm or agribusiness, and the resources available to you.