A few years ago, at a CAMA event in Calgary, a farmer told a story to the audience of agrimarketers. She explained why she and her husband had made the decision to switch to a new equipment brand. Their new brand was arguably more expensive than the brand they had previously been loyal to.
When their existing equipment had failed in the middle of seeding, the service department had been unable (or unwilling) to help. The new brand delivered a demo model to their field, free of charge. The brand banked on this move driving a sale – and it did.
Both pieces of equipment likely cost about the same to manufacture, market, and deliver. But one brand bolstered their premium price with exceptional service – to a farm that wasn’t even a customer yet. And that’s without even mentioning the incredibly valuable word of mouth marketing that comes from this story being told and retold.
The motivations of a premium B2B buyer are at once similar and distinct from the individual consumer. While some are in fact driven by the desire to pay the lowest price possible, many others will pay a premium for enhancements that they value.
A 2014 Bain study of 400 purchasing executives found that those who made bulk purchases of grains and oilseeds indicated they would pay more for consistent quality and insights into underlying market conditions.
Similarly, many growers and producers will point to the exceptional service department, quick delivery times, or expert advice they receive as reasons they choose one product over another, not price. Yes, farmers value ROI in their purchasing decisions. But the return on investment is not always directly tied to yield and profit. Downtime, complicated software (or software that doesn’t integrate well with other platforms being used), or fluctuating quality in a bulk order can all have an impact on profits.
Many growers and producers will point to the exceptional service department, quick delivery times, or expert advice they receive as reasons they choose one product over another, not price. Click To TweetAccordingly, the motivators that drive purchase decisions for farmers can often contribute to the perception of value. Ultimately, all successful premium pricing models understand and exploit the perceptions inferred by the price. Perceived value is not dictated by the cost of production, or even by the promised ROI of a product. Perceived value hinges on signifiers.
Price itself is a signifier of value. Higher price points can infer higher quality, making products more desirable. It’s easy to see this desirability in consumer spending. Luxury brands confer status and prestige to those who buy them. But the same is true in agriculture. Consider the perceived value of certain colours of paint on farm equipment, and the loyalty and sense of belonging supported by that paint (and the associated wearable swag).
Beyond price, other signifiers of value include things like:
When considering any pricing model, it’s important to understand your customer and to understand the ways in which that customer interprets certain signifiers of value. If your buyer persona is a keen do-it-yourselfer, they may not be as motivated by a mobile service team. They may be drawn to quick parts delivery or exceptional how-to content.
In addition, you must ensure that your brand and your pricing model are in alignment. Any disconnect between the two can make a buyer question whether the product is worth the price, influencing their willingness to pay a premium. You can also convey premium pricing for economy products inadvertently. Carefully considering your personas and your brand should be a key step in your pricing strategy.
Lastly, remember that your pricing strategy doesn’t need to be all or nothing. You may choose to introduce one premium-priced product into your portfolio of mid-priced products. This premium-priced item can drive media interest, confer a perception of innovation or future forward-thinking within your organization, or convey prestige by association to the other products in your lineup.
Ensure that your brand and your pricing model are in alignment. Any disconnect between the two can make a buyer question whether the product is worth the price, influencing their willingness to pay a premium. Click To TweetDo you want to explore premium pricing in your agriculture brand? Our Business Intelligence team can help you dig deeper with fresh audience insights, market research, and more.
