Choosing a practical entry point into delivery of data management service is a mystery for many farm equipment dealers. Figuring out a method for making it a profitable part of their business is even more of an enigma.
But it’s not impossible. Creating a sustainable source of precision revenue from data management service requires an understanding of how to collect quality data and then what to do with it to provide farm customers with a return on their investment.
Three dealers with diverse approaches to delivering data management packages detailed the opportunities and obstacles of integrating this service for profit at the Precision Farming Dealer Summit. From educating customers on why calibration correlates to collection of usable data, to comparing flat fee with per acre billing for yield mapping services and the value of agronomic partnerships, the panel presentation provided an experience-based roadmap to profitability.
Big Data Starts Small
While many dealers are eager to tap into the potential that data management service can provide, it’s important to first understand what your objectives are and set attainable goals, according to Steve Cubbage, president of Record Harvest in Nevada, Mo.
“Our mantra is ‘Big data starts small.’ To manage data, you actually have to have data,” he says. “If I had to grade this industry on where we’re at as far as managing data within the mainstream grower, I’d probably give it a D-minus, because in many cases, farmers don’t know what they have.”
Cubbage regularly sees farmers who have been collecting data for years, but have never downloaded it from their yield monitor or worked with a dealer or other service provider to verify the accuracy of the information. But this is a pitfall that can be remedied by dealers who organize and validate their customers’ data.
As an independent precision farming dealer, Cubbage views his company’s roles as “precision accountants” when it comes to handling data.
“We’re basically taking the box full of receipts and sorting them,” Cubbage says. “This allows the customer to get back to the business of running their farm and not deal with mapping software or chasing after data.”
“Data is the easiest way to prove ROI, and validating it is critical to showing customers the payback on their investment…”
One of the most important parts of this process is standardization of variety names and the crop protection products that customers are applying. Cubbage calls this service “monitor prep,” which helps to ensure that collected yield data is going to be accurate enough to track long-term trends.
Setting farmers up for success and then showing them the results has allowed Record Harvest to succeed in selling multi-year data management contracts with customers.
“We started bundling these multi-year service packages together about 5 years ago and one thing we learned is that keeping packages simple has made them more attractive to customers,” Cubbage says. “About 80% of our customers just want a starting point, so we’re basically boiling it down to the most basic set of services they need to succeed.
“If someone tells us he doesn’t want to put a yield monitor on his old combine because he’s going to trade it in a couple of years, well, he’s going to waste 2 years of not collecting data and will pay for it later.”
Calibrate Your Market
Making sure that customers’ equipment is prepared to collect quality data is one of the first steps toward analyzing it to help them make more informed on-farm decisions.
But convincing customers to take the time and spend the money to properly calibrate equipment is often easier said than done, says Phil Moskal, integrated solutions manager with Mid-State Equipment in Janesville, Wis.
Rather than require customers to calibrate their yield monitors throughout the year, he calibrates before harvest and then again after getting a customer’s scale tickets.
“If we have just one calibration and scale tickets to work with, it’s a lot easier to post-calibrate that data and get accurate results,” he says. “I’m getting more customers asking about this because it helps establish those year-to-year trends.
“Plus, it has also given our salespeople opportunities to upsell grain carts with scales for another $1,500-$2,000 because customers don’t have to bring out a weigh wagon. It’s just another insurance policy to get accurate data.”
Knowing Mid-State’s market has also helped Moskal adapt the dealership’s data management service offerings to reflect customers’ “data needs” vs. “data wants.” With a mix of large and small acre operations within the 4-store John Deere dealership’s service area, he found the initial pricing structure for data management services wasn’t consistently efficient or profitable.
Starting with a $600 flat fee for equipment calibration and printing spring planting maps and fall yield maps, Moskal realized that the profitability of this platform greatly depended on the customer. For a single operator, large-acre farm, it only took about 4 hours to download and verify farm data and print maps, which translated to a profit of about $150.
“When we looked at our business as far as data, we didn’t want to just dabble in it…”
But for a smaller-acre customer with 3-5 operators and a custom harvesting business, Moskal says it took up to 20 hours alone to verify and cleanup field data, which decreased overall profit to about $26.
“We have a lot more of these types of operations in our area and there was no way I was going to succeed or make any money with a flat fee,” he says. “So we moved to a per acre-fee for printing maps and charge $100 per hour for verification and data validation.”
The change resulted in about a $33 decrease in revenue from the large, single-operator customers for data management service, but was offset by a $69 bump in profit from the smaller, multi-operator customer.
“The biggest thing we learned is that we need to know our market,” Moskal says. “Data is the easiest way to prove ROI, and validating it is critical to showing customers the payback on their investment.”
Investing in Agronomy
One of the considerations for dealerships when adding data management service is whether or not to expand into analysis of farm information and prescription writing.
Torgerson’s, an 8-store Case IH dealership group based in Great Falls, Mont., chose to partner with Alberta-based Agri-Trend, an independent consulting company to supply the agronomic piece of its data management puzzle. This decision coincided with an analysis by dealership management in 2012 that precision hardware sales were approaching their peak.
“When we looked at our business as far as data, we didn’t want to just dabble in it,” says Jed Bengston, vice president of sales and marketing. “We wanted to be a facilitator, which is what led us to the partnership.”
Torgerson’s has 3 agronomic “coaches” on staff, placed by Agri-Trend, a precision farming consulting group, to coordinate delivery of the dealership’s agronomic service plans. While the dealership has more than two dozen customers involved in its agronomic service program and 100% retention through the first year, Bengston admits it will take time for the program to be profitable.
“Our plan is to have this begin to pay for itself after the third year,” he says. “Looking at our investment and our area, it will take about 50,000 acres serviced per agronomic coach, at $5 per acre for each of our three agronomists to start paying for themselves.
“After our first year, we had about 80,000 acres enrolled, which translated to about $402,000 in revenue, but only about 26,000 acres per agronomist. We’re on our way, but we understand it’s an investment in the future of the business. We’ve been around for more than 100 years and hope to be here for another 100.”