The Value of Understanding Customer Profitability
Author: Dr. Mark Manfredo, professor in the Morrison School of Agribusiness at Arizona State University
As our competitive landscape shifts, it demands ag retailers sharpen their business acumen and hone their leadership skills to manage both the challenges facing agriculture today and in the future.
Everyone in an ag retail organization has an impact on its potential profitability and financial success. Furthermore, the disruptions we are currently seeing in supply chains, rapid technology adoption, and volatile commodity prices create uncertainty with respect to the financial performance of the ag retailer. Leaders at all levels of an ag retail firm must have a solid understanding of the drivers of profitability and value — drivers that impact revenues, expenses, operational efficiency and the cost of capital. This is particularly true in the presence of an increasingly risky market and policy environment.
On the flip side, it is equally important for ag retailers to understand the key profitability and financial performance metrics of their customers in order to best meet their needs. Will the product or service the ag retailer provides improve the operating efficiency of the customer? Will the product or service ultimately improve the customer’s sales, profitability and return on investment? Having a deep understanding of what drives customers’ financial success solidifies the role of the ag retailer as a trusted advisor. Indeed, successful customers lead to successful ag retailers. It’s a positive feedback relationship, and understanding what drives financial performance for both the ag retailer and the customer is critical.
Beyond the Blog
Learn more from Dr. Mark Manfredo at the 2022 ARA Management Academy as he focuses on developing an intuitive understanding of financial performance metrics useful in decision making. Additional faculty from Arizona State University and Purdue University will be presenting on other topics such as marketplace trends, thinking strategically, creating value for your customers, service excellence and blueprinting. Register now!
There’s no double that the ag and seed industries have experienced major changes over the last 5-10 years, with the last two years greatly accelerating these changes across all levels. Mergers, acquisitions, cost saving initiatives, the pandemic and much more have impacted our daily operations. With such a dynamic and fluid marketplace, it can be difficult to make sense of these shifts; however, those who don’t attempt to keep up can quickly be left behind.
One of the cool things I get to do in my role as a professor today in sales and marketing is work with sales organizations all over the world. Hearing some of the challenges these organizations face nearly daily gives me, I think, a unique perspective on trends. When I see repeated issues arise, it prompts me to identify tools researchers in the area of sales and marketing have explored that may be relevant to what is happening in the real world, but this isn’t always the case. Sometimes academia follows the real world rather than leading it, but research about sales in one industry often applies to what happens in others. The trends I’m observing right now may fall into that category.
Financial goals have been gaining increased visibility throughout all aspects of the agribusiness value chain for some time now. While our world is full of tight margins and dynamic marketplaces, this importance will only continue to climb, also making it increasingly important for non-financial managers to understand how their decisions impact their company’s bottom line moving forward.