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introchangablesolutions-blog · 6 years

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Blog 5: Channels & Customer Relationships

Through which Channels do our Customer Segments wants to be reached? Our customers want to be reached through online websites, mobile apps, magazine advertisements, and trade shows.

How are they being reached now? We are reaching out to our prospective customers through phone sales. Customers are currently going to independent dealers, they find advertisements on magazines and attend trade shows to learn about what is currently on the market.

Which channel is most cost-efficient? Phone sales and websites are the most cost-efficient way to sell to customers because we can create a website cheaply and we can navigate our customers using our personal cell phones.

How are your channels integrated with customer routines? Right now, our channels are not very integrated with customer routines, as there is an expense associated with attending trade shows and being published on magazines. Our goal is to raise money by winning business plan competitions and/or getting funded through a seed round of angel investing.

How do you create end user demand? We are simply interviewing farmers, talking to irrigation equipment manufacturers and their respective authorized dealers. We want to gain exposure through business plan competitions and pitches, and once we gain some capital, we will start targeting trade shows, magazines, create a website, and cold call on farmers to see if our products fit their needs.

How is demand creation different for your different channels? One channel is direct sales. For this channel, we need to cold call on farmers, attend trade shows and hand out pamphlets for our controllers. Another channel is by selling our manufactured controllers to “authorized” dealers, who will be our distributors. They will control end-user demand creation and most likely have an established presence.

Evangelism vs existing need or category? A mixture of both. We need to educate farmers about the benefits of our product for their farms because a lot of them don’t see the benefits of having standardized interoperable intelligent controllers. Their is also an existing need to become automated or get left behind to stay competitive as a farmer of irrigation equipment.

Interview 5-10 people in your channel (sales, marketing, etc.)

What kind of initial feedback did you receive?

Interview 1: Kraig Schulz, CEO of Autonomous Tractor Company. We learned that farmers usually have their own databases to contact people. The main sources of communications with farmers are trade shows( can cost between 1 and 10 thousand dollars for the most exclusive ones), publications because they read a lot, and other farmers using the systems which is the most effective form of communication. One great way to attract farmers is also by showing them that there has been field testing of the technology, sometimes to rent the land is not even expensive because many farmers would allow field testing in the farm in exchange of getting services for free. We also learned that farmers are very active online, they do a lot of online discussions through blogs, they are a really strong community. Many times farmers buy their controllers through the dealers of the irrigation equipment, therefore we would need to target those dealers as well to sell our technology.

Interview 2: Pat Horrant (Needville Gin Co.): They process cotton from fields. They take the seeds out. The cotton goes to a warehouse in Galveston. Farmers around there have been around a long time, for 43 years. They are father to son, family owned and run businesses. They don’t have irrigation. Pat told us that there is one farm in Needville that uses irrigation. Tubes on the end and water through the fields. Chemical people take soil samples using their own equipment.

Interview 3: Doug, a sales employee, Valley irrigation (manufacturer): The Valley irrigation manufacturing base is located in Nebraska. They sell their equipment through independent dealers, dealers do install, design, go through features, benefits, through the entire sales process. There are approximately 280 dealer locations around the U.S. The “authorized dealers” are independent companies that are highly trained in assessing and selling irrigation equipment. They sell it to the dealers, that resell it to the growers. The things that depend on what kind of equipment and machinery farms need: Water quality. Their steal will last over 20 years. Controls can have a shorter life itself. Controllers can facilitate the automation of controllers. Valley Irrigation, the manufacturer does not set the price. Price varies, but you can average about 90 acres 700-900$ per acre. The distribution network is a key channel for them because these guys are sales and service trained, the manufacturer is not. Controllers are all sold through the dealers. They will connect us to someone in Southeast Texas, who can potentially give us a free consultation at one of our team members farm. Dealers cost for installation. Dealers either manufacture the controllers or have a license agreement with other sellers of controllers. Other uses of controllers: soil probes that report back when and where you need to put more and less water.

Interview 4: Stormy Starks (distributor): They rely heavily on family relationships down in Wharton, TX. They are a distributor corporation in the cotton industry that sold to the textile mills. The relationships of the farmers have been established for over 3 generations. They have had the same supplier since 1972. We learned that for us to enter into the farmer community, we need to gain the trust of farmers, and the best way to provide them our technology is by showing that it has been tested in fields and getting referrals.

Interview 5: CNS Welding (unidentified employee): We learned that a lot of the cotton farms that we can contact are in the areas of El Campo, Victoria, Richmond, and Rosenberg. Many farmers like when people actually go to their farms to try to sell them equipment because they can relate better with the people and with actually seeing the technology.

What are the entry barriers? Based on interviews with a variety of people in our channel, we learned that our barriers to entry are: 1. Reasonably stiff competition with “authorized dealers” who sell irrigation equipment of well-branded companies like Valley irrigation, along with their own controllers. 2. Hiring the right engineers and getting the coding right to be effective in the market. 3. Developing relationships with farmers that been in the industry and have used the same suppliers for a long time. 4. The capital needed to go in and stay in business.

Does anything change about your Value Proposition or Customers/Users? A little bit, but our initial value proposition is essentially the same. We said that we will independently sell controllers to farmers and we were correct in assessing that we can partner with irrigation equipment manufacturing companies in selling their products along with our controllers. The thing that changes is that we may be able to sell irrigation/controller whole systems instead of just the controllers. More customer validation to follow.

Does your product or proposition extend or replace existing revenue for the channel? Both. Our product replaces the function of the dealers that sell controllers, but we sell an add-on service of “condition monitoring”, which our controller learns and is able to monitor power strains of irrigation equipment.

What is the “cost” of your channel, and its efficiency vs. your selling price? Our selling price is competitive, we are able to offer complete controller package systems for about $1000. Our sales and marketing expenses through attending trade shows, buying magazine advertisements can range between 10k-40k for the first year depending on how aggressively we are looking to market. Moreover, our team of WCE students will do our initial sales calls, for the duration of the first year. When our business is profitable and growing there will be a need to hire additional sales employees. We only need to sell between 10-40 controller packages to break even on our sales & marketing. Since we manufacture controllers, our direct channel is selling to the farmers and will have the highest profit margin. Since we are a technology company, we are aiming for somewhere between 70-80% gross profit margin. If we decide to partner with distributors, it may cost us somewhere between 10%-20% to offset the costs of the distributors. We will keep this channel of communication open.

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