Category: Business Topics

Identify and Monitor Important Metrics

Dealers must stay on their toes to monitor the ever-changing inventory trends, seasons and customer demands. One way is to proactively optimize your inventory and make sure that you’re stocking the right products, at the right time. To accomplish this, identify and track certain metrics that give you a better understanding of how inventory is moving through the dealership:

A. Inventory Turnover [cost of goods sold / average inventory]

Also known as stock turn, this metric refers to the number of times that product has sold out for a particular time period.

Example: To keep numbers simple, a dealer’s average inventory costs $10,000 and it sold $50,000 worth of goods within a 12-month period. In this case, the dealer’s stock turnover rate is 5.0, which means that it sold out its inventory five times that year.

Monitoring stock turn is a must, since it lets you see how fast merchandise is moving in your business. Generally speaking, a high stock turn rate is good, because it means you’re not tying up too much capital in your inventory.

You can also compute for stock turn at a per product basis so you can figure out how fast different products are selling out. If product A has a turnover rate of 1.0, and product B’s turnover rate is 7.0, then you know that B is selling much more quickly. This serves as an indicator that you’ll need to order more of item B, and less of item A.

B. Gross Margin ROI [gross margin / average inventory cost]

The GMROI measures your return on the amount you invested in stock. It basically answers questions like, “How many gross margin dollars did I make from my inventory investment?” or “For every dollar invested in inventory, how many dollars did I get back?”

Example: A dealer’s average inventory cost is $25,000 and has gross margin of $60,000. The GMROI would be 2.4. In other words, the retailer earns $2.40 for each dollar spent on inventory.

When computed at a store-wide level, GMROI can give you insight on the overall health of your dealership. This metric can also be calculated at a per-product basis so you can determine whether it’s worthwhile to carry certain products.

Say you recently started selling a product in your store. You run the GMROI on it (by taking its gross profit then dividing it by your average inventory at cost) and find that the result isn’t as great as you’d like. You can then use this data to decide on what to do with the product (i.e. take it off the floor, put it on sale, etc.).

C. Sell-Through Percentage [units sold / (units on hand + units sold) x 100]

The sell-through percentage pertains to the number of units sold versus the number of units you had at the beginning. It’s a metric used to assess product performance. It illustrates how fast merchandise is moving and how many more units you have to sell to unload your inventory.

Example: A dealer received 200 units of Vita Charge® Liquid Boost®, and proceeds to sell 145 after a month. That item’s sell-through percentage is 73 percent. Sell-through gives you an idea of which products are selling and will allow you to make better decisions when it comes to what to stock up on, what to put on sale, etc.

Tip: Check to see if your point-of-sale or inventory system provides these metrics for you. Before pulling out your calculator to compute for these metrics, see if you can find the insights you need using your inventory or POS software. Some systems can generate reports on popular products as well as your margins, so you won’t have to do math yourself.

Alternatively, you can download Retail Calculators, an app that has several preset calculators in one program, allowing you to compute for common business metrics without having to memorize any of the formulas.

Inventory: Your Single Largest Asset

For any business, inventory is a major asset.

Just ask Kevin and Sandra Warnken, owners of Rockin W Ranch in Schulenburg, Texas. The couple manages the family’s Hereford and commercial cattle operation and work as on-farm dealers for BioZyme® with the company name of High Hill Supplements.

Sandra Warnken says the biggest misconception of inventory might be that businesses do not place enough priority on managing the items they have in stock. Because they recognize inventory as their single largest asset, the Warnken’s consistently utilize inventory management to also improve their bottom line.

Though every business has different needs Sandra says all businesses could benefit from being strategic about inventory. For High Hill Supplements, inventory rotation is an important aspect of their store. The Warnken’s believe it is vital for a business to have quick turnover of products on the shelf.

“Inventory on the floor for more than four to six weeks ties up valuable operating capital that may be needed to grow the business or purchase new equipment,” Sandra says. “In an effort to reduce inventory stock, demand is up for timely deliveries. Retailers do not want to overstock on products so when ordering they expect to have the product delivered within a certain time frame.”

Sandra says this equates to a big part of High Hill Supplements success, which is also its delivery service. Many times the Warnkens can be found delivering products before or after hours because they know a customer needs it right away. Many of their customers are ranchers just like Rockin W so the Warnkens believe they understand what those customers need and when.

“We know what works best for the particular area they may be in – for instance, our customers along the coast have the best results with consumption when their cattle are on a mineral that has a lower salt level,” Sandra says. “It’s all about personally knowing your customers and their operations and what works best for them.”

The Warnkens carefully watch product inventory, which they say is determined by the demand in their area. In order to keep product fresh, they try not to allow inventory on the floor more than three weeks. They keep staple products in stock at all time, including VitaFerm® Concept•Aid® 5S, Concept•Aid POWER Tubs, VitaFerm Cattleman’s Blend™, Sure Champ® Cattle and the entire Vita Charge® line.

The Warnken’s use Intuit QuickBooks for tracking inventory, including purchases, sales, adjustments, damages and margins. They enter accounts payable the same day product is received and invoice customers the same day product is delivered. Sandra says this process keeps their book inventory accurate with physical inventory. She also does a physical inventory count every six months to ensure computerized inventory is accurate.

High Hill Supplements also works to pass along product promotions to its customers. For example, when there is a promo Warnken will stock up on that item and in turn, offers every piece of inventory purchased to their customer base at the special price, even if it’s past the promotional deadline.

Sandra knows inventory management can be a balancing act between having too much cash tied up in inventory yet maintaining adequate product so the business doesn’t lose sales. Her advice is to take time to implement good inventory management practices including studying sales history, knowing the customer base and knowing the need for seasonal products.

Biozyme’s south Texas Area Sales Manager, Jay Willingham, helps the Warnken’s keep track of livestock shows, which in turn means they have Sure Champ products on hand during a busy show season.

“On the show side, we keep track of all the local, county and major shows as well as tag-in dates,” she says. “This helps us manage our Sure Champ line and helps us ensure we have what our customers need.”

High Hill Supplements also relies on sales reports from previous years to manage the inventory they need. These reports take into account projected growth, and help them personally understand what their customers will need and when. Sandra says it’s also critical to pay attention to the seasons. In her area of Texas fly season starts as early as March. This means they keep fly control products in stock beginning March 1.

Warnken says good inventory management is vital to the success of her family business.

“Proper inventory management keeps our products fresh,” Warnken says. “It enables us to meet our customers’ needs, reduces overhead and increases our bottom line.”

By Helping Kids in the Show Ring, We are Helping Our Future

The makers of Allied Feeds and the Ful-O-Pep brand are proud of their product and their customers’ successes with feeding their product. Just like any feed store, they work to build strong relationships and provide products people want for their livestock.

What’s unique about Allied Feeds is that nearly one-third of its customer base is livestock show families. The Allied Feeds brand, Ful-O-Pep Feeds, is specially formulated for show cattle, swine, sheep, goats, poultry and rabbits. Their product is sold across Texas and into Louisiana, Oklahoma, Arkansas and North Carolina thanks to their nearly 150 dealers who recognize and sell BioZyme® products.

Allied Feeds is owned by the Greg Gossett family, who also owns the Ful-O-Pep trademark. The company has been in business since the early 1900s, first as a Quaker Oats brand. Then it changed ownership to Wayne Feeds and eventually Continental Grain. Greg Gossett’s father, Dr. J.W. Gossett, acquired Continental Grain and continued the Ful-O-Pep Feeds reputation for being a quality full-line commercial feed manufacturer. Today, Allied Feeds manages two storefronts, one in San Antonio and one in Cuero, Texas.

It was just after the San Antonio Stock Show and Rodeo in 2012 that Dennis Delaney and Jay Willingham came to see Dennis Jemelka about selling BioZyme products. At the same time, the Cuero store was receiving calls for Sure Champ®. Since Ful-O-Pep Feeds already produced its own full-line of livestock show feed, Jemelka says BioZyme fit well with the store’s commitment to quality and fit the company price niche as well.

Allied Feeds and the BioZyme line of products offer something for everyone. Ranchers will use quality feed and supplements because they increase performance and maximize efficiency. Livestock show customers are willing to invest in top-of-the-line products because they want the best for their animals, and their goal is to win.

One of the Ful-O-Pep Feeds sales managers had children who showed steers. Naturally, they began using the products, which gave Jemelka a first-hand testimonial on how Sure Champ products work. He says the prebiotics and organic minerals all add up to be worth the investment. The selling point came when Jemelka could tell families they didn’t have to add any other top-dress supplements to their show feeds if they used Sure Champ from the beginning.

“Show feeds are a big part of our business,” he says. “As our salesman fed his own steers Sure Champ he paid special attention to the animal’s manure to see what was being digested. He came to trust what BioZyme says is true, you do get that added digestion with these products.”

Better digestion equates to more energy. As the calves mature, feeding Sure Champ will keep the animals in shape and they won’t go off feed. Jemelka reassures customers it has a high trace mineral content, which adds to the value of the product.

Allied Feeds recognizes the value of its show customers and offers several incentives to reward them for their business. One program is called Jackets for Champions. The store offers a jacket to any customer who earns a Grand or Reserve Grand Champion title at the local or state level.

The store also participates in the county level premium auctions. Jemelka says there are so many winners that use Ful-O-Pep Feeds products that it’s hard to reward them all, but Ful-O-Pep Feeds does give add-on premiums to as many as possible.

“Our show feeds are important to us but we look at it as a niche market,” Jemelka says. “Not everyone can buy higher priced feeds. You have to have a good product and if you produce winners then you’ll keep those people as a customer forever.”

There are occasions where the store is asked to visit with 4-H groups and FFA chapters to show livestock exhibitors what and how to feed. Jemelka says Allied Feeds wants to teach them about new products with the goal that a younger generation will learn the benefits of the Ful-O-Pep Feeds line.

Ful-O-Pep Feeds encourages its dealers to attend livestock shows and be among the people who need its products. He says the Rio Grande Valley is a specific area for livestock show families and the company’s San Antonio store makes textured feed and grains, which caters to more of the Valley’s show market. At one time, Jemelka says the store was making 80 tons of pelleted show goat feed in one week.

“We definitely have a show market and we try to give them, and all of our customers, the latest and greatest feed technology so they can succeed,” he says. “We think that by helping kids in the show ring, we are helping our future.”

Displays that Wow Your Customers

Product displays, if executed well, are guaranteed to stop customers and generate interest. When marketing to the show livestock audience, keep in mind that exhibitors often play more of a role in feeding decisions than you may assume, so your display should cater to a younger demographic. During the breeding season, cattlemen may prefer a display that educates them about the challenges products help them overcome. Every product and audience is different. The following are a few tips to keep in mind as you hone in on your merchandising skills:

LOOKS MATTER
Make sure your display fully embraces the product brand. BioZyme® invests a great deal of money and energy promoting brands to the end customer, and therefore, it would be in your best interest to stay consistent with the respective brand look. Because of the diversity in types of dealers within our networks, we are happy to discuss options in customizing a display to fit your space.

COMMUNICATE EFFECTIVELY
Communicating a clear understanding of what a product does is key to successful selling. Remember that communication is not limited to words: both the visual and written language of a display must also carry a cohesive message. A successful design is one that will seamlessly integrate with the rest of your marketing campaign (and in this case, the national marketing campaign efforts of BioZyme brands).

PRODUCT IS KING!
Ultimately, every display has one goal: to sell product! Displays that overwhelm the product defeat their purpose at retail. Make sure that your display is making the product the star. If your retail area does not have enough space to showcase every product, make sure you are highlighting those small pack products (Vita Charge®, Vitalize and the new Sure Champ® Spark) as conversation starters so you can lead in to telling customers about the larger mineral products available as well.

ADD VALUE FOR YOUR CUSTOMER
Every new display project is an opportunity to create value for your customer. Value can be created through timely placement (putting the right product out at the right time), added education or a sales promotion or bundled products.  Consider a display that can be changed according to time of year so your customer benefits when most appropriate for their business.

For help with your store displays, contact Katie Vaz, Marketing and Communications Manager, at kvaz@biozymeinc.com or 816-596-8782.

Measuring Return from Sponsorship Opportunities

BioZyme® began its youth investment strategy in 2007. That year, we sponsored two Junior National beef shows – Angus and Hereford. Today, we sponsor 13 – World Pork Expo, Hereford, Angus, Simmental, Shorthorn, Gelbvieh, Red Angus, Maine and Chi, Saler, Charolais, Limousin, Mini Hereford, and Brahman. The reason we choose to make this investment is simple. Youth are the future. The next question that always gets asked is how does this investment provide return.

In the ag world, it is common to get calls from the locals – FFA, 4-H, local cattleman’s association – asking for sponsorships or for you to be a volunteer. Association trade shows and exhibitions also turn to sponsors to get their program off the ground. In most cases, these organizations will ask for a modest amount ranging from a few hundred to a few thousand dollars in exchange for some type of advertising, like logos or banners.

Deciding what to sponsor can be tricky, as certain opportunities may be a complete waste of money, while others may pay off in gold (i.e. marketing your company to potential customers). In addition, sponsoring an event for someone who already sings praises about your dealership enhances that relationship, and because you are helping him or her meet a goal, they sing even louder.

Obviously making sure these choices are a good investment of your time and money is important to your checkbook. Whether you’re being recruited to provide time or money, ask yourself the following questions before deciding to invest:

  • What is the target market for this event?
  • What kind of exposure do I get for my investment?
  • Can I get this kind of exposure without this investment?
  • Do I get direct access to the audience?
  • Does it make sense for me to be there?
  • Which business goal does it help me complete?
  • Are other sponsors my competitors?
  • How does this enhance my credibility with who/what I’m helping?
  • Why wouldn’t I do it?

After you decide to invest, don’t forget to assess the results. Some metrics you should consider analyzing include: sales activity, lead generation, lower customer acquisition cost and/or attitudes toward your brand or business. BioZyme looks to Sure Champ® sales as our metric to measure success. The below graph shows the investment is paying off in more than just goodwill.

At the end of the day, the key to managing sponsorships is ensuring you get the “best bang for your buck”, while minimizing risk to your brand or business. I am sure the sponsors of the 2012 ING NYC Marathon did their due diligence. Unfortunately, they could have never predicted an event the magnitude of Hurricane Sandy. City officials, sponsors, as well as race organizers were divided on whether or not to proceed. It was a difficult decision to cancel, but the right decision. So, whether you are a title sponsor for a major event, like ING, or a smaller sponsor at a local event, setting your objectives, ensuring you have the right sponsorship partner, leveraging the association beyond just a sign, will yield better business in the long run.

A Real, Genuine Relationship

While many of our “Know Your Customer” articles focus on gathering data or technology that effectively helps you stay in front of your audience, we never want to undermine the value of a genuine customer relationship. Our animal nutrition industry tends to be more relationship driven as many of the people who own, manage or support businesses, like your dealership, are also in the business. This results in easy conversation, a real understanding of customer needs and a true comfort level between the business and customer. While we may be preaching to the choir on this one, we want to offer a few techniques to ensure your customer relationship is genuine and true.

Be patient in building new relationships.
Relationships take time. Resist indulging in disingenuous schmoozing, as it can be a severe put-off. Instead, take the time to get to know your customer, and share a little bit of yourself. Most importantly, remember that the product and service you provide is paramount in building a relationship. At the end of the day, no amount of personal connection can substitute for great product and service.

Understand the business.
We have a vast amount of segments within animal nutrition. While you may be an expert in the cattle business, equine or rabbits may not be your forte. You don’t have to be a professional, but learn to speak the same language as your customer, understand what keeps them up at night, and cater your interaction and products accordingly.

Go the extra mile.
As you grow your business and your customer relationships, there will be times that you’ll have to make a decision on when to adjust or expand your products and services to cater to the needs of a customer. The benefits of offering customized solutions are two-fold: 1) customers remember the times you came through for them and 2) it may open up additional revenue streams and new product offerings you had not previously considered.

Treat every client as your most important one.
Simply put, happy customers are more likely to make referrals. Provide all customers with your best service, regardless of whether they are a large ranch that run thousands of head or a family just getting started showing. You never know whom your customers may know or to whom they will refer you.

Respond promptly.
When a customer calls, emails or messages you on a social channel, acknowledge the receipt of the communication as quickly as possible, even if you do not have the answer they are looking for. You will give them comfort by simply acknowledging the receipt of their request and by communicating that you’re on it. This may seem like a no-brainer, but we often see dealers worry about having the right answer, and as a result, they forget to acknowledge they are looking for a solution.

Be more than a contact.
Despite the importance of collecting an email address, cell phone number for text messaging services, a social handle etc., these types of communication can often be misconstrued, especially during stressful situations. Consider a phone call or an in-person meeting to put a face (or voice) to a name. Often the phone gets a bad reputation when using it to ‘get on the same page’, but if used for good news, a phone call is a great way to build a better relationship with your customer.

Show up.
Every customer segment in your business has events they attend. Your show audience gather at the county fair or local 4-H or FFA events, your equine customers at rodeos and your cattlemen at field days. Seeing your face and knowing you care enough to attend these events to show your support or learn more about their involvement will not go unnoticed. Consider participating in those events, offering your time or sponsorship. With every new technological advance in communication, there is nothing more important or powerful than face-to-face interaction.

Pricing 101: your pricing strategy

Pricing is the most important aspect of your business. No other factor has a higher impact on improving profits. A 1 percent improvement in price optimization results in an average boost of 11.1 percent in profits. That’s no small change.

The following are methods commonly used when determining how to price inventory. Read through these pricing options and compare them to how you currently price items in your dealership. Keep in mind the services your dealership provides when trying to match the best method for you moving forward.

Value based pricing: It’s all about the customer

To consumers, price is a number of how much they value what you are selling. For example, if I needed a new winter hat, I could get one from the local Goodwill store for a dollar, or I could go to Macy’s and buy one for $25. If I only cared about covering my head, Goodwill would win, but since I care about my fashion sense, Macy’s wins. A customer’s willingness to pay is contingent upon the value he or she places on the product desired. Essentially, value based pricing cuts through the red tape of this scenario to determine the true willingness of a customer to pay for a particular product.

Unfortunately, the most common pricing strategies and methodologies forget about the customer. Instead, people in charge of pricing justify price points based on internal reasons or simply adopting existing market prices. Newsflash: customers don’t care how much something costs you or your competitors to make. Customers want to know how much value they are receiving at a particular price.

Value based pricing requires a lot of research. But it allows more interaction between you and your customer. Plus, unlike pricing done by market norms, this method focuses on isolating qualities that distinguish your product from a dozen similar products on the market.

Value based pricing models utilizes customer data, as well as breakdowns of the relative value of different features within your offering. You’ll also need to conduct an analysis of competing goods, because once you have the data, you’ll want to know the other options consumers have open to them. In the end though, you have the greatest amount of data to make an informed decision about your profit maximizing price.

Pros of value based pricing

1. It helps you develop higher quality products.

Value based pricing not only determines a more accurate price for the end product, but the process will also benefit your business. Taking on a consumer perspective will also help you discover what customers are really looking for. Products and features will be driven by consumer demand, which raises perceived value, thereby resulting in a higher price.

2. It allows you to provide phenomenal customer service.

Much of the customer data in value based pricing is collected through customer surveys or interviews. In past newsletters, we have stressed the importance of building relationships with customers and providing them quality customer service. Your customers will perceive that you are providing the best service available and building repeat business instead of a one-time customer. The customer will trust that you are providing the most bang for his or her buck.

Cons of value based pricing

1. It takes time and resources.

The method takes time; both while building relationships with customers and researching competitors’ prices and services.

2. It’s a science, just not an exact science.

Value based pricing is more of a process that requires consistent dedication, not just a “set it and forget it” mentality. Think about it, willingness to pay differs between different customers, regions and even offers. A 100 percent accurate prediction is impossible, but we can get pretty darn close.

Summary: Value based pricing should be a part of almost everyone’s pricing strategy. When done right, value based pricing provides increased opportunities to provide customer service and motivates you to provide a higher quality product.

Cost plus pricing: The oldest and simplest method of setting prices

Cost plus pricing is the simplest method of determining price, and embodies the basic idea behind doing business. You buy something, sell it for more than you spent buying it (because you’ve added value by providing the product), and the difference between your price and costs equals profit.

A lot of companies calculate their cost, determine their desired profit margin by pulling a number out of thin air, slap the two numbers together and then stick it on a couple thousand widgets. It’s really that simple. This method involves very little market research, and also doesn’t take into consideration consumer demands and competitor strategies.

Pros of cost plus pricing

1. It takes few resources.

Cost plus pricing doesn’t require a lot of additional market research. Cost of product is something businesses are mostly aware of by adding up different invoices, labor costs, etc. Businesses can then take the total costs and place a margin on top of them that they believe the market will bear. Cost plus pricing is especially helpful when you have no information about a customer’s willingness to pay and there aren’t direct competitors in the marketplace.

2. It provides full coverage of cost and a consistent rate of return.

As long as whomever is calculating the costs per item is adding everything up correctly, cost plus pricing ensures that the full cost of the product is covered, allowing the mark-up to generate a positive rate of return.

Cons of cost plus pricing

1. It’s horribly inefficient.

The guarantee of a target rate of return creates little incentive for cutting cost or for increasing profitability through price differentiation. This inward facing approach discourages market research, including watching your competitor’s prices. Plus with no research, you have minimal data on your customers’ perceived value of your product.

2. It doesn’t take into account consumers.

Perhaps the biggest downfall of cost plus pricing is that it completely disregards the customer’s willingness to pay. To make money, a customer must be involved. They’re the most important part of selling anything, so any pricing strategy that doesn’t take customer value into account is creating a vacuum that’s sucking all of the profit out of the business.

Furthermore to be blunt, customers don’t care about how much something cost you. They understand there are costs associated with doing business, but consumers care more about how much value you’re providing.

In summary, cost plus pricing isn’t ideal for most businesses, unless you truly cannot spend some extra time on the most important aspect of your business – your customers.

Competitor based pricing:  logical, but ineffective

Competitor based pricing is a lot like a bad case of plagiarism in a college class. Because you don’t want to do the work yourself, you look at your competitors’ prices for similar products, and set your prices similarly.

Imagine stacking all of your competitors on a totem pole with the most premium or luxury brand on top and the bargain brand on the bottom. You then decide where on the pole you fit, place yourself in there and set your price accordingly. This is not the way to do business.

Pros of competitor based pricing

1. It’s fairly simple.

If you’re in an industry with even one or two direct competitors, you can implement a reasonable competitor based pricing strategy. In most industries, marketing and product managers will then have to do relatively little research to find a price.

2. It’s low risk.

It’s rare to royally screw up using this form of pricing, and chances are if your competitor has never filed bankruptcy, neither should you.


Cons of competitor based pricing

1. It leads to large missed opportunities.

You will miss the opportunity to work closely with your customers and provide them true customer service if you just sell a product without any extra perceived value. You will likely lose profits and not take advantage of improving your product or business. Maintaining a lower price than your competitors isn’t always the best way to attract consumers, and as Lisa’s chart on page 2 showed, prices are not a priority like customer service and communication.

2. Formed by group consensus and lacks personal responsibility.

Competitor based pricing operates off the assumption that businesses already in the market have the correct answer and that every decision competitors’ make is intelligent. However, if a large portion of companies all use this tactic, then with time, competitor based pricing can lead to the entire industry losing touch with demand.

Summary: Competitor based pricing should be a part of everyone’s pricing process, but not the central pillar. As we alluded to before, competitor based pricing also gives you too much of a “set it and forget it” mentality. Pricing is a process that requires data and attention. If you’re not changing your prices and differentiating your product over time, you’re not sustainable. Yes, you should know what your competitors’ prices are, but knowing your customers and their demands is more important. If you take elements of all three of these pricing strategies, you should see increased business and an increase in your profits.

Understanding The Value

Without an understanding of what all is included in a bag of BioZyme mineral, it is possible your customers feel they are comparing apples to apples when, in fact, they are not. BioZyme mineral prodcts contain a host of things other mineral brands simply do not offer:

AMAFERM®
The key ingredient in all of BioZyme’s products, Amaferm® is a natural feed additive, that acts as a prebiotic increasing digestibility to maximize the energy value of feed.

OPTIMIN® Proteinates
The nutritional success of any organic trace mineral depends on the ability of the organic escort to hold onto and protect the metal from undesirable reactions. Optimin’s superior chelation stability maintains the integrity and keeps the organic mineral in its original form during digestion. Optimins are soluble and ready for absorption, especially when they are needed most – under stress or during difficult dietary digestive conditions.

PRICELESS Attributes of BioZyme Mineral Products

  • Research proven vitamin and mineral levels
  • Exceeds NRC requirements for respective production stage
  • Highest ingredient quality and consistency
  • No least-cost formulations as BioZyme manufactures to the ingredients, not the guarantee

An Inside Look at how the Value Pencils Out

Pricing is an issue of which 99-percent of all dealers struggle. However, Doug Underwood and his Area Sales Manager, Ben Neale, contest this issue with testimonials to demonstrate the benefits of including BioZyme® products in their customers’ nutritional programs in order to prove its value and thus price accordingly. 

Underwood has been selling BioZyme products for more than five years and became a dealer when he needed access to the supplement and mineral lines for his own cows. After using it for 19 years on his Polled Hereford seedstock, Underwood was a convinced of its worth. When his local dealer retired, he decided to establish his own BioZyme dealership at his farm near Campbellsville, Kentucky.

Many of Underwood’s customers were familiar with the products, but to continue to educate them as well as new prospective customers, Underwood and Neale have hosted field days to talk about how and why BioZyme products work. Underwood says when he hears the question of expense, he focuses his selling points around Amaferm®.

“That is what sets this brand apart from other mineral products,” Underwood says. “It’s one particular ingredient that makes a big difference in cattle. They have a much better feed intake and appearance. That’s the positive result you get from Amaferm.”

Neale’s territory covers Tennessee, Kentucky and Mississippi, so he’s on the road working with dealers like Underwood. In addition to field days and producer meetings, he says BioZyme has many marketing tools available to help dealers explain to producers how investing in premium products will increase their bottom lines. When Neale visits with dealers, he encourages them to think about inventory control. “Our price list shows buying 22 tons at a time is the best way to achieve greater margins, but if you have to sit on inventory for 6-10 months that may cost more money if operating on a line of credit,” Neale says. “So, we try to focus on flipping inventory faster. You can still turn a profit if you buy 5-10 tons at a time, and the product remains fresh for the customer.”

Underwood says the time he puts into selling a value-added product like those BioZyme provides is worth it. Even when cattle prices are down and it seems like input costs and supplements, like BioZyme, don’t make sense, he encourages fellow producers to try the product. Their return on investment will become apparent when they wean heavier calves or when cows settle on the first cycle. And he says, he would never lower his prices to match a competitor. “When they start comparing ingredients and prices from the local feed store, I have to show them what Amaferm does for them instead,” he says. “The math will speak for itself. If I can get a cow bred on the first cycle instead of the second I’ve saved 21 days at maybe $1.50 per pound and gain another two pounds per day for those 21 days for a total of 42 lbs. at weaning for an additional $63 per calf. The benefits BioZyme products provide for the additional cost pencils out in the long run.”

Neale says dealers should remember when faced with price comparisons from other mineral products they should focus on the ingredients BioZyme provides and how the ingredients found on the tag are not found in any other product. That’s what the extra pricing goes toward – better ingredients plus Amaferm in the mineral bag.

Neale says he talks to customers about Amaferm and how this prebiotic increases gut health, increases feed efficiency and helps animals recover faster from times of stress. The added benefit, he says, of two products in one bag is also a good selling point during price discussions.

Another benefit of the Neale-Underwood team is that ASM’s like Neale can help dealers grow their business outside of an established customer base. Neale is working with Underwood to recruit sub-dealers and build a network from customers who are two or more hours away. 

“I am working with Doug to build upon his strong local relationships,” he says. “It’s new for both of us but without the availability of stores in his area he has to network with breeders and others who can help grow his business.”

“Real business is successful when someone sees a return on investment not on price,” Neale says. “We want customers who use these products to understand and believe that as well. When you talk with someone who’s going on a diet, are they going out to buy and consume healthy food or junk? It’s the same with cattle. If you want higher returns then you have to be conscious of what you’re feeding them. You may have to pay more to be efficient.”

“Just let the product speak for itself,” Underwood says.

4 Myths to Debunk about Pricing

Pricing tends to be looked at as this ominous figure in business that’s so difficult that most are left paralyzed. As one of the least studied branches of marketing, pricing has become a black box for many dealers, who simply adopt existing prejudices and misinformation.

Put simply: if pricing is a black box, you’re losing money. A lot of it.

Therefore, let’s dispel some of the most common myths so you can be catapulted into action and start capturing all of that lost cash you’re leaving on the table. Increased revenue makes every business owner happy.

Myth #1:
We need to accept market or competitor pricing

Basic microeconomics teaches that in perfect competition, individual companies cannot affect market prices. In other words, businesses must accept the equilibrium price, where the demand curve crosses the supply curve. While this is a convenient way to calculate price, this theory doesn’t correctly reflect how the real market works. Prices in any market span across a range, rather than fixing on only one point. Product and service differentiation through brand, quality, etc. can all affect where your business lies on this range.

TRUTH: No matter the density of your industry, product and brand differentiation can take you well above the market standard.

Myth #2:
The only way to increase volume of sales is by decreasing price

It may sound too good to be true, but it is indeed possible to raise prices and increase volume at the same time. As Lisa states in her letter this month, price isn’t the only factor that attracts customers. Focusing on giving customers a reason to pay a higher price for your product or service is crucial, whether that be greater quality or better service. A powerful tool is market segmentation. Most products have a target audience, whether it’s the progressive cattleman, the bargain hunter, the show segment or the hobby horseman. Creating different classes for your product depending on quality or services can expand the number of customers you cater to, thus increasing buyers. Additionally, sometimes lowering your price can actually deter people from buying your product. Think about it. If I came up to you and said I’d sell you an Apple MacBook Air for $100, you wouldn’t buy it, because you’d definitely question the quality.

TRUTH: Volume is created by customer segmentation, charging different sets of customers different prices, and thus increasing volume and revenue.

Myth #3: 
We need to charge lower than everyone else

This is quite possibly the biggest misconception. A race to the bottom is one of the worst ways to compete, because you end up underpricing and losing out on your customer base. Your customers begin to question the quality of your product, but needs to buy the product. So they continue to shop around, and you lose customers. Lower prices equal lower revenue rates, which means the number of sales must increase to cover the loss. Obvious, yes, but it needed to be stated. Additionally, a lower price tag doesn’t mean customers will automatically flock toward your product. For example, if BMW suddenly sold its cars for $35,000 instead of whatever ridiculous dollar amount they’re priced at now, would that necessarily increase its revenues? Possibly in the short term, but in the long term they would begin to compete with cars made by Honda and Toyota who already have that market cornered. BMW would also lose out on the consumers that put luxury value in the premium pricing of their cars.

TRUTH: Underpricing is rarely the solution to any pricing woes. You end up dropping into a different segment of customers and lose out on cash from your current customers.

Myth #4:
Pricing isn’t important

Pricing is the most important aspect of your business. Period.
A 1 percent improvement in pricing results in an average increase of 11.1 percent in operating profit. No other business lever has that impact – not cost optimization, volume increases, or anything.


TRUTH: Pricing is, bar none, the lever in your business that has the highest impact on the most important cell on your end-of-month spreadsheet – your revenue. You need to take it seriously.

Source: http://www.priceintelligently.com