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Aaron Troyer Marisa Zansler 2001 AAEA Case Study Competition

UF. Food & Resource Economics Dept. Aaron Troyer Marisa Zansler 2001 AAEA Case Study Competition. XS Inc.com “Redefining Agricultural Input Supply”. XS Ag.com Website designed to enable producers, dealers, and manufacturers to trade agricultural seed, chemicals, fertilizer, etc.

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Aaron Troyer Marisa Zansler 2001 AAEA Case Study Competition

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  1. UF Food & Resource Economics Dept. Aaron Troyer Marisa Zansler 2001 AAEA Case Study Competition

  2. XS Inc.com “Redefining Agricultural Input Supply” • XS Ag.com • Website designed to enable producers, dealers, and manufacturers to trade agricultural seed, chemicals, fertilizer, etc. • Nterline • Combines the traditional agricultural input distribution system with up to date technology that streamlines the supply chain

  3. Problem Statement ? XS Inc.com must consider a marketing strategy designed to meet its challenges and allow profitable operation in the future Marketing Plan

  4. XS Inc.com: Challenges • Competition • Supply Chain Inefficiencies • Market Readiness

  5. Core Strengths Lower Input Prices 24 hour availability Fills Supply Efficiency need Allows for better price transparency Customer data management Company Weaknesses Internet Only Access Service “Return ability” Delivery Time No Personal Relationships XS Inc. Internal Forces

  6. Opportunities Participates in large market Internet market is growing Access growers around US in one location Nterline is open platform Pressures Traditional markets turning e-friendly Strong service from traditionals Many online ag services Compete directly with manufacturers, distributors, and retailers. XSInc. External Forces

  7. XS Ag.com Market Segmentation Total U.S. Farms Inputs 188.5 Billion Chemical Sales & Application 8.48 Billion Other Ag Inputs 166.88 Machine Parts & Repairs 3.58 Billion Animal Health 2.26 Billion Seeds & Plants 7.35 Billion

  8. Percent of Farms and Land in Farms: By Economic Sales, U.S., 1998-2000 Farms Reporting Greater Than $100K Source: Farms and Lands in Farms, Agricultural Statistics Board, NASS, USDA February 2001

  9. Alternatives • Continue on current course • Address issues of XSag.com and Nterline pricing and positioning • Drop either two lines

  10. XSag.com Implementation • Redefine the target market • Launch a phone service for producers • Add enticing information to website • Increase customer service availability

  11. XSag.com: The Target • Focus the target to specific users • Promote planning • Advertise use for specific crops • Target mid-revenue not acreage

  12. Target By Region Mid revenue firm size by region

  13. Add New Telephone Service • Hire or contract new telephone customer service • Allow for orders over the phone • Can provide price information • Access potential new clients • Fits with the traditional method of communication

  14. Expand Informational Services • 65% of growers with access to the internet use it to find information • Add news and weather • Crop information • New products available • Commodity Prices and Outlooks

  15. Launch Promotional Campaign • Advertising: @Agriculture online and in Successful Farming • Promote Price • New Telephone Order Service • 800 number to access XS ag

  16. Establish Customer Loyalty Pinpoint Most Likely Users Addressing the needs expressed by the end-user More capital risk Returns are somewhat unknown Evaluation PROS CONS

  17. Expected 2001 Revenues 1.44 million from XSag.com Base costs on Ag Services Powerfarm.com They lost .03/share or $164,000 dollars XS ag Costs then could range +/- 20% Revenues And Costs XSag.com

  18. XSag.com Anticipated 2002 Financial Data Dollars are in millions

  19. Core competency Software that anticipates and analyzes demand for ag inputs Open system Coordinates different users along different points in the supply chain Challenges Competition from large traditionals Many large distributors already use some form of ASP Must be compatible with all users Nterline Evaluation

  20. Source: Gartner Group May, 2001 ASP Market Size

  21. Nterline Pricing • Should be based on the level of service provided • Three levels of service • Customized • Must be competitive with other available ASP • Must save customers money

  22. Three Levels of Service • First Level provides transactional assistance throughout supply chain • Second Level available provides the first plus customer data tools and regional anonymous data • Third level includes both 1 and 2 plus and website integration.

  23. Nterline Pricing • Each level adds additional service, thus additional price • First level $2,000 per quarter plus transactional fees • Second level $3,000 per quarter plus transactional fees • Third level $4,000 per quarter plus transactional fees plus website maintenance

  24. Nterline Financials • Cost associated with the development of Nterline • $5.0 million + .5M to promote and service • Long term approach • Target smaller to midsize firms and Co-Ops • Set a goal of 125 customers in the first year • Yields revenue of 1.5 million

  25. Conclusion • Chose to continue development of both Nterline and XSag.com • Nterline • profitable after 2 years • Investment recovered after 6 years • XS ag restructured: • Fits end-user needs • Increases service and support

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