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Agricultural financial market segments

Author

Listed:
  • Maud Roucan-Kane
  • Corinne Alexander
  • Michael D. Boehlje
  • Scott W. Downey
  • Allan W. Gray

Abstract

Purpose - For agricultural bankers, agribusiness managers, and salespeople, understanding customers and their preferences and behaviors is crucial to success. The two goals of this paper are first to identify today's distinct market segments for financial products for US crop and livestock commercial producers, and second to predict segment membership based on observable characteristics. Design/methodology/approach - Cluster analysis was used to identify four distinct buyer segments for the purchase of financial products and services by US crop and livestock commercial producers. A multinomial logit model was used to predict segment membership based on demographic, behavioral, and business management factors. Findings - Although, traditionally, the financial services industry has segmented the market for commercial producers based primarily on sales/size categories; this research shows that this factor is not a significant predictor of behavior. Instead, this paper proposes a segmentation based on buying behaviors and identify four distinct market segments for financial products and services for US crop and livestock commercial producers: balance, price, convenience, and service. The balance segment being by far the largest segment. Research limitations/implications - Although the sample size means is representative of the US ag population, it may or may not be representative of the customers of a regional lender. Readers who are lenders are therefore advised to apply this methodology to their customer database and use the results of the paper as a quality check or benchmarking exercise. The findings also raise a number of issues, which require further research, such as how to implement a targeted marketing plan when there is one dominant segment and two other distinct segments. Practical implications - Lenders need to reconsider their market segmentation methodology. Originality/value - While there has been some research on market segments for retail financial markets, apparently there has been no work on market segments for agricultural financial products. This study exploits a unique dataset of 2,575 responses to Purdue's Large Commercial Producer Survey and the 2008 survey is the first time the survey included a series of detailed questions on how producers choose a financial service provider. This paper's findings will benefit agricultural bankers and agribusinesses that offer financing to their customers.

Suggested Citation

  • Maud Roucan-Kane & Corinne Alexander & Michael D. Boehlje & Scott W. Downey & Allan W. Gray, 2010. "Agricultural financial market segments," Agricultural Finance Review, Emerald Group Publishing, vol. 70(2), pages 231-244, August.
  • Handle: RePEc:eme:afrpps:v:70:y:2010:i:2:p:231-244
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    References listed on IDEAS

    as
    1. Gloy, Brent A. & Akridge, Jay T., 1999. "Segmenting The Commercial Producer Marketplace For Agricultural Inputs," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 2(02).
    2. repec:oup:revage:v:26:y:2004:i:4:p:505-520. is not listed on IDEAS
    3. Jason Henderson & Frank Dooley & Jay Akridge, 2004. "Internet and E-Commerce Adoption by Agricultural Input Firms," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(4), pages 505-520.
    4. Glenn Milligan & Martha Cooper, 1985. "An examination of procedures for determining the number of clusters in a data set," Psychometrika, Springer;The Psychometric Society, vol. 50(2), pages 159-179, June.
    5. Alexander, Corinne E. & Wilson, Christine A. & Foley, Daniel H., 2005. "Agricultural Input Market Segments: Who Is Buying What?," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 23(2).
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    Cited by:

    1. Calum Turvey & Xiaolan Xu & Rong Kong & Ying Cao, 2014. "Attitudinal Asymmetries and the Lender-Borrower Relationship: Survey Results on Farm Lending in Shandong, China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 46(2), pages 115-135, October.

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