I want to tell you ladies and gentleman about when I’ve chosen the worst possible product in the world and it’s the most unglamorous product. It's fertilizer that the ingredient of the PNK stinks. You put it in the bag and when you’ve sold it, you rip it open and check it away you know on the floor.
And this goes back a few years now but I was engaged by the International Fertilizer Association. Yes, I lead a very glamorous life, ladies and gentlemen. The International Fertilizer Association and the president said to me before I started he said, “Professor McDonald”. He said, “We have declared officially fertilizer as a commodity”.
So I got my pointer out and I said to this guy and I said you see this, I said “This is a pointer. It’s not a magic wand. I’m a professor of marketing not a professor miracles” I said “You’ve just explained to me why when I went on the internet, I discovered that there was not one single, not one single manufacturer of fertilizers in the world are making $1.00 of profit”, you’ve just explained it to me.
Now part of this was a company called ICI fertilizers who’d tried everything else and they’ve got me as a professional marketing. And it was very simple. They weren't actually paying any attention to the farmer market. What they were doing was sort of dumping this stuff into their intermediaries, their merchants.
And when I said you know, “Who buys this stuff?” They said, “Merchant”. I said “Yes, I know that but who buys from merchants?” and they said, “Oh, they will buy on price” and I said “Who told you that” and they said “The sales force.” And that’s just not true. They will see that there are seven blocks on there. I’ve only put three blocks on to save boring the pens some fuel and I could go through all seven but this piece of segmentation research was very simple, very inexpensive and if you look at this guy, some of you might recognize him. He's the alpha segment.
He is the price segment and no matter what anybody does he will buy on price. It doesn’t matter what you offered this guy he’ll buy on price. But he was only 10% of the market and I want to make these points to you all ladies and gentleman. I think that all the research I've done on every continent in the world for all the big companies in the world, I have never find market anywhere in the world where the price segment is greater than 10%.
Can you see the point I'm making about these companies that buy on price and why are they doing it because they don’t understand segmentation. It’s very simple. And if you look at this character here, this character is David. David is the showoff farmer and I’m obviously giving you thumbnail sketches of them. David likes white fences, clean cows, he likes plants that look luscious to colors.
This one is Oliver. Oliver is a different character. He’s the technical farmer. He’s driving around his farm on this truck to an area attached to a satellite. And he’s actually analyzing the soil in his fields and he's mixing the PNK to get the maximum yield. He thinks he's Einstein, this guy.
Now you just imagine, you either send a direct mail shot or on your website or a representative goes around or whatever. If you actually said to David you started talking technical, his eyes would glaze over. If you went to Oliver and start to saying “Put this on your crops it will look nice” his eyes will glaze over. But guess what the whole industry all over the world was doing price, price. Nobody bothered about the feelings of this people. And when I say I changed their research and development totally it only took them six months before they came the most profitable, the only profitable fertilizer company in the world and they became the most succeed of ICI again. Simple, simple elementary market segmentation.
Now the company that bought ICI fertilizers, a Finnish company, I had a guy at Cornfield not so long ago and he told me, “They repeated the survey again across Western Europe and the segments are exactly the same.” Segments do not change, ladies and gentlemen. The size of some had got bigger and some have got smaller but generally speaking segments do not change over time.
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