Understanding the
Entrepreneur:
How to segment your client base
Dr. Chris Peterson
Dr. Chris
Peterson
Director,
Product
Center
for Agriculture and Natural Resources
Michigan State University
Understanding the
Entrepreneur:
How to segment your client base
Dr. Chris Peterson
Director, Product Center
for Agriculture and Natural Resources
Michigan State University
© Dr. H. Christopher Peterson, Michigan State University, 2005
Segmenting Entrepreneurs

Why?
– Entrepreneurs come in many forms for
many reasons
• New, mgmt. experience, serial, limited resource
• “Great” idea, inventor, no choices left, why not
– How you assist them depends on
understanding who your entrepreneurs are.
– Your program’s success depends on
reputation for quality assistance.
MSU Product Center for Agriculture and Natural Resources
Possible Segments

By producer type
– Commodity through product producermarketer

By completeness of venture concept
– The idea, the will, the market opportunity

By willingness to plan
– Think-it-through vs. act-it-through
MSU Product Center for Agriculture and Natural Resources
By Producer Type
Understand that value-added marketing
is different with commodity marketing.
 Assess the readiness of your
entrepreneurial client for value-added
(differentiated product) marketing.

MSU Product Center for Agriculture and Natural Resources
Marketing Strategy Differences
Strategy
Component
Commodity
Marketing Strategy
Product
Marketing Strategy
Segmentatio
n
Not needed
CRITICAL DECISION:
Many possible
segments
Positioning
Best price, acceptable
quality—little to decide
Meet the demands of the
chosen segment
Product
Fixed—little to decide
CRITICAL DECISION:
Many possible
attributes
Place
CRITICAL DECISION:
Physical distribution
CRITICAL DECISION:
Many channels &
“spaces”
Limited—”shout out”
price
CRITICAL DECISION:
Many promotion mixes
Promotion
MSU
Product Center for
Agriculture and
Natural Resources
Price
CRITICAL
DECISION:
Residual decision
Actual Producer Strategies

TEPAP Alumni Survey
– 141 (41%) responses from 346 alumni
– 62 not doing vs. 79 doing value added
• 42 doing less than half of farm sales as VA
• 32 doing half or more of farm sales as VA

How are the two types of producers
alike? Different?
MSU Product Center for Agriculture and Natural Resources
Management Emphasis:
Efficiency vs. Special Customer
Needs
Customer Need
Mixed
Efficiency
0%
10%
20%
VA Producer
30%
40%
50%
Non-VA Producer
MSU Product Center for Agriculture and Natural Resources
60%
70%
Management Emphasis:
Cost Reduction vs. Premium Price
Premium Price
Mixed
Cost Reduction
0%
10%
20%
VA Producer
30%
40%
Non-VA Producer
MSU Product Center for Agriculture and Natural Resources
50%
60%
In-depth Interviews
Follow-up extensive telephone
interviews with 60 producers.
 Insights into five producer strategies:

– True Commodity Producer (15)
– Reverting Commodity Producer (6)
– Transitional Product Producer (11)
– Product Production Specialist (4)
– Product Producer-Marketer (24)
MSU Product Center for Agriculture and Natural Resources
Types of Producer Strategies
Type
Means
True Commodity
Reverting
Commodity
Transitional
Product
Production
Specialist
Product
ProducerMarketer
Differentiated
Product?
Differentiated
Production?
Differentiated
Marketing?
No
Yes
No
No/Limited
No
No
Yes
Yes
No/Limited
Yes
Yes
No
Yes
Yes
Yes
MSU Product Center for Agriculture and Natural Resources
Strategy Characteristics

True Commodity Producer
– Focus on traditional commodity.
– VA not viewed as more profitable.
– Strong focus on cost control.
– Extensive use of commodity marketing
tools.

Reverting Commodity Producer
– Forays into specialty crops or livestock that
have “premiums” but revert as premiums
disappear.
MSU Product Center for Agriculture and Natural Resources
Strategy Characteristics

Transitional Producer
– Committed to compete on product
attributes/benefits, not on price.
– Experimentation with production and
marketing methods to find formula for
success.

Product Production Specialist
– Significant alteration of farming operation.
– Outsource the marketing.
– Emphasis on reputation as specialist.
MSU Product Center for Agriculture and Natural Resources
Strategy Characteristics

Product Producer-Marketer
– Focus on end-user demand and supply
chain to produce VA crops or livestock.
– Radical innovation in farm procedures.
– Extensive direct customer contact and
responsiveness to customer requests.
– Non-farm networking and reputation.
– Reject cost reduction=quality reduction.
MSU Product Center for Agriculture and Natural Resources
How would you help each?

Consider the amount of product
differentiation in the new venture
– Ethanol plant (commodity into commodity)
• Commodity producer: limited on-farm change,
but market access needs to be “assured”
– Gourmet organic pastured poultry
• Product producer/marketer: limited change;
focus on the venture planning
• Commodity producer: huge change; focus first
on education then venture planning
MSU Product Center for Agriculture and Natural Resources
By Concept Completeness

What are the building blocks of a
successful new venture?
– A “complete” venture concept
– A means to test potential & feasibility

Complete Venture Concept
– The innovative idea
– The entrepreneurial drive and skill
– The market opportunity
MSU Product Center for Agriculture and Natural Resources
Types by Concept
Completeness
Innovative
Idea
Entrepreneurial
Drive & Skill
Market
Opportunity
Inventor
Yes
No
No
Pure Entrepreneur
No
Yes
No/Yes
Business Analyst
No
No
Yes
Classic Venture
Client
“Manager” Client
Yes
Yes
No
Yes
No
Yes
Complete
Entrepreneur
Yes
Yes
Yes
Type
Component
MSU Product Center for Agriculture and Natural Resources
How would you help each?

“Incomplete” types: inventor, analyst,
pure entrepreneur, classic venture
client, manager
– Assess will/ability to add the missing
component(s) as an individual
– Assess will/ability to build a venture team
– Fill in the missing components as
appropriate
Complete entrepreneur: full speed
MSU Product
Center for Agriculture and Natural Resources
ahead

By Willingness to Plan

What are the building blocks of a
successful new venture?
– A “compete” venture concept
– A means to test potential & feasibility

Testing potential & feasibility
– Formal planning: Think-it-through
– Experiment: Act-it-through
MSU Product Center for Agriculture and Natural Resources
Why Plan?

The client cannot supply all the
resources alone! The client needs
others!
– Others must be convinced that innovative
idea is unique, marketable, and profitable.
– A plan is the sales brochure showing that
the potential and feasibility have been
tested.

The plan also forces the client to know
resources are needed and when!
MSU Product Center for Agriculture and Natural Resources
Business &
Product
Development
Process
MSU Product Center for Agriculture and Natural Resources
Formal Planning

Pros
– Desire doesn’t overwhelm reason.
– The logical flow is created.
– Investment of time and resources is
matched to the potential & feasibility of the
idea.

Cons
– Its may be, at times, too logical
– Its no fun; clients don’t want to do it
MSU Product Center for Agriculture and Natural Resources
Is there an alternative?

The process can be made simpler or
more complex depending on:
– How big is the venture relative to internal
resources?
– New business or expanding an existing
one?
– The ability to experiment?
– How risky?

Alternative: Experiment, rather than
plan
– Act-it-through rather than think-it-through
MSU Product Center for Agriculture and Natural Resources
How would you help each?

Client is “willing”: Formal Planning
– Plan even if the client doesn’t want to
– Assist by making process enabling, not an
obstacle

Client is not: Plan through Experiment
– Assist client in taking action steps that test
the concept, e.g., prototypes, direct tests.
– Launch and help client evolve
MSU Product Center for Agriculture and Natural Resources
Conclusions

Segment your clients and match your
assistance to the segment’s need.
– By producer type
– By completeness of concept
– By willingness to plan

As with any product delivery strategy,
segmentation should enhance success.
MSU Product Center for Agriculture and Natural Resources