Thursday 17 January 2019

Alan O'Neill: 'Convincing customers to embrace buying over the web'

Stock image
Stock image
Cormac Tagging’s operations manager, Ursula Gormley, with a pedigree Holstein Friesian calf. Photo: Ray Ryan

Alan O'Neill

Many of us have been transacting business online for more than 15 years. We don’t concern ourselves with security quite so much anymore. We almost take it for granted, knowing that the banks and payment gateways such as Stripe and Paypal have our backs.

However, in the early days of online, the internet was used mainly for communicating and seeking information. It took time for the masses to adapt and adopt to paying for goods and services online. You’ll remember it started out with airline and event tickets, then Amazon and other retailers created a new norm.

For me, the turning point was when the banks reassured us that moving money between our accounts on their secure platforms was safe.

The banks, as you well know by now, have dramatically changed their old and costly branch model, where customers queued to cash cheques and pay bills.

Now we are encouraged to manage our money on our smartphones. Or if we insist on going to the branch, we’re encouraged to use the machines rather than queue for service.

The challenge of encouraging customers online

If your business sells goods or services online, you’ll know how efficient and cost-effective it can be. But how do you encourage customers that are used to a traditional model, to convert to a new way? For Cormac Tagging (see case study below), the preference is for farmers to buy the tags online. It’s a low-margin business and heavily compacted into a short calving season. But because farmers have been buying from just one supplier for many years in a traditional model, getting them to change and switch to buying online will take time.

That is not to say that farmers are slow to adopt online practices.

I have farming cousins and they have more technology and gadgetry than you can imagine and are avid online surfers. They are more the norm and it’d be very wrong to assume that farmers are old-fashioned resisters.

The challenge for Cormac Tagging is more about how to get farmers to change supplier and to buy on the internet.

According to David Leydon, head of food & agribusiness in Ifac: “Just like most other SME businesses, farmers are using digital technology where they perceive a real benefit. Springtime is the busiest time on Irish livestock farms with calving and lambing in full swing, so being able to do business online when it suits is critical.

“Convenience is a key priority for farmers, such as mobile optimised websites, ease of transaction, and clarity on when goods will arrive in the yard are all high on their agenda.”

Change Tips

1. The first step in cracking this issue is to research what is preventing your customers from converting to a new model. Is it a security or a usability issue? Or is it that the farmer suddenly remembers at 2am when they are in the barn aiding a cow to calve, and the debit or credit card is in the house? So ask for feedback.

2. Provide a choice of interactive options to your customers. Some customers will prefer to use the telephone. For those that do engage online, offer a choice real-time web-chat or telephone support. During the calving season, that might even mean a temporary service over 24 hours.

3. Highlight the benefits of the online service using all communication methods, from social media to email. And, of course, face to face at exhibitions such as the Ploughing Championship presents a prime opportunity.

4. Learn from Amazon’s 1-Click, which is about speeding up the payment process for the customer.

5. Educate your customers. When AIB bank introduced its new branch model, in Capel Street in Dublin, my team and I supported the transition. The challenge was how to encourage customers of all ages to embrace in-branch technology, instead of queuing. We trained a temporary team of assistants to proactively engage with customers, to educate them on how to use the machines

It’s important to manage expectations also. While it may be a generational reality that people of a certain age may be slower to adapt, there will always be a percentage of people even of a younger age group, that will not embrace this.

The Last Word

While I appreciate animal tags are a price-sensitive product and margins are low, could Cormac Tagging collaborate with resellers, such as vets or local farm supplies retailers? The tags would, of course, have to be priced accordingly, as I can’t imagine a vet or a retailer being happy to charge more than the direct online price. But it may be a temporary way of getting farmers’ names on the database for future years. “The farming community still value the local hardware, feed merchant and co-op store but there is no doubt where digital technology is more efficient or saves time it will be used,” said Leydon.

Cormac Tagging doubles revenue after securing State contract

Agri-Tech

Business: Cormac Tagging

Set up: 2005

Founder: Thomas and Cathleen Gormley

Turnover: €2m

No of Employees: 22

Location: Tuam, Co Galway

Ursula Gormley Cormactagging.jpg
Cormac Tagging’s operations manager, Ursula Gormley, with a pedigree Holstein Friesian calf. Photo: Ray Ryan

Farms are valuable assets, and like any business, maximising the value from that asset makes good commercial sense. Just like humans with individualised passports, farm animals can be uniquely identified through a numbered tag that is pierced into their ears.

The purpose of the tagging is for traceability on the one hand, so that all meat can be tracked from farm to fork. That unique number stays with the animal all through its life and beyond, as it makes its way through the food chain.

This is very comforting for consumers, particularly in the light of some scandals in recent years.

The current national cattle herd is 6.5 million and with 2.8 million calves born every year, it’s a tidy niche industry.

Cormac Tagging

TJ Gormley was a sheep farmer in Tuam, Co Galway, with an added passion for innovation in farm equipment and accessories.

He has won many agri innovation awards over the years, some of these products included weighing scales, foot baths and other livestock handling equipment.

All these concepts needed to be showcased and sold, so he set up a farm supply retail store in Tuam. From 2001, the company added sheep, goat and pig tagging to the portfolio and now holds 33pc of that market in Ireland.

The supply of cattle tags however is awarded by the Department of Agriculture, Food and the Marine and it was only possible to access the market through a tender process, which came up every two years.

The company engaged in every tender without success. For 14 years, the tender was won by just one Irish company which meant that during this time, farmers did not have choice of supplier or product. And in a market-driven economy, that scenario wasn’t to last.

The Business Model

Ursula Kelly is the eldest daughter of five girls and she joined her father TJ in the business in 2014.

An accountant, she went through various business development programmes, such as the ‘Enterprise Ireland Going for Growth’ and ‘AIB Women in Business Growth Academy’. 

“This gave me the added confidence and drive to just go for it and to take the business to the next level,” she said.

In December 2016, the company was awarded a contract to supply cattle tags. Cormac Tagging is the sole importer and distributor of Caisley tags in Ireland, a German-designed tagging system.

It is such a superior quality cattle-tagging product that the company guarantees replacement tags for free, for the full life of the animal. Because farm animals get up to all sorts of mischief, such as rolling around the ground and getting their heads stuck in wire, the tags take lots of abuse.

However, the Caisley cattle tag’s replacement rate is less than 1pc proven across 17 countries in Europe.

Lightweight and flexible in design, and with live patents on the products, the tagging system is far superior on the world animal-traceability stage. This has to be a big attraction for farmers, as they currently replace over half a million tags annually. It’s not just that farmers save on the replacement cost, but also the potential penalties if there are animals without tags during inspections by the department.

The tags are laser printed with a 15-digit number that is allocated by the department.

If you’ve ever seen a human’s ears being pierced, you’ll be familiar with this system.

The tag is attached to the ear using a punch-type applicator. However, it also takes a tissue sample from the ear at the same time, which is then sent off for testing, as part of the BVD disease eradication programme.

BVD virus is the cause of an important viral disease of cattle that is estimated to cost Irish farmers around €102m each year, according to Animal Health Ireland.

The business is very heavily weighted from November to January.

Due to our weather and grass growth, Irish farmers plan their calving season for the start of the year. Roughly 70pc of the country’s new-born calves arrive in an eight-week period from about now. Given that calves must be tagged within 28 days of birth, that puts pressure on the production process for the company.

The Future

Selling is done directly to farmers through online ordering and the telephone, and the company has more than doubled its turnover in tags in the last year.

It is a very price-sensitive market with low margins, so costs have to be managed tightly.

In an emerging Ag Tech sector, the company will continue to innovate and add to the portfolio of products.

Ursula has ambitions to be the number one animal identification supplier in Ireland and knows that it will take work and dedication.

They are more than prepared for the effort having spent the last 30 years in the agri industry.

Alan O’Neill, author of Premium is the New Black, is managing director of Kara Change Management, specialists in strategy, culture and people development. Go to www.kara.ie if you’d like help with your business. Business advice questions for Alan can be sent to sundaybusiness@independent.ie

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