Cultivating knowledge

Photos by Kate Spirgen

We hit the road to Columbus, Ohio, again this year for Cultivate’22 to bring you the latest news from one of the industry’s biggest trade shows. You can read up on some of our coverage below, and be sure to visit bit.ly/CultivatingKnowledge for more.

Building loyal customers

It’s a well-known fact that it’s a bigger investment to recruit a new customer than it is to retain an existing one, so how do you turn a first-time buyer into a loyal customer?

People often act on autopilot, said Dr. Bridget Behe, professor of horticultural marketing at the University of Michigan, at her session “First-time Buyers to Loyal Customers.” It takes more cognitive energy to make a change and go to a different retailer than it does to return to a store you know.

"So you have to stop thinking about a transaction as a one-time sale and start thinking about it as a relationship,” Behe said. And once you build the relationship and trust, an indirect benefit is the capacity to make recommendations on plants and placement, which increases their chances of success.

Loyal buyers buy repeatedly, but not because there aren’t other choices and not because you are the easiest choice, conserving them time and energy. “A loyal customer buys repeatedly but we need to get into the psyche of the consumer to understand that,” Behe said.

There are plenty of choices out there for consumers, but the key to repeat customers isn’t just making them happy — it’s going a step further to make them delighted. That can be done through anything from signage to new products to freebies. “Happy customers are satisfied but delighted people are likely to make the purchase again,” Behe said. “Yes, we need satisfied customers, but what we see in the literature is that we need that combination of delight and joy to have loyal customers.”

Emotions like delight, and its opposite, regret, can create intense reactions. And when a transaction leaves a customer with a feeling of regret, they’re likely to make a switch in retailers.

What makes a customer stray?

Competitors can lure customers away with a better proposition (price relative to perceived value). “Customers are not rational,” Behe said. “They will act on what they perceive and what they believe, and marketers have a huge capacity to nudge some of those decisions.”

A poor retail experience and/or poor product experience can drive customers away as well. At the end of the day, a customer’s decision to buy from a competitor comes from that feeling of regret. In the garden industry, the biggest regrets come from plants that die, which is why it’s so important to focus on finding the right plant for the right place. When customers have a great retail experience, they’re much more likely to come back and see you. The best way to do that is to optimize plant performance and give them the best value proposition. In other words, make them feel like they got what they paid for.

Find out more at: bit.ly/IGCLoyalCustomers

— Kate Spirgen

Photo by Kate Spirgen

Forecasts from Dr. Charlie Hall

Dr. Charlie Hall, AmericanHort’s chief economist and the Ellison Chair of Texas A&M University’s Department of Horticultural Sciences, said that 2021 was mixed performance within a great year.

Growers reported sales up 20% across the board. Despite that, their profitability ranged from barely profitable to very profitable. Still, he asked growers to consider where they were a few years ago. When comparing gross sales year-to-date to 2019, 63% of growers are up more than 25%.

Part of this is due to input cost increases. Hall showed aggregate input costs increased 10.1% in 2021, 8% year-to-date in 2022, and he is forecasting another 3.6% increase in 2023.

He hopes the industry can continue raising prices to compensate. However, in his research, he found that only 40% of green industry companies are passing 100% of their input cost increases on to their customers — which essentially means they are sharing their margins with their customers.

“That’s magnanimous of you,” he said, “but you won’t be in business for long.”

He also discussed a compensation study with data from the Bureau of Labor Statistics. In 2022, 21% of businesses said they increased wages more than 10%, 58% of businesses reported increasing wages between 6-10%, and 21% said they increased wages 1-5%. If green industry businesses want to attract or keep employees, their wages must keep up with the cost of living and inflation, Hall said.

Hall pointed to an Axiom marketing survey showing that 19% of respondents plan to add new shrubs or trees to their landscape, a number that compared favorably to other home improvement projects listed as choices.

And finally, although nearly every indicator he showed was positive. Hall said he believes there is a 50% chance of a recession occurring between now and Cultivate’23. A correction is coming, he said, so what should green industry businesses do? Establish your value proposition, don’t expect massive sales and over-leverage your business, or you may be left holding excess inventory.

Find out more at: bit.ly/CultivateSOI

— Matt McClellan