Machinery Chatter

Deere's New Payment Path

Jim Patrico
By  Jim Patrico , Progressive Farmer Senior Editor
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The advanced 4640 display from John Deere requires an equipment purchase and a software subscription. The formula is a departure from previous payment plans. (Photo courtesy of John Deere)

Last month John Deere introduced a new, more powerful display for use in many farm vehicles. The 4640 has four times more processing power and 40 times more storage capacity than previous models to give it much greater capabilities. The 4640 is also portable and universal. Customers can move it from machine to machine -- both green and other brands -- to get the most production out of tractors and combines.

But the 4640's new capabilities weren't the only storyline. Deere will market the 4640 in a new way: There will be an equipment price plus an annual software subscription. No one else in the industry has such a price structure. In the past, Deere displays came with a price for the hardware and a one-time unlock fee for the software, similar to the price structures offered by competitors.

Because it was a departure from the past, Deere's new payment structure created some buzz in social media circles. Why, the cloud-based conversations asked, should customers have to pay an annual subscription to use a piece of equipment they already own? What will this mean to the resale value of old displays? With Deere being the largest player on the field, would its new payment system become the norm?

They are fair questions, and I asked Deere for answers.

Deanna Kovar, director of production and precision ag marketing for John Deere, outlined pricing for the 4640. List price is $3,995 for the hardware; to add the software to use AutoTrac the tab is $850 for one year or $4,000 for five years. "If a customer is looking to do more than AutoTrac," Kovar told me, "we offer a Core Precision Ag Bundle that includes AutoTrac, but also Documentation and Section Control for $1,700 per year or $8,000 for five years." Totals of those two plan levels are $7,995 and $11,995 respectively.

Both the one-year and the five-year scenario are less expensive than totals for the previous plans to purchase and permanently unlock the 2360 displays, which were $9,395 and $12,395 respectively, Kovar said.

Of course, after the fifth year under the previous payment plan, the 2360 owner would incur no further cost. With the 4640, he would have to renew a subscription.

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WHY?

Subscriptions are not new to farm equipment, Kovar said. Deere and other manufacturers have long charged on an annual basis for software that powers services like RTK correction or wireless data transfer. But the move to a subscription for software use on displays was a first.

"We know that when we made this shift that there was risk for us," Kovar said. She points to several goals Deere had in mind to make that risk worthwhile for the company and its customers. The goals include:

-- Reducing the cost of the upfront hardware.

-- Charging for where the value is -- in the software applications.

-- Allowing customers to try new things with reduced costs by breaking up the software payments into annual subscriptions.

The new plan also might mean new customers, Kovar said: "It was the best choice we had to make the entry price for precision ag more affordable."

Deere was well aware of possible blowback, she said: "We certainly did not undertake a change like this without much research and conversation with both dealers and customers. We know change is hard, especially when it impacts your livelihood, and we wanted to be sure we understood how both our dealer organization and our customers would react."

TRADE IN?

What about the trade-in value of old displays? "Unlock codes for previous displays typically transfer on trade in, which means customers do not have to pay unlock codes each time they trade," Kovar said.

However, under the new plan, 2360 display owners will not be able to transfer unlock fees to 4640 displays. But once they own a 4640, "We will allow subscriptions on one 4640 to transfer to another 4640," she said.

FUTURE?

Is the subscription route the industry's future path? Kovar cannot answer for other manufacturers. About Deere, she said, "I do know that it is our goal to move some of the other subscriptions like SF3 [RTK] or JDLink [wireless data transfer] to be bundled [with other software] so we can get away from having multiple subscriptions."

Agriculture does not exist in a vacuum. Technology and the constant change it brings affect farmers in many areas, Kovar said: "As we think about software today, there has been a change from a 'buy it and own it' model to a 'pay as you go' model in many other industries to allow customers to have the most up-to-date tools and benefit from the speed that software is changing today. So this isn't new, and producers experience this in other business relationships they have."

The season for new product releases is upon us. Will other farm equipment manufacturers follow Deere's lead in charging subscriptions for display software? My guess is they will take a wait-and-see attitude.

(AG)

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Comments

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RSimpkins1489533924
7/26/2017 | 7:13 AM CDT
Sometimes too much technology bites you in the butt.
KC
7/18/2017 | 7:43 AM CDT
I will repair my 2630 until the cows come home. Bad move Deere