Recruiting and maintaining dairy cooperative members: a strategy for reducing the free rider problem

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Virginia Tech

Dairy marketing cooperatives provide marketwide services, such as lobbying for higher support prices and negotiating for premiums above marketing order prices, which benefit all dairy farmers in the market. The presence of free riders, people who benefit from these marketwide services without paying any of the costs of these services, can jeopardize the existence of the cooperative. Understanding why members were attracted to the cooperative and why independents (non-members) were attracted to the investor oriented firm (IOF) allows cooperatives to target specific membership groups.

Depending on the cooperative's goals, management can then use this information to focus on either retaining current members or attracting new members or both. The purpose of this study is to produce practical recommendations for dairy marketing cooperatives for recruitment and retention of members. This study begins with a background on cooperatives and a conceptual framework based on group and game theory. The data are a result of a regional survey of dairy farmers. The data are then analyzed using t-tests for continuous responses and chi-square tests for categorical responses. This analysis results in a comparison of responses from cooperative members and independents.

The independents stressed immediate benefits over long-run gains. Independents also appeared to have a risk/return trade-off. They received higher prices in exchange for fewer written contracts. Economic issues were important to both groups but significantly more important to independent producers. The two groups exhibited no difference on tradition and loyalty issues. Cooperative members emphasized prices and deductions, but they also highlighted assured markets and field services offered by their cooperatives.