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Caterpillar Channel Relations Make Your Dealers Your Partner Donald Fites, HBR (March-April 1996) Distribution Channel Strategy L. P. Bucklin Spring 2000.

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Presentation on theme: "Caterpillar Channel Relations Make Your Dealers Your Partner Donald Fites, HBR (March-April 1996) Distribution Channel Strategy L. P. Bucklin Spring 2000."— Presentation transcript:

1 Caterpillar Channel Relations Make Your Dealers Your Partner Donald Fites, HBR (March-April 1996) Distribution Channel Strategy L. P. Bucklin Spring 2000

2 Contractual Characteristics of Caterpillar’s Distribution System Exclusive distribution--62 in the US Employ only a single channel type Foster dealerships as independent, private companies Exclusive dealing--90% of products sold by dealers are Caterpillar No contract termination date, but either party may terminate in 90 days

3 Distribution as a Strategic Asset Recognition of after-sale service as a critical need in the end-user buying decision Provide two way product information flows Design channel to facilitate service –Enable dealers to provide the bulk of part requirements “on the spot” –Replace all parts, around the world, in 48 hours –Design machines for serviceability

4 Caterpillar’s Golden Rules Foster mutual trust through –Share gains as well as pain –Strive for consistency Þ in relations Þ in policies Þ in communications –Treat all dealers with uniform practices –Recognize independence and uniqueness –Build products to fit distributor capabilities

5 Governance Policies for Building Trust Develop system for channel co-government with dealers Maintain dealer profitability, at supplier expense if necessary (note Mexico example) Focus product development upon channel targets, skills (construction) Insure dealer continuity/management Continuous consultation to raise efficiency

6 Reducing Conflict in Tightly Controlled Channels Careful reseller selection for compatible goals Development of bilateral governance programs –Build decision interface across members –Coordinated data exchange for improved forecasting, inventory control, parts supply –Joint supplier-distribution project teams –Develop expectations on marketing programs, performance, efficiency –Focus upon category management Act consistently in distributor’s interest

7 Reviewing Dealer Performance Review dealer marketing and financial performance annually Provide consulting advice to help dealer with aid of all dealer financial ratios Frequent communication from top level and line management Build close personal ties to overlay business relationship, strive for private ownership

8 Caterpillar Rules Build dealer trust and profit –Through fair dealing with resellers Þ Use only a single channel, close communications Þ Share profit opportunities Þ Employ consistent policies –Sharing of limited channel decision power while maintaining coordination –Develop programs to help resellers improve operations and profits


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