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Cat dealers given ultimatum

Caterpillar believes its distributors are missing out on somewhere between $9 billion and $18 billion in easy-to-capture revenue each year because they are falling down in at least three ways. They are not tapping into the wealth of real-time customer data now at their fingertips; they are not communicating with each other; and they are not providing customers across the globe with a consistent experience when it comes to everything from e-commerce to parts and services pricing.

So Caterpillar, which is in a hunt for new revenue because of weakness in key markets, is giving dealers until the end of the year to come up with a three-year plan to capture those lost sales. Distributors who fail to meet their targets could have their dealership agreements terminated, though top executives insist a cull of dealers probably won’t be needed.

“That would be the last resort, the last outcome and certainly not desirable,” says Chief Executive Officer Doug Oberhelman.

Like its rivals, Caterpillar has integrated all kinds of diagnostic technology into its machines that throws off a torrent of real-time information about the health of the products. The data helps owners track their equipment, optimize its utilization and manage fuel and maintenance costs.

Better exploited by the dealers, the information could immediately increase part and service sales to existing customers, Caterpillar says. Dealers could anticipate problems, schedule preventive and predictive maintenance and help customers manage their equipment fleets more efficiently.

The company says its best dealers already do that pretty decently and have, in the words of Stu Levenick, the group president in charge of dealer relations, “an awareness of about 90 percent of their parts demand by customer, have it very well segmented and understand where 90 percent of the opportunity exists.”

Many more dealers are missing out. “The average dealer, or lower-performing dealer, he only knows 40 percent of his opportunity,” Levenick says. “And we demonstrated that if we just take the best practices of the first group and apply it to the other group, they automatically get a 6 to 8 percent aftermarket share improvement … just by doing something obvious. But they haven’t done it because we haven’t directed them to do it or helped them to do it.”

Read more here.

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