- Email: [email protected]
The importance of distributor training at Caterpillar
In 1% I Caterpillar, Inc. celebrated 48 years of continuous profitable leadership as the indisputable world ~bamp~on in earthmoving uipment. With record I98 1 profits of $587 million it w business as usual wtth only minor attentive given to its number two rival, Komatsu. tee ad one-calf years later a b&tiered C&xpi!!ar announced a meager $50 milt ion second quarter profit only the fourth profitable quarter in the 14 since
Address corresprdmce Marketing and Tfansprtation hernational
to Professor S. Tamer Ca\wpil.
Cepdrrmrnt
of
A&ninisrr;ition. Michigan State University. 205
Center. East Lansing. MI 18824.
This rapid deeline was partially the result of the decision by Xonatsu to enter the global earthmoving equip~IIZI~ma&r. A de&rate strategy was in place to capture a portion of the heavy machinery market share. As early as 1980 Komatsu was pricing 10% or more below Caterpihar products in some markets, offering free tryouts, and providing engineers on short notict to go anywhere to cope with machi,lery breakdowns. By 1981 Komatsu had five regional centers in the United States. Yet Caterpillar continued as the oligopolistic industry’s market and price leader, pricing well above Komatsu and others in the industry. it wasn’t until 1985 that Caterpillar instituted a major policy revision in response to “ . . . major competitors instituting price reductions that Caterpillar must follow.” In four years Caterpillar had moved from price leader to price follower. Historically, Caterpillar’s marketing efforts were based on a production-oriented policy of building advanced, rehable, and long-lasting machines, selling them at a premium price, and focusing on fast efficient service. Possibly as a result of these policies, while becoming the industry leader in quality and price, Caterpillar also developed into one of the industry’s highest cost producers. The result of these practices along with the slowing world market for heavy earthmoving machines, as well a stronger dollar, provided &heclassic cost and price situ-
l99dtasmarlhfti-;i‘%ii~ mii,idgn?lr9lt 19. l-9 (1990) 0 Elsewer Sciene Fubtishing Co. Ins.. 1990 655 Avenue of the Americas. New York. NY itMl0
C019-8501/9O/S3.50
it possible for Komatsu to penetrate the gfobal construction industry.
Caterpillardeveloped a strategy that met the Komatsu head on. Starting in the early 1980s. it cut all 0pemtir.g costs by 22%. gave more pricing authority to sales managers while moving them out of Peoria into dealer districts. and diversified into other product areas [I]. Perhaps most importantly, Caterpillar responded also by capitalizing on the one area that made the company unique-its very strong dealer network. Caterpillar chose to compete with the total product concept. a decision to augment the product with the services that customers deemed the most important. including dealership service. In harmony with this philosophy, Caterpillar already provides a wide variety of marketing programs and support to dealers. These include merchandising plans, finance plans, inventory plans, and assistance in pricing and advertising. Dealers are expected to assimilate these programs and coordinate them in such a way that they improve their sales. market share, and margins. More recently, Caterpillar recognized that it must sustain its competitive edge in the industry by an aggressive program of ongoing training and support for its dealers. One method of such support has been in improved information flew and communications. Caterpillar has modernized its communications capabilities with the purchase of the most advanced equipment that allows for more acculzte record and inventory keeping. Another area of support is the training of dealership personnel, both sales and service, to make them more responsive to the market and to improve the total product image. This is the area of competitive struggle examined in this article. The discussion will focus on the importance of a strong dealership network and training programs that ensure excellence in dealer performance in the tong run. J+_,if\,4” 0-i-l corporations expand into global markets. ._\i!IjN?c’I%II).‘ :.*JWWies. Companies not only compete \al:h C’X.;~~agd+13~4c rivals, but are fiercely competitive
S. TAMER CAVUSGtt is Professor of Markemg and International Business at Michigan State Unrwrsity in East Lansing, blichigan.
with overseas firms. Marketing becomes increasingly important and, in particular, the distribution strategy for capital and durable goods becomes essential. In this article we examine the end-players of the d~st~butio~ channel, the independently owned dealenhip. The focus is on the role of dealer training in enhancing the competitivenw
of both the dealer and the industrial manufac-
the article reportson a case study of how Caterpillar has implemented dealer training programs for its worldwide dealers in order to secure a competitive edge. These programs have significantly contributed to deab-- strength and to the ultimate sustained success of Caterpillar. Caterpillar’s dealer network and dealer training programs have become particularly important since the entry of Komatsu into the U.S. market. tuw.
In particular,
That dealers play a key role in industrial distribution channels is now widely recognized. fn the international context, dealers/distributors are perhaps even more essential to an industrial manufacturer [2-S]. Dealers represent the final link in the distribution chain-the vital link between manufacturers and customers. The customers, purchasers of equipment, rely on the dealer for expertise, and often the dealer represents the customer’s sole source of product information. Therefore, to most effectively assist the customer, the dealer must understand the business and use conditions of the ultimate user. Dealers must realize that the appeal of their equipment to customers is based on tht money-making and moneysaving potential of such equipment. Customers are ultimately concerned with obtaining equipment that will increase production efficiency, maximize revenues, and improve the quality of work performed. Therefore, dealers must possess a thorough knowledge of the characteristics of their product from both a technical and an economic perspective. Caterpillar’s training programs accomplish just this. Dealerships ensure technical expertise through a threetier training system designed to focus on specific aspects of mechanical problems, and rna~~ta~~a very close relationship with their marketing dep~ment to ensure that the economic objectives of the customers are being met. Caterpillar organizes its training and proving ground operations at rhe same location to give its mecba~ics the best on-the-job training that it can devise in order to give
the customer the best service
ssible at the co~s~ction site. Customers also desire ease in parts, and convenient and effective servici &ers satisfy these customer require through dealers. Dealers provide the local channels for industrialgoods, and the geographical proximity of dealers helps the manufactureraccomm e the users’ initial needs as well as provide a steady services for the future. Located in more easily and cost-effectively service customers than a manufacturerwho wouid have to establish presence io rtance in the manufacturer-dealerinterface is the benefit of dealers to the industrial manufacturer. Dealers can easily develop local personal contacts, are close to the ultimate buyer, and in many cases, play an active role in the community FarticuiarQ for mu%national manufachlrers, the dealer’s network is invaluable. Dealers located in foreign counties bave first-hand knowledge of local cultures and customer preferences. They exist as the essential link that communicates the needs of foreign customers to the manufacturer. Dealers use local contacts to more effectively develop ad expand sales, and by residing closer to ultimate buyers, operations and transactions become more intimate, direct, and quick. From a financial viewpoint, since dealers are knowledgeable about local markets, they can more intelligently take financial risks in the sale of products to ultimate purchasers than can the industrial manufacturer. Another important benefit dealers offer to industrial manufacturers is their ability to accurately analyze local market conditions and provide feedback to the manufacturer. Dealers can analyze present and future local market patterns for given products, and through such analysis they can ascertain the location, extent, volume, and character of local markets. Again. this is a critical function for dealers operating in foreign countries. Their analysis of foreign market conditions and forecasts of volume potential for product lines can significantly ease the market analysis performed by the manufacturer. And because dealers are independently owned, they have greater in-
unity mantermined by local market conditions. By consolidating country marketing plans at the regional or co rate headquzuters level the manufacturer can more effectively design a global marketing plan. Likewise, dealers can determinehow variationin local business conditions would influence market and sales potentiai for the industrial good. And they can help determine how price changes and changing market conditions for products of prospective purchasers in each industry affect the demand. This is particularly important in the case of Caterpillar. Caterpillar realizes that the market for large earth-moving ‘~cn dcchning in the psa decade. Thcrc ing attention to “smaller” equipment to meet a new segment of the market. Caterpillar’s ability to depend on dealers for local market feedback undoubtedly provides a critical edge over competition. Finally, and perhaps most importantly, a strong dealer network provides a major barrier against competition. Caterpillar recognizes that it can not claim superiority and a strong competitive edge in design and technology compzed !c its competitors. But it does have the distribution network and customer support that sets it apart from competition in the international area. As compared to Caterpillar’s large (96 U.S. and 932 overseas) and well-entrenched dealer network, Komatsu’s perhaps weakest link in the market is its dealer network [il. (In recognition of this weakness, Komatsu has recently taken steps to strengthen its distribution by joint venturing with Dresser Industries.)
A key element of a strong dealership system is ongoing manufacturer sujrkrort. Manufacturers cannot have the attitude that once the product is solo to the dealer, it is “out of OUT ha;.ds. ” Industrial manufacturers must ensure that both their product and appropriate service are pro-
vided to the ultimate user. the customer. If this is not effectively achieved, the manufacturerultimately suffers because of loss of sales resuiting in reduced revenues a2d profits. And failure to support dea!ers will result in a L..ss e4ective global competitiveness. Support is needed 10 ensure the consistent and desired reputation of the nx+ ufacturer, to clarify the responsibilities ot the dealz - ;. and to ensure that both the manufacturer and the deai . :3 share common objectives It is essential that dealers uphold the reputation of ‘2 industria! manufacturer. Since the dealer is the major ii& between the manufacturer and the customer, the reputation of the dealer in a customer’s mind will most likely correspond to how the customer will view the manufacturer. If the dealer develops a poor reputation in the local market, this will reflect poorly on the manufacturer. In addition, negative attitudes will result in lost sales. Industrial manufacturers must suppori and communicate with their dealers to ensure that their desired reputation is conveyed to the ultimate customers. Finally, and ~rry importantly, the manufacturer’s and dealers’ objectives must be consistent. The most predominant goal of both manufacturers and dealers is to increase the volume of sales to satisfied customers in order to produce a profit for both the manufacturer and the dealer If a manufacturer fails to support dealers, dealers ma) potentially set goals that are not in the best interest (.k both parties. Manufacturers must assist the dealer in being profitable and successful in order to receive the desired flow-through benefits. Manufacturers can support dealers in many ways. ho: example, they can furnish sales assist:.nce by providing necessary literature. photos, blueprints, and samples G;’ work. Some manufacturers send traveling sales engineers lo help demonstrate special equipment. Industrial manufacturers also ensure that sales proceedings are continually updated to reflect changing products and changing needs of customers. Dealers can be invited to inspect new be briefed on new Perhaps the most impo~a~t support a manufacturer ,. offer its dealers is dealer training. In the BCFI~:~~~J&~ 4
Why train dealers? 5 How to train dealers? 3 Who should receive training?
What topics to cover?
Where to tram?
Who should train?
What methods to use?
i How to evaluate training’? 1 Follow-up FIGURE I.
Principal Considerations in Implementing Training Programs
this article, we address issues related to dealer training. These issues are illustrated in Figure 1. Throughout the discussion references se mzdc to a dealer training program initiated by Caterpillar in 1985. Known as the Sales Team Development System (STDS), the program was designed to address functional areas of the dealerships. By the end of the 1Zmonth pilot period, participating dealers exhibited very positive responses. Most felt that the program improved their effectiveness in customer relations. Caterpillar did not introduce the Sales Team Development System as another individual training effort to improve sales. Rather. the aim was to design nt as a system that provides professional assistance in utilizing all the resources that are availab!e throasg :hc Qe~!er. A consulting team. consisting of b erpillar and dealer specialists, works directly e of the deale~bi~ in an sales manager and the sales eting effectiveness. effort to improve dealer’s training program i STDS is not a highly structu ented within a designated time frame. Rather, it is a exible system that, once installed, will hel dealer’s human resources for t marketing effectiveness.
HVT
LEWS?
any reasom can
training:
fidence and enthu
dealers. This can be t of effort expended As the marketcontinues to be unpredictable, the training program must adapt to change by identifying the needs of the dcaIers. Specific training needs include:
Altering their sales approach to match the situation, and * Making prudent decisions on how to spend their time efficiently. In the STDS promo of Caterpillar, training resulted in the following benefits. among others: l
l
l
KW%of participating deaiers felt they significantly improved their organization skills. 80% felt they significantly improved their planning skills, product/technical knowledge, and general marketing~sales skills. 50% felt they significantly improved their application knowledge, financial knowledge, and follow-up skills.
Sales The ultimate objective of any training program is to increase sales. Most maqcrs believe that dealers who understand their products and market, and who are well-versed in salts techniques will be moie effective. In addition, there is an indication that customers usually prefer trained dealers because they are better able to identify the functions of the products to fit their own needs. Caterpilhar’s Sales Training Development System (STDS) meationed above, has shown evidence that eealers participating in the program significantly increased their net revenues by 102% during the pilot period.
General selling skills * Overcoming client objections Creating an effective team selling network * Improving product knowledge . Increasing involvement in the marketing function Developing better time management skills l
l
l
With a changing marketplace, several Caterpillar dealers are developing aggressive marketing campaigns, offering special financial incentives, using telemarketing to identify prospective customers, and initiating many other changes in response to a new market of broader product lines and a greatly expanded customer base.
HOW TO TRAIN DEALERS? Figure 1 illustrates some of the key issues involved in any program of professional assistance. In this section we will elaborate on these issues and make references to Caterpillar’s Sales Team Development System. Wko SIPould Rweiv~ Training? It is reasonable to expect that ;lot al! dea!ers require a particular training program in a large and diverse network such as Caterpillar’s worldwide distribution system. Limited training resources also compel managers to be se!ecti\e in targeting dealers who should receive training. In general, a manufacturer should offer training to those dealers who could pmvide the highest return on its training investment. No magic formulae have been developed for deciding 5
on eligible dealers. in the implementation of the STDS, Caterpillar has employed the following criteria: What is the probability of gaining full commitment of the dealer? Does the dealer enjoy sufficient financial stability to invest time and manpower resources into the program? Does the dealer have a stable organizational structure? Is the dealer located in a stable and economically promising country? Does the dealer promise sufficient growth opportunities in sales, market share, and margins? (Resist the temptation to implement the system at the best dealer in the region.)
Topics to Cover? The choice of subjects to be covered in a formal dealership training program de-ends on the products tc be sold and the background of the people being trained. Companies that sell complex products, of course, have more material to include in their program than companies that sell simoler products or services. The following topics are important for a competitive dealership training program: ct Wnowledgc A common misconception is that dealership training is designed primarily to improve the selling skills of dealer representatives. There is an indication that today’s customers are buying more from dealers who have the most product knowledge. For Caterpillar, product knowledge is oni: of the most important subjects in the training program. Caterpillar offers courses conducted on a worldwide basis on wide ranging icing the products to engine diagnosis. iques. Selling techniques are always an important subject to be covered in any dealership training program. Caterpillar conducts courses on negotiating skills. selling skills, and related topics addressing salesanagement . ~s~o~~@~~~~~~0~.
The ability of dealers to forecast future demand wilHenable them to institute a better inventory control system. This is imillar because its products requiir big
transportation and storage costs. In addition, customer orientation will ensure a better relationship between dealers and the customer, which is a must for selling highly complex and expensive equipment. A key component of Cate~illar’s STDS was enhancement of market analysis skills of dealer sales force. The consulting team would teach and advise the salesperson on why and how to examine industIy trends, develop customer pmfiles, and identify competitive skngths and sales opportunities. After a territory is analyzed and opportunities are identified, specific goals would be established.
here to Train? This is acomplicated issue, especially for multinational companies with dealers around the world. The location decision boils down to whether to centralize or decentralize. For centralized tr&ing, the major advantage lies with the use of specialized instructors, materials, and audiovisual equipm&. In addition, top-level managers at corporate headquarters can kdp ‘boost morale and provide valuable insights into sales procedures and customer3 needs. Although centralized training provides greater consistency in program content and professional instruction, trainees have to be reimbursed for travel to the central site and for !odging during their stay. For decentralized training, the learning process is moved closer to the customer, which introduces a measure of realism. But one common problem is that dealers are so busy supervising the existing sale may not take the time needed for new ret addresses this problem b Minded Supervising (Iv! addition, with decentraii process may vary wirkly from dealer to dealer One other akrnative is a co~~i~a~io central training. Caterpillar has adopted thi the United States, dealers typically travel to headquarters in Peoria for two to four days of co~~~5i~g 60% and 40% lab time. hands-on trainil-lg 0 Barconducts course5 at the dealcsship or ar
quarters.The four Caterpillar art2in Brazil, la
It is not easy to e;tablisb clear-cut reh3tionships between initial rship training and su fotmance. Evaluation of a traimng pro portant. While a
,haveahetterfeel
s and follow-up efforts to help dealers bectarne tnomous professionals. In the STDS of Caterpillar,the salespersons and &es mmagers evaluate their performance based on the obj4xtives set farth at the beginning. The consulting team assists them in anafyzing the changes in their territory and identifying how well they adapted to these changes. In the evaluation process. three principles are followed: l
l
’
Companies employ combinations of training methods ing approaches such as direct d videotaping of dealers are recognized as more e than self-learning. Catersently using teleconference methods for some ining. Hnaddition+ it is planning TVzt up a new satellite system for ~vor~~w~detraining purposes.
As P ucts chauge, markets shift, and territories are recognized, dealers need additional training to help adjust to these new e~viro~me~ta~ situations. A cammon costef~~~e~t way to retrain ex rienced dealen is to incorporate ~a~~~~gmaterials in regular dealer meetings. Pe-
The sales team does the evaluating; The evaiuation is constructive; and Changes in systems or strategies are imp!emented.
In addition to a subjective analysis of participants* perceptions during and after the training program, a quantitative evaluation can be employed. I[nthe initial implementation of the STDS, Caterpillar compared a set of performance measures between a control and an experimental group. The experimental group included all dealers who received training during a specified time period. The control group included a randomly selected group of dealers who did not receive training. Performance measures included sales, net revenue per personal call, market share, lost sales, and impact on new product sales.
An effective dealer training pragram depends an the reinforcement by management of skills being introduced. Training and its emphasis cannot end when the formal training program ends. An ongoing rno~ita~~g of the training pro ress toward the objectives agreed upon by t 7
ans for feedback. This
programs ae not in progress,
rogram called Management-Minded imptemented bj: Caterpihx dealers worldwide. S is a flexible and adaptable program that ailows to progress at &eir own rate. Because of this, most trainees develop a high degree of enthusiasm and rnoti~~atio~to meet the program’s objectives. This pro gives direction with clear statements of competency
yees to think like managers. It emphasizes attitudes
set of skill techni
attitudes that enable
rant additional employee training. Managers/trainers should also excessive waste in their departme ployees, or high turnovers, and res by investi &jg problems and correcting the traimng . Also, with the increased emphasis on tion and technological improvement, transfers to are increasing. and this provides implement training. MMS addresses the qualities of a trainer that are important. In order for managers/trainers to ’ s results from their training efforts, they m an enthusiasm for teaching, and empa put themselves in th their employees. errors. Among t two- way communication. In manager/trainer must be oriente This will enable the finer to offer m feedback more often.
Address corresprdmce Marketing and Tfansprtation hernational
to Professor S. Tamer Ca\wpil.
Cepdrrmrnt
of
A&ninisrr;ition. Michigan State University. 205
Center. East Lansing. MI 18824.
This rapid deeline was partially the result of the decision by Xonatsu to enter the global earthmoving equip~IIZI~ma&r. A de&rate strategy was in place to capture a portion of the heavy machinery market share. As early as 1980 Komatsu was pricing 10% or more below Caterpihar products in some markets, offering free tryouts, and providing engineers on short notict to go anywhere to cope with machi,lery breakdowns. By 1981 Komatsu had five regional centers in the United States. Yet Caterpillar continued as the oligopolistic industry’s market and price leader, pricing well above Komatsu and others in the industry. it wasn’t until 1985 that Caterpillar instituted a major policy revision in response to “ . . . major competitors instituting price reductions that Caterpillar must follow.” In four years Caterpillar had moved from price leader to price follower. Historically, Caterpillar’s marketing efforts were based on a production-oriented policy of building advanced, rehable, and long-lasting machines, selling them at a premium price, and focusing on fast efficient service. Possibly as a result of these policies, while becoming the industry leader in quality and price, Caterpillar also developed into one of the industry’s highest cost producers. The result of these practices along with the slowing world market for heavy earthmoving machines, as well a stronger dollar, provided &heclassic cost and price situ-
l99dtasmarlhfti-;i‘%ii~ mii,idgn?lr9lt 19. l-9 (1990) 0 Elsewer Sciene Fubtishing Co. Ins.. 1990 655 Avenue of the Americas. New York. NY itMl0
C019-8501/9O/S3.50
it possible for Komatsu to penetrate the gfobal construction industry.
Caterpillardeveloped a strategy that met the Komatsu head on. Starting in the early 1980s. it cut all 0pemtir.g costs by 22%. gave more pricing authority to sales managers while moving them out of Peoria into dealer districts. and diversified into other product areas [I]. Perhaps most importantly, Caterpillar responded also by capitalizing on the one area that made the company unique-its very strong dealer network. Caterpillar chose to compete with the total product concept. a decision to augment the product with the services that customers deemed the most important. including dealership service. In harmony with this philosophy, Caterpillar already provides a wide variety of marketing programs and support to dealers. These include merchandising plans, finance plans, inventory plans, and assistance in pricing and advertising. Dealers are expected to assimilate these programs and coordinate them in such a way that they improve their sales. market share, and margins. More recently, Caterpillar recognized that it must sustain its competitive edge in the industry by an aggressive program of ongoing training and support for its dealers. One method of such support has been in improved information flew and communications. Caterpillar has modernized its communications capabilities with the purchase of the most advanced equipment that allows for more acculzte record and inventory keeping. Another area of support is the training of dealership personnel, both sales and service, to make them more responsive to the market and to improve the total product image. This is the area of competitive struggle examined in this article. The discussion will focus on the importance of a strong dealership network and training programs that ensure excellence in dealer performance in the tong run. J+_,if\,4” 0-i-l corporations expand into global markets. ._\i!IjN?c’I%II).‘ :.*JWWies. Companies not only compete \al:h C’X.;~~agd+13~4c rivals, but are fiercely competitive
S. TAMER CAVUSGtt is Professor of Markemg and International Business at Michigan State Unrwrsity in East Lansing, blichigan.
with overseas firms. Marketing becomes increasingly important and, in particular, the distribution strategy for capital and durable goods becomes essential. In this article we examine the end-players of the d~st~butio~ channel, the independently owned dealenhip. The focus is on the role of dealer training in enhancing the competitivenw
of both the dealer and the industrial manufac-
the article reportson a case study of how Caterpillar has implemented dealer training programs for its worldwide dealers in order to secure a competitive edge. These programs have significantly contributed to deab-- strength and to the ultimate sustained success of Caterpillar. Caterpillar’s dealer network and dealer training programs have become particularly important since the entry of Komatsu into the U.S. market. tuw.
In particular,
That dealers play a key role in industrial distribution channels is now widely recognized. fn the international context, dealers/distributors are perhaps even more essential to an industrial manufacturer [2-S]. Dealers represent the final link in the distribution chain-the vital link between manufacturers and customers. The customers, purchasers of equipment, rely on the dealer for expertise, and often the dealer represents the customer’s sole source of product information. Therefore, to most effectively assist the customer, the dealer must understand the business and use conditions of the ultimate user. Dealers must realize that the appeal of their equipment to customers is based on tht money-making and moneysaving potential of such equipment. Customers are ultimately concerned with obtaining equipment that will increase production efficiency, maximize revenues, and improve the quality of work performed. Therefore, dealers must possess a thorough knowledge of the characteristics of their product from both a technical and an economic perspective. Caterpillar’s training programs accomplish just this. Dealerships ensure technical expertise through a threetier training system designed to focus on specific aspects of mechanical problems, and rna~~ta~~a very close relationship with their marketing dep~ment to ensure that the economic objectives of the customers are being met. Caterpillar organizes its training and proving ground operations at rhe same location to give its mecba~ics the best on-the-job training that it can devise in order to give
the customer the best service
ssible at the co~s~ction site. Customers also desire ease in parts, and convenient and effective servici &ers satisfy these customer require through dealers. Dealers provide the local channels for industrialgoods, and the geographical proximity of dealers helps the manufactureraccomm e the users’ initial needs as well as provide a steady services for the future. Located in more easily and cost-effectively service customers than a manufacturerwho wouid have to establish presence io rtance in the manufacturer-dealerinterface is the benefit of dealers to the industrial manufacturer. Dealers can easily develop local personal contacts, are close to the ultimate buyer, and in many cases, play an active role in the community FarticuiarQ for mu%national manufachlrers, the dealer’s network is invaluable. Dealers located in foreign counties bave first-hand knowledge of local cultures and customer preferences. They exist as the essential link that communicates the needs of foreign customers to the manufacturer. Dealers use local contacts to more effectively develop ad expand sales, and by residing closer to ultimate buyers, operations and transactions become more intimate, direct, and quick. From a financial viewpoint, since dealers are knowledgeable about local markets, they can more intelligently take financial risks in the sale of products to ultimate purchasers than can the industrial manufacturer. Another important benefit dealers offer to industrial manufacturers is their ability to accurately analyze local market conditions and provide feedback to the manufacturer. Dealers can analyze present and future local market patterns for given products, and through such analysis they can ascertain the location, extent, volume, and character of local markets. Again. this is a critical function for dealers operating in foreign countries. Their analysis of foreign market conditions and forecasts of volume potential for product lines can significantly ease the market analysis performed by the manufacturer. And because dealers are independently owned, they have greater in-
unity mantermined by local market conditions. By consolidating country marketing plans at the regional or co rate headquzuters level the manufacturer can more effectively design a global marketing plan. Likewise, dealers can determinehow variationin local business conditions would influence market and sales potentiai for the industrial good. And they can help determine how price changes and changing market conditions for products of prospective purchasers in each industry affect the demand. This is particularly important in the case of Caterpillar. Caterpillar realizes that the market for large earth-moving ‘~cn dcchning in the psa decade. Thcrc ing attention to “smaller” equipment to meet a new segment of the market. Caterpillar’s ability to depend on dealers for local market feedback undoubtedly provides a critical edge over competition. Finally, and perhaps most importantly, a strong dealer network provides a major barrier against competition. Caterpillar recognizes that it can not claim superiority and a strong competitive edge in design and technology compzed !c its competitors. But it does have the distribution network and customer support that sets it apart from competition in the international area. As compared to Caterpillar’s large (96 U.S. and 932 overseas) and well-entrenched dealer network, Komatsu’s perhaps weakest link in the market is its dealer network [il. (In recognition of this weakness, Komatsu has recently taken steps to strengthen its distribution by joint venturing with Dresser Industries.)
A key element of a strong dealership system is ongoing manufacturer sujrkrort. Manufacturers cannot have the attitude that once the product is solo to the dealer, it is “out of OUT ha;.ds. ” Industrial manufacturers must ensure that both their product and appropriate service are pro-
vided to the ultimate user. the customer. If this is not effectively achieved, the manufacturerultimately suffers because of loss of sales resuiting in reduced revenues a2d profits. And failure to support dea!ers will result in a L..ss e4ective global competitiveness. Support is needed 10 ensure the consistent and desired reputation of the nx+ ufacturer, to clarify the responsibilities ot the dealz - ;. and to ensure that both the manufacturer and the deai . :3 share common objectives It is essential that dealers uphold the reputation of ‘2 industria! manufacturer. Since the dealer is the major ii& between the manufacturer and the customer, the reputation of the dealer in a customer’s mind will most likely correspond to how the customer will view the manufacturer. If the dealer develops a poor reputation in the local market, this will reflect poorly on the manufacturer. In addition, negative attitudes will result in lost sales. Industrial manufacturers must suppori and communicate with their dealers to ensure that their desired reputation is conveyed to the ultimate customers. Finally, and ~rry importantly, the manufacturer’s and dealers’ objectives must be consistent. The most predominant goal of both manufacturers and dealers is to increase the volume of sales to satisfied customers in order to produce a profit for both the manufacturer and the dealer If a manufacturer fails to support dealers, dealers ma) potentially set goals that are not in the best interest (.k both parties. Manufacturers must assist the dealer in being profitable and successful in order to receive the desired flow-through benefits. Manufacturers can support dealers in many ways. ho: example, they can furnish sales assist:.nce by providing necessary literature. photos, blueprints, and samples G;’ work. Some manufacturers send traveling sales engineers lo help demonstrate special equipment. Industrial manufacturers also ensure that sales proceedings are continually updated to reflect changing products and changing needs of customers. Dealers can be invited to inspect new be briefed on new Perhaps the most impo~a~t support a manufacturer ,. offer its dealers is dealer training. In the BCFI~:~~~J&~ 4
Why train dealers? 5 How to train dealers? 3 Who should receive training?
What topics to cover?
Where to tram?
Who should train?
What methods to use?
i How to evaluate training’? 1 Follow-up FIGURE I.
Principal Considerations in Implementing Training Programs
this article, we address issues related to dealer training. These issues are illustrated in Figure 1. Throughout the discussion references se mzdc to a dealer training program initiated by Caterpillar in 1985. Known as the Sales Team Development System (STDS), the program was designed to address functional areas of the dealerships. By the end of the 1Zmonth pilot period, participating dealers exhibited very positive responses. Most felt that the program improved their effectiveness in customer relations. Caterpillar did not introduce the Sales Team Development System as another individual training effort to improve sales. Rather. the aim was to design nt as a system that provides professional assistance in utilizing all the resources that are availab!e throasg :hc Qe~!er. A consulting team. consisting of b erpillar and dealer specialists, works directly e of the deale~bi~ in an sales manager and the sales eting effectiveness. effort to improve dealer’s training program i STDS is not a highly structu ented within a designated time frame. Rather, it is a exible system that, once installed, will hel dealer’s human resources for t marketing effectiveness.
HVT
LEWS?
any reasom can
training:
fidence and enthu
dealers. This can be t of effort expended As the marketcontinues to be unpredictable, the training program must adapt to change by identifying the needs of the dcaIers. Specific training needs include:
Altering their sales approach to match the situation, and * Making prudent decisions on how to spend their time efficiently. In the STDS promo of Caterpillar, training resulted in the following benefits. among others: l
l
l
KW%of participating deaiers felt they significantly improved their organization skills. 80% felt they significantly improved their planning skills, product/technical knowledge, and general marketing~sales skills. 50% felt they significantly improved their application knowledge, financial knowledge, and follow-up skills.
Sales The ultimate objective of any training program is to increase sales. Most maqcrs believe that dealers who understand their products and market, and who are well-versed in salts techniques will be moie effective. In addition, there is an indication that customers usually prefer trained dealers because they are better able to identify the functions of the products to fit their own needs. Caterpilhar’s Sales Training Development System (STDS) meationed above, has shown evidence that eealers participating in the program significantly increased their net revenues by 102% during the pilot period.
General selling skills * Overcoming client objections Creating an effective team selling network * Improving product knowledge . Increasing involvement in the marketing function Developing better time management skills l
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With a changing marketplace, several Caterpillar dealers are developing aggressive marketing campaigns, offering special financial incentives, using telemarketing to identify prospective customers, and initiating many other changes in response to a new market of broader product lines and a greatly expanded customer base.
HOW TO TRAIN DEALERS? Figure 1 illustrates some of the key issues involved in any program of professional assistance. In this section we will elaborate on these issues and make references to Caterpillar’s Sales Team Development System. Wko SIPould Rweiv~ Training? It is reasonable to expect that ;lot al! dea!ers require a particular training program in a large and diverse network such as Caterpillar’s worldwide distribution system. Limited training resources also compel managers to be se!ecti\e in targeting dealers who should receive training. In general, a manufacturer should offer training to those dealers who could pmvide the highest return on its training investment. No magic formulae have been developed for deciding 5
on eligible dealers. in the implementation of the STDS, Caterpillar has employed the following criteria: What is the probability of gaining full commitment of the dealer? Does the dealer enjoy sufficient financial stability to invest time and manpower resources into the program? Does the dealer have a stable organizational structure? Is the dealer located in a stable and economically promising country? Does the dealer promise sufficient growth opportunities in sales, market share, and margins? (Resist the temptation to implement the system at the best dealer in the region.)
Topics to Cover? The choice of subjects to be covered in a formal dealership training program de-ends on the products tc be sold and the background of the people being trained. Companies that sell complex products, of course, have more material to include in their program than companies that sell simoler products or services. The following topics are important for a competitive dealership training program: ct Wnowledgc A common misconception is that dealership training is designed primarily to improve the selling skills of dealer representatives. There is an indication that today’s customers are buying more from dealers who have the most product knowledge. For Caterpillar, product knowledge is oni: of the most important subjects in the training program. Caterpillar offers courses conducted on a worldwide basis on wide ranging icing the products to engine diagnosis. iques. Selling techniques are always an important subject to be covered in any dealership training program. Caterpillar conducts courses on negotiating skills. selling skills, and related topics addressing salesanagement . ~s~o~~@~~~~~~0~.
The ability of dealers to forecast future demand wilHenable them to institute a better inventory control system. This is imillar because its products requiir big
transportation and storage costs. In addition, customer orientation will ensure a better relationship between dealers and the customer, which is a must for selling highly complex and expensive equipment. A key component of Cate~illar’s STDS was enhancement of market analysis skills of dealer sales force. The consulting team would teach and advise the salesperson on why and how to examine industIy trends, develop customer pmfiles, and identify competitive skngths and sales opportunities. After a territory is analyzed and opportunities are identified, specific goals would be established.
here to Train? This is acomplicated issue, especially for multinational companies with dealers around the world. The location decision boils down to whether to centralize or decentralize. For centralized tr&ing, the major advantage lies with the use of specialized instructors, materials, and audiovisual equipm&. In addition, top-level managers at corporate headquarters can kdp ‘boost morale and provide valuable insights into sales procedures and customer3 needs. Although centralized training provides greater consistency in program content and professional instruction, trainees have to be reimbursed for travel to the central site and for !odging during their stay. For decentralized training, the learning process is moved closer to the customer, which introduces a measure of realism. But one common problem is that dealers are so busy supervising the existing sale may not take the time needed for new ret addresses this problem b Minded Supervising (Iv! addition, with decentraii process may vary wirkly from dealer to dealer One other akrnative is a co~~i~a~io central training. Caterpillar has adopted thi the United States, dealers typically travel to headquarters in Peoria for two to four days of co~~~5i~g 60% and 40% lab time. hands-on trainil-lg 0 Barconducts course5 at the dealcsship or ar
quarters.The four Caterpillar art2in Brazil, la
It is not easy to e;tablisb clear-cut reh3tionships between initial rship training and su fotmance. Evaluation of a traimng pro portant. While a
,haveahetterfeel
s and follow-up efforts to help dealers bectarne tnomous professionals. In the STDS of Caterpillar,the salespersons and &es mmagers evaluate their performance based on the obj4xtives set farth at the beginning. The consulting team assists them in anafyzing the changes in their territory and identifying how well they adapted to these changes. In the evaluation process. three principles are followed: l
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Companies employ combinations of training methods ing approaches such as direct d videotaping of dealers are recognized as more e than self-learning. Catersently using teleconference methods for some ining. Hnaddition+ it is planning TVzt up a new satellite system for ~vor~~w~detraining purposes.
As P ucts chauge, markets shift, and territories are recognized, dealers need additional training to help adjust to these new e~viro~me~ta~ situations. A cammon costef~~~e~t way to retrain ex rienced dealen is to incorporate ~a~~~~gmaterials in regular dealer meetings. Pe-
The sales team does the evaluating; The evaiuation is constructive; and Changes in systems or strategies are imp!emented.
In addition to a subjective analysis of participants* perceptions during and after the training program, a quantitative evaluation can be employed. I[nthe initial implementation of the STDS, Caterpillar compared a set of performance measures between a control and an experimental group. The experimental group included all dealers who received training during a specified time period. The control group included a randomly selected group of dealers who did not receive training. Performance measures included sales, net revenue per personal call, market share, lost sales, and impact on new product sales.
An effective dealer training pragram depends an the reinforcement by management of skills being introduced. Training and its emphasis cannot end when the formal training program ends. An ongoing rno~ita~~g of the training pro ress toward the objectives agreed upon by t 7
ans for feedback. This
programs ae not in progress,
rogram called Management-Minded imptemented bj: Caterpihx dealers worldwide. S is a flexible and adaptable program that ailows to progress at &eir own rate. Because of this, most trainees develop a high degree of enthusiasm and rnoti~~atio~to meet the program’s objectives. This pro gives direction with clear statements of competency
yees to think like managers. It emphasizes attitudes
set of skill techni
attitudes that enable
rant additional employee training. Managers/trainers should also excessive waste in their departme ployees, or high turnovers, and res by investi &jg problems and correcting the traimng . Also, with the increased emphasis on tion and technological improvement, transfers to are increasing. and this provides implement training. MMS addresses the qualities of a trainer that are important. In order for managers/trainers to ’ s results from their training efforts, they m an enthusiasm for teaching, and empa put themselves in th their employees. errors. Among t two- way communication. In manager/trainer must be oriente This will enable the finer to offer m feedback more often.