Territory protection policies

[Orchard Ex]

In the "Arrogant Cat Dealers" thread someone mentioned that you have to buy Cat equipment from your dealer or at least at your dealers price. A few days ago one of the New Holland dealers that I use said the same thing - he couldn't sell me new equipment because I was in a different dealers territory. Yesterday I heard a similar story about a bunch of other brands.
Is this true? Are most of the equipment manufacturers going this way? That seems like a good way to make customers shop other makes of equipment instead of staying brand loyal.

 

[tuney443]

With Deere,you can go ''outside'' your area dealers location, but for new,you have to pay a 5% premium for this BS.Not sure on used,but I pissed off this 1 order taker{there are no true salesmen anymore} big time when I was checking for a used 410G last year by going to other dealers.Said I was making him look bad--I said well do something then--his prices on his iron was still about $10K higher than on Machinery Trader.Then he really got pissed off when I bought private from a newspaper ad---a deal he was trying to broker on the side with the seller.But yes,certainly seems un-American.

 

[Casetractorman]

"Protected Territories" .. a sensitive subject amongst dealers .. Cat and Deere Dealers both pay premiums to sell outside their area of responsibility .. this is manufacturer driven to protect dealers so that the dealer can preserve some profit margin .. after all that is why we are all in business (correct) .. I am 100% certain that CNH (CASE, NEW HOLLAND) have no provision for protected territories .. the manufacturer assigns "areas of responsibility" and holds the dealer responsible for market share goals and objectives .. but there is no penalty or assesment for selling in or out of your market area ..

 

[Orchard Ex]

I just going by what my salesman said. I bought a used skid from him and we talked about looking at a a new CTL next year. He called me a few days later and said that he could sell me used equipment all day long, but that NH had just implemented more protection on territories and we'd have to jump through some hoops to sell me new equipment. Not that it absolutely couldn't be done, but he said that it would take some wrangling. I can't believe that he'd make up a story to avoid relieving me of a bunch cash.

Yeah Tuney, it does seem kinda un-American.
FWIW - Back in the days of communism my pop used to say "Every year the Russians get more freedoms, and every year we lose some of ours. Pretty soon we'll have switched places."

 

[JBL]

Orchard Ex, I heard the same thing as you when I bought my case dozer . The sad thing is I had never even heard of the dealer that I was suppose to be buying through. My closest Case dealer is 30 miles away and the dealer for my territory is 100 miles away. I bought the dozer through the closer dealer and they never heard a complaint out of anyone.

 

[Lashlander]

I ordered some parts from a Case dealer in another state. Gave em my card number and everything. It was a go until I gave them my address. They told me they couldn't ship parts out of state to another dealers area. This was a couple years ago.

 

[John C.]

As usual there is a grain of truth in all that has been stated. Cat, Deere and Komatsu dealers have exclusive territories that they can market in. There is nothing that prevents someone from buying a new machine from any dealer in any territory. There is a commission that goes to the particular dealer that has the territory the machine is sold into. However there are exceptions and there are ways to work through the issues. One of the big issues is who will support the new machine with parts and service once it gets on the job outside of the selling dealer's territory. Basically any warranty work has to come from the selling dealership so you are going to be on the hook for lots of travel time and mileage should something go wrong.

In my experience when someone from out of territory starts the purchase process there is some communication between the two dealers at a higher level than the regular sales force. The discussion will concern what is going on and how it is going to be handled. Many times construction companies will have a home office in one state but work in many other states. It doesn't make sense to try to service a machine in another state so the account will be handled through the construction office if so desired.

The process is totally legal and has been done that way for the thirty five years I have been in the business.

Casetractorman is correct about CNH and their franchise agreements. I have been told the same thing and know for a fact that the Kobelco dealers in my area frequently pirate each others territory.

Bottom line is the manufacturer sells the machines for a wholesale price to all their dealers who turn around and sell to the end user at a retail price. They don't make a lot on the base machine but do make loads of money on the add ons. The price of a machine is negotiable only to the point that the dealer is making his minimum required profit. The fact that someone is not happy with what the dealer is quoting has more to do with personalities, negotiating skills and the amount of capital behind the buyer. In my experience running to another dealer usually only makes the potential purchaser look inexperienced at best and possibly stupid or malicious at worst.

 

[farm_boy]

John C,

A couple of comments:

One of the big issues is who will support the new machine with parts and service once it gets on the job outside of the selling dealer's territory.

I agree 100%. This is the reason that manufacturers administer a service fee for selling into another dealer's territory. Legally no one can dictate where or where not to sell a new piece of machinery on the sales side. What can be done is a fee that is has to be paid by the selling dealer to the dealer who's territory the new machine was sold into. This does two things, it obviously discourages dealers from selling out of their territory, but it also helps the dealer that has responsibility for the machine's service in the territroy in which it was delivered. This leads to my second point...

Basically any warranty work has to come from the selling dealership so you are going to be on the hook for lots of travel time and mileage should something go wrong.

This may be the case with most manufacturers, but with John Deere the warranty travels with the machine, just like a new vehicle. Even so since most dealers don't get reimbursed for travel time or mileage this service fee helps the servicing dealer with these costs IF the machine would require service work under warranty.

 

[Orchard Ex]

The price of a machine is negotiable only to the point that the dealer is making his minimum required profit. The fact that someone is not happy with what the dealer is quoting has more to do with personalities, negotiating skills and the amount of capital behind the buyer.
In my experience running to another dealer usually only makes the potential purchaser look inexperienced at best and possibly stupid or malicious at worst.

Assuming that each dealer gets to decide what his/her minimum acceptable profit is, your statement just proves that smaller contractors should be shopping different dealers to be sure that they are getting the best price possible. (Taking into account different dealers servicing abilities, customer service etc. as has been discussed in other threads) I don't have the negotiating power of the big companies and I don't have a crystal ball telling me what price a dealer should be willing to accept. I'd rather look inexperienced and stupid with a few extra dollars in the bank than be a fool and just accept the salesman's "best price" without checking around. "Trust but verify" comes to mind. I have no idea how checking prices could be malicious?

If it's true that only the selling dealer is allowed to do warranty work on a machine then maybe there is a point to the system. But that sounds like a rotten way to do business as well. Who cares who sold the machine? If warranty work is needed it should be reimbursed by the manufacturer to the dealer performing the work. Hmmm, I guess that's just my inexperience and malicious stupidity showing through again.