Boston Whaler, Incorporated: Managing the Dealer Network

Note - for the purposes of this exercise we assumed that BWI's primary objective was managing its sales channel to increase large powerboat sales

1. How do the objectives of the dealers and BWI differ - in what ways are their goals not aligned?

BWI Objective Aligned with dealer?

Expand large boat sales No - cost/profit structure not favorable to dealer; higher turnover in smaller boats is preferable; long sales cycle not consistent with short buying window for most dealers (seasonality and tourism); dealers may not have growth imperative

Get inventory off books (RMA) No - executive compensation tied to RMA expenses, creating incentive to stuff channel to diminish inventory, passing the inventory cost on to dealers

Maintain brand perception It depends. No - if customers are too loyal to BWI brand, dealers are beholden to BWI. Yes - in certain markets, carrying BWI boats could be a valuable point of differentiation for dealers

Dealers adhere to BWI price guidelines No - dealers want flexibility to price compete

Increase cooperative advertising No - increases loyalty to BWI, shifts customer ownership; dealers get advertising regardless of whether they participate or not

Increase coordination with dealers It depends. Yes - better coordination is beneficial to both parties if it leads to creating more value and equitable distribution. No - could put dealers at a disadvantage if BWI uses consolidated information from all dealers exclusively for their advantage

DEALER Objective Aligned with BWI?

Make money No - there is no specific incentive to sell BWI products; they will sell whatever is most profitable (other boats, motors, accessories, etc.)

Inventory turnover No - large boats have long sales cycle

Maximize sales window No - large boats have long sales cycle, and many dealers' selling season only lasts a few months

Exclusivity It depends. No - this could give single dealer too much power; Yes - there is the potential to help BWI expand in large boat segment or undeveloped regions

2. What information will the dealers not provide accurately to BWI?

Information Reason

Pricing and cost structure Gives dealers bargaining power

Agreements with competing manufacturers Profit margin, commission structure, financing, etc. - may distort to gain more favorable terms from BWI

Inventory Inflate inventory levels to deflect pressure to buy more from BWI

Customer information Control customer profile data and preferences to manipulate communications with BWI (e.g. customers don't' like large boats)

Demand forecasts Better bargaining power to negotiate pricing and stock level

3. What information will BWI not provide accurately to the dealers?

Information Reason

Cost of goods sold (margins) Would give dealers price negotiation power; BWI may use price discrimination to vary wholesale prices from dealer to dealer

Comparative dealer information Pricing, financing terms, incentives, inventories, etc.; this fosters competition among dealers

Market response to BWI large boats BWI will extol virtues regardless of actual data (baby will always be beautiful)

RMA as measure of performance BWI does not want dealers to know there is management incentive to unload inventory on dealers

4. Why are the dealers reluctant to advertise Boston Whaler's products?

Limited feedback mechanisms - cost-benefit is difficult to measure

Free rider problem - dealers will benefit from various campaigns whether they invest or not

Customer ownership - increases loyalty to BWI products, not dealer

Network effect - may benefit competing dealers disproportionately

Stringent program criteria - most importantly, coop component required dealers to list price