In China, Add a Caterpillar

Selling giant industrial machines in China sometimes feels to Mike Cai like living life in a traveling circus.

A marketer for Caterpillar Inc., Mr. Cai is working to crack the China market for earthmovers called wheel tractor-scrapers. Already a decades-old product in America, these dirt-scoopers, which weigh in at 38 tons, haven't made much headway in China, which still relies on the smaller "hex" -- industry jargon for hydraulic excavator -- and trucks on most construction sites.

To change that, Mr. Cai and his colleagues have eschewed traditional advertising techniques. Instead they've taken their show on the road, adopting a tactic popular in China's burgeoning market.
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Caterpillar's wheel tractor-scraper is on a show-and-sell tour of China.

For the past year, Mr. Cai has taken more than 40 trips, stopping in different Chinese towns to try to showcase feats that he hopes will fully create some village buzz -- and that he knows is a lot cheaper, and believes is more effective, than advertising. "Word-of-mouth is the best form of publicity for the construction industry in China," he says.

China presents immense business prospects for industrial-machinery companies like Caterpillar, Cummins Inc. of Columbus, Ind., and Japan's Komatsu Ltd. Cities and towns across the country are rapidly building airports, highways, railroads, pipelines, mines and irrigation projects as part of the country's rapid economic development. Caterpillar says it expects China revenue to quadruple to $4 billion in 2010 from about $1 billion last year.

Selling the Cat 627G Wheel Tractor-Scraper's efficiency benefits at first seemed fruitless. Chinese construction companies seldom, if ever, keep data on productivity and machine efficiency. Telling them the Cat 627G does the work of several other machines -- loading, hauling, spreading and compacting -- can be futile when the potential clients have no basis with which to compare results.

Caterpillar, Peoria, Ill., declined to discuss pricing. Still the scrapers are expected to be costlier than what Chinese customers are used to buying. "The initial outlay may be more, but in the long term you save on labor and machinery costs," says Jin Guodong, a Caterpillar dealer.

In June 2006, Caterpillar's business-intelligence group canvassed more than 100 customers and dealers across China and tested their awareness and acceptance of the new product. "Half of them had never even heard of a scraper," says Scott Bailey, Caterpillar's market-development manager for the contraption.

Caterpillar executives decided the best way to exhibit the scraper's muscle was in the field. The decision came from an insight the survey yielded: Chinese customers said they wanted the experience of watching scrapers at work. No amount of data from Australia to Europe and the U.S. would convince them. "Roadshows are very popular in China," says Scott Kronick, president for Ogilvy Public Relations Worldwide/China. "Chinese customers are being introduced to a lot of products and services for the first time, so you can't advertise something that's intangible."

Starting in September, Caterpillar's marketing teams fanned out to different parts of the country, visiting ongoing or new projects that are on a large-enough scale to show off the scraper's prowess. Live events involve intense logistical work. In a demonstration that Caterpillar staged last month, executives flew more than 500 miles from Beijing to Changchun, capital of rust belt Jilin province in the northeast, before driving a further 310 miles to a remote town called Baicheng, home to two million people.
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Earlier, six scrapers were shipped from the U.S. and afterward transported on a flatbed truck to different parts of China.

At Baicheng, in the northwest of Jilin province, two demo scrapers were put to work. The city wants to turn wasteland into arable earth, by building grids of irrigation canals throughout a 900,000-plus-acre plot that can help wash away the salt -- the result of soil erosion -- that is now making the earth sterile. On the last demonstration day, an audience of local government officials, contractors, landowners and the local media turned up. The gawking helped to spin off a level of publicity Caterpillar hadn't expected.

When the project operator excitedly told reporters the scrapers could cut the work schedule by five months and bring benefits to local farmers earlier than expected, the local news station beamed a two-minute clip on its evening news about the machine's wonders.

China Central Television, the national broadcaster that reaches out to the entire country, also had sent reporters to Baicheng, intending to report on the farmland project, said to be Jilin province's biggest ever. Caterpillar says its dealers arrange the guest lists.

Days later, CCTV ran the story, which had a two-second glance of the scrapers -- free publicity that might have cost millions of Chinese yuan in paid advertising.

The local news clip has made it online, giving Caterpillar extra brand boosting. "It gave us excellent credibility, visibility and awareness," says Kate Wang, Caterpillar's spokeswoman in Beijing. In the past, the company also has advertised in trade publications but has preferred to submit academic-type articles for trade magazines that explain how its machines work, believing that this unpaid approach confers a more reliable image.

Yet cementing faith in the scraper and getting final orders may take awhile more. During the demonstration at Baicheng, the scrapers dumped soil layer by layer to form the banks of the canals, while engineers took measurements of the canal walls. But they couldn't keep up with the machines' speed.

"The scraper works faster than any traditional machine we know. Even after we buy one, we'll need to train our workers on using it," says Dang Jianyin, a Caterpillar customer in the mining sector who isn't involved in the canal project.

For now, the Baicheng operators have decided to rent two scrapers when construction resumes in March. Although Caterpillar's scrapers can run in all climates, the ground has become too hard for any digging, with snow at least two feet deep.

The company is working on a number of contracts with other customers and has had "a few successful rentals," says Mr. Bailey, the market-development manager. "The price tag shouldn't be a deal breaker once customers see the machines at work," he says. "They do get it. Chinese customers appreciate the fact that the scraper can shorten the schedule."

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