SALES AND DITRIBUTION 14

8/13/2019 SALES AND DITRIBUTION 14

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Ch 14 Tata McGraw Hill Publishing 1

Chapter 14

Channel Information Systems


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Learning Objectives

• Understand importance of information

systems for management of channels

• Elements of channel information systems• How information systems are used to impact

channel service objectives

• Performance measures for channels• Understand principles of channel

implementation


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CIS Purpose

• CIS is Channel Information Systems• CIS is the orderly flow of pertinent operational

data both internally and between channel

members, for use as a basis of decision

making in specified responsibility areas of

channel management

• CIS is of primary use of sales managers.


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Information - Advantages

• Useful in marketing planning – helpsimprove quality of marketing decisions

• Can help tap market opportunities• Provides an alert against competition

• Helps spot trends – favourable or

otherwise• Helps develop action plans for growth

• Gives feedback on consumer needs


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Classification of Information

• Based on the use made of it by marketing – planning, operations, decision making orcontrol

• Based on subjects – consumers, products,competition, channels, promotions, pricing,sales volume, value etc

• Operations data – facts and figures• Also based on assumptions, anticipated

occurrences – forecasts relating to thechannel system


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Information Process

COLLECTION

USE

PROCESSING

STORAGE


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Information Process• Collection: acquiring and placing raw data –

monthly sales by each territory

• Processing: analyzing data to get meaningout of it – arranging, modifying andinterpreting the data by the user – comparison of sales between periods

• Storage: keeping the information intact till it isneeded

• Use: application of information formanagement decision making – sales data ofthe last 6 months to forecast the sales of thenext month. evelopment…


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Developing a Channel MIS

Decide what information is required

Decide who will use the information

when and for what purpose

Organize information in a manner suitable

for interpretation and action


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Use of Information

• Planning: sales forecasts or distributorindents

• Control: expenses against budget• There is always a cost of collecting

information.

• If data collected is not used properly, the data

provider will hesitate to give the information.• The channel MIS works at the sales

operational level. It has very little strategicintent.


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Sources of Data

• Reports (oral and written) and records ofchannel members, sales people

• Letters, statements and market research

• Any other info collected by the sales people

and the channel members from the market• External sources like business publications,

magazines, newspapers, trade journals.

• In a dedicated channel system the collection

of info is well streamlined – in the JC meeting• With use of IT enabled systems collection and

processing has become simpler.


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A Good Channel MIS…

• Integrated system to handle all regular data• Useful decision support system

• Reflects the style of the marketingorganization

• User friendly and user oriented

• Convincing to the providers of the info as toits purpose

• Be cost effective• Not need for verification from other sources

• Be fast and totally reliable


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Element Importance

• In a good channel MIS, it is necessary

to define upfront for each element of the

MIS, the following: – Purpose of the info

– Source of the info

– Action possible – Impact on customer service


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Competition Tracking

Purpose Plan day to day corrective action to protect market

shares and shelf space

Source Trade, channel partners and sales people

Action

possible

Spot action while in the market and taken by

channel partners or sales people

Impact on

service

Timely action to provide better support to the trade

and retain their goodwill

Example


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Channel Performance

Evaluation


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Evaluation Criteria

• Channel system can be evaluated on howwell it provides time, place and possessionutilities

• Formal channel evaluation only withcontracted channel members

• Independent wholesalers and retailers may

not accept any evaluation by a company• Periodicity of evaluation and parameters like

achieving targets market coverage etc agreedwith channel partners.


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Distributor Evaluation

• Once a month by the sales people on

the performance of the previous month

on all agreed criteria• Criteria varies with the category of

channel member, nature of the product

and the nature of customers.


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Evaluation• Each of the primary criteria can be

given a weightage and performance

scores worked

Criteria Weightage

% - X

Criteria

score (1 to10) - Y

Weighted

score X*Y

Sales target achievement 50 7 3.50

Inventory management 15 8 1.20

Selling resources 15 7 1.05Market coverage 10 8 0.80

Back office support 10 6 0.60

Overall performance score –

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Evaluation• Each of the primary criterion can be broken down

into it components and also rated.

Criterion Weightage

% - X

Score 1

to 10 - Y

Weighted

score X*Y

Primary sales

15 8 1.20Secondary sales 50 7 3.50

Achievement of secondary

sales target20 7 1.40

Sales growth by period 10 8 0.80

Market share achievement 5 6 0.30

Sales target achievement –

Performance score

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Evaluation Overall Rankings

Channel

member

Overall performance

score

Ranking

A 7.39 1

B 7.20 2

C 7.15 3

D 6.89 4E 6.56 5

F 5.60 6


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Overall Rankings - Action

• Bottom 20% to be warned to improve

performance

• Top scorers have potential to give morebusiness to the company – to be

encouraged

• Consistent poor performance will entaildismissal


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Implementation Principles

• More relevant where member is bound by acontract. Wholesalers and retailers areinvolved in the implementation to the extentthat the company wants to cover them with itsproduct presence.

• The most critical issue in implementation isthe ‘intensity’ of distribution desired. This is more relevant to FMCG, pharma kind ofproducts and not so much for consumerdurables or industrial products


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Influencing Factors

• Intense distribution allows consumer to shopwhere he likes for the product

• Intensive distribution increases sales – goodcompanies insist on retail distribution intensity

• Selective or exclusive distribution may resultin loss of sales opportunities

• Channel members feel widely distributedproduct must be a fast seller. Equitable efforts are required in selling all brands and packs ofthe same company


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Influencing Factors

• Intensive distribution is more expensive and requires more supervision

• For consumer electronics or durablesintensive distribution may result in ‘free-riding’ situations

• Channel members prefer selectivedistribution – the company should givethe products only to them


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Influencing Factors

• If a brand has a strong consumer franchise,

no outlet can ignore it – HLL brands –

distribution becomes intensive• Channel partner or reseller also has a choice

on what he wants to stock and sell

• If the product category is important and

competition is severe, selectivity is a costlyoption


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Implementing Rules

• Low value goods: cigarettes, soaps,

shampoos – intensive distribution – fmcg kind

of low investment but mass based.• High value goods: electronic goods or

consumer durables – buyer makes

comparisons across outlets – selective

• Specialty goods: Mont Blanc pen or TagHeuer watches – exclusive distribution.


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Intensive - Factors

• Influence of channel principal decreases withintensity

• Channel member’s competitors also have

same products• Higher quality positioning does not match

higher intensity

• Depends on the target market

• Takes into account the importance of themarket and prevailing competition – moreintense the competition, more the intensity ofdistribution


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Selective - Factors

• Can cut costs but may prove inadequate –

lower selling expenses, higher promotional

allocations, larger transactions, moreaccurate forecasting of demand

• Channel members margins may be better

• Better influence over channel members

• Manufacturer attracts more aspirants

• Suitable for new product or testing the market


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Key Learnings

• Channel information systems is to collect andanalyse data about operations of channels

• CIS uses methods and sources to collect,process, store and use pertinent informationfor decision making

• Steps for development of a CIS are: decide

info required, organize info in a suitablemanner and decide users with purpose

• A CIS can include all elements of interest tosales managers to operate better


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Key Learnings

• The channel evaluation system checks as tohow well the system reaches the products orservices to customers

• Channel implementation is guided by the‘intensity’ of the distribution required

• For products with a large consumer base,

intensive distribution is preferred• Under specific circumstances, selective orexclusive distribution has advantages.

SALES AND DITRIBUTION 14

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