Lecture Sales and distribution management: Chapter 14 - Krishna K Havaldar, Vasant M Cavale

Chapter 14, channel information systems. After studying this chapter you will be able: 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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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

• 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

• Operations data – facts and figures

• Also based on assumptions, anticipated

occurrences – forecasts relating to the

channel system

STORAGE

• Processing: analyzing data to get meaning

out of it – arranging, modifying and

interpreting the data by the user –

comparison of sales between periods

• Storage: keeping the information intact till it is needed

• Use: application of information for

management decision making – sales data of the last 6 months to forecast the sales of the next month

Development….

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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

• 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 strategic

intent

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Sources of Data

• Reports (oral and written) and records of

channel 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 marketing

organization

• User friendly and user oriented

• Convincing to the providers of the info as to its 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

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Channel Performance

Evaluation

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Evaluation Criteria

• Channel system can be evaluated on how

well it provides time, place and possession

utilities

• Formal channel evaluation only with

contracted 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 agreed with channel partners

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Distributor Evaluation

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

Overall performance score – 7.15

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Evaluation

• Each of the primary criterion can be broken down

into it components and also rated.

Sales growth by period 10 8 0.80

Market share achievement 5 6 0.30

Sales target achievement –

Performance score 7.20

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Evaluation Overall Rankings

Channel member Overall performance score Ranking

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Overall Rankings - Action

performance

business to the company – to be

encouraged

• Consistent poor performance will entail dismissal

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Implementation Principles

• More relevant where member is bound by a

contract Wholesalers and retailers are

involved in the implementation to the extent that the company wants to cover them with its product presence

• The most critical issue in implementation is

the ‘intensity’ of distribution desired This is

more relevant to FMCG, pharma kind of

products and not so much for consumer

durables or industrial products

• Selective or exclusive distribution may result

in loss of sales opportunities

• Channel members feel widely distributed

product must be a fast seller Equitable efforts

are required in selling all brands and packs of the same company

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Influencing Factors

• Intensive distribution is more expensive

and requires more supervision

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

• Channel members prefer selective

distribution – the company should give the 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 costly option

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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 Tag

Heuer watches – exclusive distribution

• Depends on the target market

• Takes into account the importance of the

market and prevailing competition – more

intense the competition, more the intensity of distribution

accurate 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

• CIS uses methods and sources to collect,

process, store and use pertinent information for decision making

• Steps for development of a CIS are: decide info required, organize info in a suitable

manner and decide users with purpose

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

• 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 or

exclusive distribution has advantages