Sdm ch14


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Sdm ch14

  1. 1. Chapter 14 Channel Information SystemsSDM – Ch 14 Tata McGraw Hill 1
  2. 2. 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 implementationSDM – Ch 14 Tata McGraw Hill 2
  3. 3. 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.SDM – Ch 14 Tata McGraw Hill 3
  4. 4. Information - Advantages• Useful in marketing planning – helps improve 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 needsSDM – Ch 14 Tata McGraw Hill 4
  5. 5. Classification of Information• Based on the use made of it by marketing – planning, operations, decision making or control• 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 the channel systemSDM – Ch 14 Tata McGraw Hill 5
  6. 6. Information Process COLLECTION PROCESSING STORAGE USESDM – Ch 14 Tata McGraw Hill 6
  7. 7. Information Process• Collection: acquiring and placing raw data – monthly sales by each territory• 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….SDM – Ch 14 Tata McGraw Hill 7
  8. 8. Developing a Channel MIS Decide what information is required Organize information in a manner suitable for interpretation and action Decide who will use the information when and for what purposeSDM – Ch 14 Tata McGraw Hill 8
  9. 9. Use of Information• Planning: sales forecasts or distributor indents• 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.SDM – Ch 14 Tata McGraw Hill 9
  10. 10. 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.SDM – Ch 14 Tata McGraw Hill 10
  11. 11. 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 reliableSDM – Ch 14 Tata McGraw Hill 11
  12. 12. 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 serviceSDM – Ch 14 Tata McGraw Hill 12
  13. 13. Example Competition TrackingPurpose Plan day to day corrective action to protect market shares and shelf spaceSource Trade, channel partners and sales peopleAction Spot action while in the market and taken bypossible channel partners or sales peopleImpact on Timely action to provide better support to the tradeservice and retain their goodwillSDM – Ch 14 Tata McGraw Hill 13
  14. 14. Channel Performance EvaluationSDM – Ch 14 Tata McGraw Hill 14
  15. 15. 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.SDM – Ch 14 Tata McGraw Hill 15
  16. 16. 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.SDM – Ch 14 Tata McGraw Hill 16
  17. 17. Evaluation• Each of the primary criteria can be given a weightage and performance scores worked Criteria Weightage Criteria Weighted %-X score (1 to score X*Y 10) - Y Sales target achievement 50 7 3.50 Inventory management 15 8 1.20 Selling resources 15 7 1.05 Market coverage 10 8 0.80 Back office support 10 6 0.60SDM – Ch Overall Tata McGraw Hill 14 performance score – 7.15 17
  18. 18. Evaluation • Each of the primary criterion can be broken down into it components and also rated. Criterion Weightage Score 1 Weighted %-X to 10 - Y score X*YPrimary sales 15 8 1.20Secondary sales 50 7 3.50Achievement of secondary 20 7 1.40sales targetSales growth by period 10 8 0.80Market share achievement 5 6 0.30Sales target achievement – 7.20Performance score SDM – Ch 14 Tata McGraw Hill 18
  19. 19. Evaluation Overall Rankings Channel Overall performance Ranking member score A 7.39 1 B 7.20 2 C 7.15 3 D 6.89 4 E 6.56 5 F 5.60 6SDM – Ch 14 Tata McGraw Hill 19
  20. 20. Overall Rankings - Action• Bottom 20% to be warned to improve performance• Top scorers have potential to give more business to the company – to be encouraged• Consistent poor performance will entail dismissalSDM – Ch 14 Tata McGraw Hill 20
  21. 21. 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 productsSDM – Ch 14 Tata McGraw Hill 21
  22. 22. Influencing Factors• Intense distribution allows consumer to shop where he likes for the product• Intensive distribution increases sales – good companies insist on retail distribution intensity• 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 companySDM – Ch 14 Tata McGraw Hill 22
  23. 23. 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 themSDM – Ch 14 Tata McGraw Hill 23
  24. 24. 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 optionSDM – Ch 14 Tata McGraw Hill 24
  25. 25. 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.SDM – Ch 14 Tata McGraw Hill 25
  26. 26. Intensive - Factors• Influence of channel principal decreases with intensity• 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 the market and prevailing competition – more intense the competition, more the intensity of distributionSDM – Ch 14 Tata McGraw Hill 26
  27. 27. Selective - Factors• Can cut costs but may prove inadequate – lower selling expenses, higher promotional allocations, larger transactions, more 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 marketSDM – Ch 14 Tata McGraw Hill 27
  28. 28. Key Learnings• Channel information systems is to collect and analyse data about operations of channels• 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 betterSDM – Ch 14 Tata McGraw Hill 28
  29. 29. Key Learnings• The channel evaluation system checks as to how well the system reaches the products or services 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 or exclusive distribution has advantages.SDM – Ch 14 Tata McGraw Hill 29