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1
Channel Information Systems
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
implementation
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.
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 needs
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 system
6
Information Process
COLLECTION
USE
PROCESSING
STORAGE
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….
8
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
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.
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.
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 reliable
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 service
13
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
14
Channel Performance
Evaluation
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.
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.
17
Evaluation
• Each of the primary criteria can be
given a weightage and performance
scores worked
Criteria Weightage
% - X
Criteria
score (1 to
10) - Y
Weighted
score X*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 0.60
Overall performance score – 7.15
18
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 1.20
Secondary sales 50 7 3.50
Achievement of secondary
sales target
20 7 1.40
Sales growth by period 10 8 0.80
Market share achievement 5 6 0.30
Sales target achievement –
Performance score
7.20
19
Evaluation Overall Rankings
Channel
member
Overall performance
score
Ranking
A 7.39 1
B 7.20 2
C 7.15 3
D 6.89 4
E 6.56 5
F 5.60 6
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
dismissal
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 products
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 company
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 them
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
option
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.
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
distribution
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 market
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 better
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.

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3 channel-information-systems

  • 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 implementation
  • 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.
  • 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 needs
  • 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 system
  • 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….
  • 8. 8 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
  • 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.
  • 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.
  • 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 reliable
  • 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 service
  • 13. 13 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
  • 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.
  • 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.
  • 17. 17 Evaluation • Each of the primary criteria can be given a weightage and performance scores worked Criteria Weightage % - X Criteria score (1 to 10) - Y Weighted score X*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 0.60 Overall performance score – 7.15
  • 18. 18 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 1.20 Secondary sales 50 7 3.50 Achievement of secondary sales target 20 7 1.40 Sales growth by period 10 8 0.80 Market share achievement 5 6 0.30 Sales target achievement – Performance score 7.20
  • 19. 19 Evaluation Overall Rankings Channel member Overall performance score Ranking A 7.39 1 B 7.20 2 C 7.15 3 D 6.89 4 E 6.56 5 F 5.60 6
  • 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 dismissal
  • 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 products
  • 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 company
  • 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 them
  • 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 option
  • 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.
  • 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 distribution
  • 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 market
  • 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 better
  • 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.