1. Channel Information Systems Tata McGraw Hill Publishing
Chapter 14
Channel Information Systems
SDM – Ch 14
Tata McGraw Hill Publishing

2. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

3. Tata McGraw Hill Publishing
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 Publishing

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
SDM – Ch 14
Tata McGraw Hill Publishing

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
SDM – Ch 14
Tata McGraw Hill Publishing

6. Tata McGraw Hill Publishing
Information Process
COLLECTION
PROCESSING
STORAGE
USE
SDM – Ch 14
Tata McGraw Hill Publishing

7. Tata McGraw Hill Publishing
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 Publishing

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 purpose
SDM – Ch 14
Tata McGraw Hill Publishing

9. Tata McGraw Hill Publishing
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 Publishing

10. Tata McGraw Hill Publishing
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 Publishing

11. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

12. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

13. Tata McGraw Hill Publishing
Example
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
SDM – Ch 14
Tata McGraw Hill Publishing

14. Channel Performance Evaluation
SDM – Ch 14
Tata McGraw Hill Publishing

15. Tata McGraw Hill Publishing
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 Publishing

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 Publishing

17. Tata McGraw Hill Publishing
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
1.05
Market coverage 10
0.80
Back office support 6
0.60
Overall performance score – 7.15
SDM – Ch 14
Tata McGraw Hill Publishing

18. Tata McGraw Hill Publishing
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
1.40
Sales growth by period 10
0.80
Market share achievement 5 6
0.30
Sales target achievement – Performance score
7.20
SDM – Ch 14
Tata McGraw Hill Publishing

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
SDM – Ch 14
Tata McGraw Hill Publishing

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
SDM – Ch 14
Tata McGraw Hill Publishing

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
SDM – Ch 14
Tata McGraw Hill Publishing

22. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

23. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

24. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

25. Tata McGraw Hill Publishing
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 Publishing

26. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

27. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

28. Tata McGraw Hill Publishing
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
SDM – Ch 14
Tata McGraw Hill Publishing

29. Tata McGraw Hill Publishing
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 Publishing