Ingersoll
Ingersoll Rand (A)
Managing Multiple Channels:1985
Section S4, Group 9
 

The Problem

Which channel should the newly developed 200

hp centrifugal model, Centac-200 should be
sold?
• Ingersoll Rand (I-R) Sales Force
• The distributor network
• Air centres
 

The Situation
Direct Sales Force:
Advantages:
• Well established
established service capabilities
capabiliti es
• Good addition to the shrinking line
Disadvantages:
• Sales force tend to become ‘elephant hunters’ 
 

The Situation
Distributor network:
Advantages:
• Well established network.
• Consistent with the hp portfolio.
• Good reward to the loyal distributors

Disadvantages:
•

Attention away from the smaller compressors.

• Distributor training is required.
• Channel not completely under control
 

The Situation
Air Centers:
Advantages:
• Useful in areas where distributors were not successful.
• Inventory Transfer Facility
Facil ity..
• Centralized Order Entry System.

Disadvantages:
•
High Overheads.
• Apprehension in the minds of distributors.
 

Cost Analysis
Cost of Centac- 200 =$225*200= $45000
(19 Mill/200 Units=$45000)
Installation Cost = 12% of $45000
= $5400
Spare Parts and Maintenance Cost = 2% of $45000
=$900
Gross Margin on Compressors
Compressors = 15% of $45000

= $6750
Gross Margin on Spare Parts = 30% of 900
= $270
 

  Air Centre:
Gross Margin per unit = $6750+$270-$5400
= $1620
Sales of Air Centres = 20% of 200
= 40
Gross Margin for market = 40*$162
40*$16200
(40 units) =$64800

Sales =200*0.46=92
Total sales =92*45
=92*45000=$
000=$41400
4140000
00
Cost to Company =0.19*4140000=$786600
 

Sales Force:
 
Gross Margin per unit = $6750+$270-$5400
$6750+$270-$5400
= $1620
Sales of direct Sales force
force = 30% of 200
= 60
Ex Factory price of product = 60*$1620
(60 units) =$97200

Sales = 200*0.22=44 Units

Total sales = 44*45000=$1980000
44*45000=$19 80000
Cost to Company =0.11*1980000=$217800
=0.11*198 0000=$217800
 

  Distributor Network:
Gross Margin per unit = $6750-$5400
= $1350
Sales of Distributor Network= 35% of 200

= 70
Gross Margin for market = 70*$1350
70*$135 0
(70 units) =$94500

Sales = 200*0.32=64
Total sales = 64*45000=$28
64*4500 0=$2880000
80000
Cost to Company =0.21*2880000=$604800
 

Recommendations

Distributor Network
 

Why?
•

Distributor Networks
Networks earn higher profits than air ce
centres.
ntres.
• Distribution centres have a better chance of earning profits due to
the reach.

The distributor network is bigger compared to any of the channels.

• Distributor centres
centres have better structure than Air Centres and
Direct Sales Force.

Also the cost to company to

to maintain a distributor network is less
compared to air centre.

• Distributorss may push the products better than the ssales

Distributor ales force.