Sales & Distribution Management: Session 1

What is a purpose of a distribution channel?

A distribution channel has primarily two roles:
a) To reach the product/services from the organization to consumer & customer
b) Data capture(information) about consumer behavior, buying patterns, preferences etc. flows
back to organizations
How many ways can a product reach a consumer/Customer?

B2C
A) General trade: Kirana store/general store/pan shop (trade marketing)
B) Modern Trade store: super markets/hypermarkets/specialized outlets
C) E-Commerce: Online sites like amazon flipkart/ special custom websites
B2B
A) Hotels/Trains/canteen etc.
Network Marketing: Push strategy through friend/family member. A word of mouth is just a
recommendation.
Franchise
KFC/Subway/Habibs saloon another way or route to market.
C2C Model: Like quickr etc.
What distinguishes general trade from modern trade?
It is differentiated by size and who owns it. In the US, GT is known as mom & pop store i.e. (a
family run business). Modern trade is an outlet which is opened to scale. Modern trade is able
to work without such complex network of stockiest, retailer, wholesaler etc. because of its
scale.
Why consumes behave differently in GT, MT and E-comm?
When you buy in GT, we ask what we need. We don’t have access to touch the product, so you
ask for give me this, give me that.
In case for MT, we move around the store and see whatever we need, because we can access
the product, it gives a touch and feel factor.
The main difference between E-comm and MT is you browse physically in MT and browse
digitally in E-comm.
Purchasing Styles:
A) Brand recall: Top of Mind: Brands which we can immediately recall and recall first
Unaided recall: without any assistance
Aided recall: Hints/assistance aided recall.
In GT, aided recall and unaided recall is not important. In MT, they are important.
B) Role of Advocacy of the retailer
C) Inclination to compare
The skills required for GT
A) Reach+visibility=coverage
B) Retailer advocacy is overt: good selling practices
C) TOM recall and visual merchandising: anything which reminds of the product at the
point of sale.
The skills for MT& E-commerce:
A) Visibility, brand strength & offers
B) Retailer advocacy: covert: MT: product placement & E-comm: SEO
Product placement: The average height of the eyes for a housewife for groceries (changes
on consumer)
Significant difference from B2B trader & a B2C buyer
B2C buyer buys either for his own or a friend/family which has emotions involved in it.
B2B buyer buys a product without emotions and based on pure technical/financial
implications such as trade terms & quality of service.
Let’s take an example of ITC and understand the allocation of distribution in GT/MT/E-comm
for Ashirbaad atta and Candyman:
Ashirbaad Atta: 1) 85% GT, 15% mT &ecomm (rising), very little for B2B
Candyman: 1) 95% GT(half of them in panshops), most of the rest in B2B(Hotels,restaurant &
cateting HORECA) very little in MT & E-comm this mix will not change.
B2C e-commerce: 3rd party aggregators & individual websites(captive E-comm websites):
Humara shop HUL, Tea box Tata etc, bombay shaving company.
3rd party aggregator specialized: Myntra: Depth & width of range.
Advantages of 3rdparty: 1) Way more visibility 2) way more coverage but disadvantage is
competition. Vice versa for captive websites.
For what kind of products will captive B2C work?
a) Brand Loyal
b) Uniqueness
What is a difference between EBO & MBO:
a) EBO: exclusive brand outlet: captive
b) MBO: Multi brand outlet: 3rd paty
 Sales & Distribution Management: Session 2
Cash & Carry: A whole sale format, every firm has quantity discounts. (telescopic
pricing). The retailer is happy to buy from cash & carry since it gets more discount
than a stockiest/distributor. These are 3rd party sellers. But they can only sell to
business i.e. for only people having a trade license.
FDI in india is allowed for single brand retail not for multi brand.
Cash & carry is going B2B ecommerce giving the benefits to the retailer by asking
him not to come down rather they can order from the comfort from their home.
Pure play B2B e-comm player: Indiamart (specific verticals), Alibaba(exception)
We also have amazon & metro
Also there is captive and 3rd party.
B2B e-commerce is going to do better than captive e-commerce.

Different modern trade formats: B2C landscape: Food & Groceries ( spencers, big
bazars) & Speciality Retail (Reliance trend, fresh etc.)
B2B: Metro Cash & Carry
Hyper market, supermarket are based on size and not on the format.
In India around 35 rupees of 100 is sold in F&G in retail, for 65 rupees in specialty
retail.
How do you define a retailer: The person who sells directly to the End
consumer/customer.
General Trade Landscape: heart and soul of dist. In India but rapidly changing
consumers moving to Modern trade & E-commerce. GT are called mom and pop
stores. GT stores are closer to you physically and mentally. Strong personal
relationship. Tanishq took a long time break through this format because of that.

General Trade divided in two parts: Food & Groceries & specialty. (55% F&G, 45%
specialty consumption from GT). The richer a country becomes the %ge allocation
would go more towards specialty. Less than 0.1% is spent by Mukesh Ambani on
F&G. All F&G retail come under Kirana shops/variety/medicine/pan shops/Hot-
tea shops in India.
Why do they keep cold drinks in a medicine shop?
Ans) They already have a refrigerator and they use that spare capacity issue.
Another reason is Indians uses medical expenses (provided by company) which
are not used on such products.
General trade for specialty: Innumerable variability, watches, electrical wires,
paints shops etc.
A franchise is a modern trade format.
Flurys in Kolkata was originally a general trade format opened by husband and wif
where it was just there in park street. Few years back it was bought by apeejay
group and it was then expanded to 25 other locations in the country. It became a
modern trade then.
Of all the channels in India, the toughest to handle is General trade for food &
groceries. Why?
Ans) The no. of F&G outlets in india are 7.88 million( Nielsen 2012 data). The
population was 1210 million (2010 data). If you divide 1210/7.88 then you get
150. So, for every 150 customer there is 1 person. Average family is 5 in india. So,
it can only cater to 30 family on an average. Hence the implication is such that
they are way smaller. 80% of these retail outlets have a turnover(topline) of less
than 20k in a month even though 90% of F&G is from GT. This is happening in
india because many of them don’t have employment opportunities and it is the
easiest way and the last refuge.
FDI in cash & carry is allowed, single brand MT allowed and Multibrand MT not
allowed??
FDI in multi brand is not allowed in India then the disguised unemployment will
become complete unemployment and will cause social implications. Whereas
govt encourages cash & carry is not allowed to sell to general public and because
the retailers will get the products at less and hence his margin will go much
higher. Single brand is also allowed because it is not competing, it is just selling its
own stuff.
China has only 2 million outlets for a similar population, India has 8. What are
the difficulties of Unilever in India?
 1) Last mile delivery of cost will increase, shipping and freight cost will also
increase (4 times higher costs due to lower ticket size)
2) High credit risk to these small retailers
In GT to achieve your sales volume, you have to ensure availability of the product
in all GT stores. But the problems are cost to make the product available and the
credit risk with these retailers.
Modern Trade & E-comm (B2B & B2C) has posed a different problem to
marketers:
1) They are taking Market share. (bargaining power less with MT & E-comm)
2) They democratize the access: doesn’t differentiate between haldiram bhujia &
local one
3) Private labels are store brands which every modern trade outlet will display
priced much lower with good packaging.
Inside a reliance store, reliance will place its private label at a better place to
compete with established brands.
 Sales & Distribution Management: Session 2
Distribution decisions follow from one dominant variable? What is it?
It is how a consumer behaves. How you align your distribution base on the
consumer buying behavior.
All of marketing flows from consumer buying behavior which is not common
with 4Ps, digital etc. What is it?
The two most important component of distribution is logistics & transportation.
One of the things that affects the distribution is the physical nature of your
product. It doesn’t change promotional aspects. The nature of perishability, size,
weight all matter in distribution decisions.
Will the distribution also be dependent on the business model like for eg. a a
particular company may use warehouses some might do it locally?
A good business model has to flow from how consumer behaves. Your ware-
house decisions are not based on your model. Your ware house decisions are
based on how your consumer buys. Not based on the business model as per say.
Variable 1&2:
No. of consumers: Categories of highly dispersed

What are the distribution implications for such products?

a) to achieve such number and scale a large no. of intermediaries is important.
Apollo tyres which manufacture different types of tyres. If Maruti udyog(OEM
market) needs tyres for 1 lakh cars, they require 5 lakh tyres. One market is apollo
tyres who supplies to Maruti udyog. Then one year later the tyre needs to be
replaced and you go to neighboring auto parts shop(replacement market). The
distribution channel for apollo for Maruti udyog will be direct selling(only help
from a transporter). End of strory. But for replacement market I would need to
follow intermediaries like dealers, wholesalers, retailers etc. So bigger geography
and more customers I would need for intermediaries.
Variable 3:
Higher frequency of purchase:

In FMCG, the term fast comes due to the consumption speed which is the mean
time between two purchases (rough timeline: 90 days) it is termed as FMCG.
FMCD is about 5-10 throughout your life time.
Mean time between two purchases for cigarettes is probably a day, and for 5kg oil
is probably few weeks.
What are the distribution implications for such products?
Higher frequency, Stockouts are likely to be higher due to wrong forecast due to
different triggers to demand & uncertainty of the people. You could have 1 pan
shop which has a fixed 40 of smokers. If they move, the demand forecasting goes
haywire similarly if they bring another 10 friends the demand forecasting goes
wrong. The actual implication is on the transport intensity on the last mile
because of fear of stock out. The higher the consumption, the higher probability is
to order from GT. Milk, cigg, bread are bought from GT. If you look at low volume
SKUs. Your only option is to focus on GT because your freq. of purchase is higher.
Why don’t the GT buy more in advance to reduce chances of stockout?
They wouldn’t since if they buy too much, they have a chance of their cash to be
stuck. For a panwalla it might seem obvious to stock more cigarettes to minimize
fluctuation in demand even though majority of his topline is due to cigarettes. It is
actually his private label pann on which he makes more of its margin. So he
cannot afford that risk!
Variable 4:
Higher frequency of purchase:
Tendency to postpone purchase (Felt need)

What are the distribution implications?(Low felt need)

Life insurance buying behaviour is to procastrinate. Every body agrees its
important but they postpone it. If we have to get them to buy, the role of the
sales force is important. When you have a consumer with low felt need, you have
to motivate him to buy it. Network marketing works very well here. Tupperware is
such item which is good to have but not essential. So they sell it through network
marketing where the products needs some good sales force.
What are the distribution implications? (High felt need)
Branding is very much critical here, because distribution is not a problem. The
customer will seek you out.
Variable 5:
Low level of familiarity:
What are the distribution implications?
Impact of the promotion is known. But what is the distribution implication? The
most important implication is knowledge about the product or information. If you
are searching for information then quality of field force is very very important.

For slightly high-end products, companies will use shop in shop format inside an
MT retail outlet explaining about the product and give you demonstration. For
others where much more information about the whole product/service category
is required firms may even go door to door, like BYJU (an ed-tech company).
Aquaguard established water purifiers for the whole Indian market going door to
door (it’s a route to market) with their product.
Variable 6:
High Brand loyalty:

What are the distribution implications?

a) With higher brand loyalty the companies have bargaining power and will give
less margin. For ITC, godflake margins are very low given to a retailer. For
other less branded cigarettes the margin provided will be less.
b) The visual merchandise at pos for low branded products very much along with
position on the shelf.
Variable 7:
Purchased on impulse:

What are the distribution implications?

Cross-selling strategy by E-commerce, bundled products.

For GT, availability & visibility. In modern trade a consumer is idle during billing or
some sort of que, you will see most of the impulse products are lined they are. In
hypermarkets, the trial rooms are the locations where the modern trade cash in
on accessory/impulse products. In impulse category transportation at last mile
delivery is very important. Pepsico says to be present at arms length of a buyer.
Because you never know when the desire would strike. If it strikes, you have to be
there.
 Sales & Distribution-session 4- Prof. Govindarajan
We look at variable 8, the level of involvement is nothing but quantum or degree of quantum search
which consumers go through before buying, the two aspects are frequency of buying and price
Information are critical. Products with high value are purchased less frequency and have high LOI.
Whereas products with low cost are purchased more often and have low LOI.

What is the impact of distribution on LOI?

• The first implication is higher the LOI, lower the importance of availability, people are willing to
go ahead to other places. Availability not a critical dimension. This is a category where the most
important marketing mix is promotion and powerful part is word of mouth specially in India.
• For High LOI categories, the information is extremely important. People want more and more
information and hence quality of skill force(sales) need to be upskilled and reskilled very often
so that they are extremely well trained.
“Skill of the employee goes up, as you move up in a mall”

(9) What is a basket of goods?

Combination of goods people buy together. Coffee, milk and sugar. Soaps, ketchup and pulses this is
a housewife basket.

Antacids, glucose & karela juice’; kerala juice is a thought process because we think karela juice has
medicinal property
Greeting, cards perfumes and fancy chocolates are available at gift stores in GT, MT and e-
commerce. The consumer is buying it from a gift shop and hence the perfumes will sold through
there also which you might have missed as a route to market. So, you as marketer have to
brainstorm on what all RTM possibilities are there. That’s why chocolates are found in gift stores
because it comes under the same gift basket. Even though the categories are not similar, like locks
are very different from paints but our mental basket correlates them and hence we need to
brainstorm on more and more types of RTM

Impact of distribution: From the marketers POV, assortments analysis should be done to find out
what are the products bundled together.

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 Sales & Distribution-session 4- Prof. Govindarajan
Do you think the placement(shelf) helps for mental basket? For MT, it definitely helps. IN GT, the
shelf arrangement is very chaotic.

(10) Can you give examples of products which are very slow and complex decision?

In B2B: Purchasing machineries or things which involve capital investment are slow & complex
process. Essentially all B2B purchases are straight rebuy, modified re buy and New order. In straight
buy just simply reorder, in modified: change of supplier or products, new order as it suggests are
completely new buy. New task will be much slower. If I am buying an analytics solution it is a first
time buy and will take much longer time. In Institutional purchases, answer sheets or staples these
are things which are straight rebuy mostly. A new type of projector is modified rebuy and involve
more people in the process, but a new order of an ERP soln. has to be a much more slow and
complex process.

(Q) Isn’t the process variability depend on price also? Like in general high-priced transaction will
involve complex decision?
Not essentially, an Udupi restaurant transacts in lakhs for coconuts which might be even costlier
than the gas oven it buys to make the food. But the gas oven will be slower and a complex decision
to makes since it’s a new order.

Distribution Impact:
Lower the speed and higher the complexity, the more skilled workforce one needs to have.
As you move from left to right the information is req more, the availability goes less, accessibility
goes less.

(11) There are certain purchases, in B2C, before buying it we consult someone which means our
decision is shaped by some examples. Medicines are bought after consultation with a doctor only.

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 Sales & Distribution-session 4- Prof. Govindarajan

Most clinics and hospitals will have clinic stores beside them. Medicines are of two types: The first
one is an ethical drug which is a schedule H drug which cannot be bought without doctors’
prescription. OTC drug are available without a doctor’s prescription. In India you don’t need anything
to buy medicines. When we buy medicines, we feel a particular ailment Is serious, we don’t stray
from the doctor’s advice. If the drug is seen as life threatening, we are more cautious for our
information.

Distribution:
lets take the example of a floor tiles. Now you know in a market, 40% of architects are being
consulted. So essentially you have two customers: one is an architect and the real customer. In the
medicine example, a need a good salesman who can convince my composition is superior. I need
another field force who are explaining to chemists (dawai dukan) to push my product. In Russia, MRs
are generally doctors. One handles direct sales, on the indirect influencers.

(12)

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 Sales & Distribution-session 4- Prof. Govindarajan
Risk aversion examples of EBO: When you open a EBO, the only person who will step in to buy in
world of titan is a person who has thought of buying it. Do you have loyal customer base? Strong
loyalty, have different options, adequate resource to build revenues. The retailer knows that the
only loyalist comes, on the upside the better margins, credit terms, marketing support etc. EBOs are
looked with much more care.

For MBOs: The great eastern/ reliance digital for an MBO, in an MBO you are buying a higher LOI. A
retailer or salesman can’t push a product, but what he can do is he can unsell the competitive
product.

13)

Daily essential, fruits, vegetables, medicines. The most perishable product is newspaper. The three
main impacts of distribution: 1) Replenishment of stocks 2) the IT analytics soln of forecasting 3)
Easy transportation.

14) Seasonality: seasons and festivals of the year. They give a sales que for a year. If we take a day
as a unit time, bread milk is generally bought in the morning time. For perishables according to
products like newspaper will need more workforce for e.g. 3000*30=90,000 calls to be made within
2 hrs. of morning, for HUL 3000*4 (once a week) = 12,000 calls to be made with larger amount time.
So, the work force required is pretty different. Apart from this all other perishable distribution
impacts are same.

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 SDM Session 5-Prof. Govindrajan

A negative reinforcing product is not bought with something to be happy about. It is not a product
that people want to spend money on. Negative reinforcing products are typically sold due to
functional use. For example, a mosquito repellent or a washing powder is mainly bought due to its
functional purpose to kill mosquitoes or wash dirty clothes. People are not ready to spend extra
money on them.

A positive reinforcing product is such that people are happy to buy or are ready to spend money on
even though the core benefit may be -ve reinforcement. Due to promotions and marketing
techniques the transition can be done from a -ve reinforcing product to +ve reinforcing product.
Take the example of a deodorant, its core benefit was to remove body odour, but with extensive
marketing campaigns and branding the product has become aspirational. People are even ready to
spend 1000 bucks on it.

Impact of negative/positive products on price elasticity:

The ratio of the highest price/lowest price is a measure of how much you want to spend. Positive
products are more price elastic. The core benefit of a deo is -ve reinforcement. But what has deo

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 SDM Session 5-Prof. Govindrajan
managed to do with marketing? The marketing team has tried to steer towards positive
reinforcement. Shaving gear for men, shaving is a negative reinforcement at core, but Gillette has
brought smoothness and elevated to a positive product.

What is the impact on modern trade? Diff for -ve reinforcing & positive reinforcement

In case of positive reinforcement, experience is critical because you are trying to spend more for it,
the apparel, deo section looks much more appealing than a detergent section. And hence it would
always have to be neater clean and you would want an experiential experience. You don’t need it for
-ve reinforcement like detergent or boot polish. Hence the people skill will also be needed more by
the employees at deo section than at detergent.

Physical nature of product: Price/quantity ratio

For manufacturer eg: Atta, 10Kgs of the value/volume is much less and hence transportation cost
and storage will be very high compared to a product which has higher value/volume. Hence you are
paying more rent, transport cost, storage cost for less profit.

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 SDM Session 5-Prof. Govindrajan

If I have to transport it is always important to remember that products with low value/volume will
incur very low roi/sq ft since the cost of transportation and storage will be much higher. For
example, if I was to transport atta from one location to another location, the transport and storage
cost will be comparable to my product cost ultimately bringing down the ROI/sq ft for a retailer. But
if I was to transport a diamond, even if I choose chartered flight with champagne offerings it would
still be nowhere neat to a real diamond. Hence ROI/Sq ft will be very high. For retailers it is an
important criterion. Bigbasket, Groffers all will be terrified if you just ask for a kg of atta since the
transport cost will be higher than the margin, hence they will apply shipping charges, but once you
bundle it with other products and the overall amount is above a threshold limit they will provide you
with free shipping

Brand Parity is nothing but brands being indistinguishable or not. The Brand parity index talks about
how much a brand in a category has differentiated itself from others. In essence brand parity can be
thought of brand equality, for example matchstick boxes, do you really ask for a certain matchbox or
just go and ask “Bhaiya, matchis de do”. If two brands are similar to each other with product
offerings etc. they are said to have high brand parity index. On the other hand, brands like
automobiles which are very different from each other with respect to product offerings have low
brand parity index meaning they are not equal at all.

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 SDM Session 5-Prof. Govindrajan
So, the impact on S&D is such that with higher brand parity, distribution is very important, you need
to make sure that the product is accessible or within reach of the customer. But if you have already a
low brand parity, the impact on distribution is less since people already know that you are visible
and they will ask for you.

High brand parity: Place & Price more important

Low brand parity: Promotion & Product

GT Channel-FMCG

85% of all FMCG happen through General Trade, 15% products are bought which are upmarket,
frozen food, customized products, niche products through MT.
Lets take the example of Loreal: Ways to buy are 1) Sachet GT 2) Bottles GT &MT 3) B2B like OYO,
ITC are the routes to market. 90% of sachets are sold through GT mainly. Sachets give an advantage
of trial and error decision.

FMCG have large type of consumers, frequency of purchase higher, perishable items some are like
milk, bread, newspaper, low value/volume ratio. What is the implication of distribution?
-Availability
-visibility (consumer has to see it) 2 mantras of FMCG: Jo dikhtaa hai wo bikta hain in GT FMCG

ITC/HUL/Marico are all great at visibility & accessibility.

The objective function. is to both depth of distribution & width of distribution (retailers’ point of
view)
-width is how many cities you are available or outlets? Depth is which kind of cities are you available
is it a population of 1lac etc.

1) If you have geographically scattered segment, and purchased all over India, I need a large
intermediary to make the product available.
2) The cost of GT is higher for last mile delivery and value/volume ratio is very low

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 SDM Session 5-Prof. Govindrajan

Is GT distribution more than Modern trade? Depends on the margins and the number of
distributions it covers. But raw cost of availability is always higher in GT

Lyril soap is manufactured by HUL and transported through length and breadth of India. The first
transport happens with the new product to a company warehouse to distribute and make it visible &
accessible I need 5000 distributors to retailers. And to service these 5000 distributors I need 25 ware
house.

1) First movement happens to company go-down or rented go-down (clearing & forwarding agent
CFA, 3rd party who stores the products)

2) From this 25 go-down they will move from warehouse to a stockist/distributor/whole sale
distributor depending on company terminologies.

3) All the lyrils are lying with distributor, if you have a distributor in BBSR he now distributes it to
whole seller and retailers. Whole seller buys in bulk, retailer in small quantity. IF the stockist has not
sold to customer, he sells it to retailer.

4) From retailer to consumer

4 level journey it takes to complete from manufacturer to consumer.

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 SDM Session 5-Prof. Govindrajan

There is no selling, if the products are moved to C&FA hence you are just holding my goods, and you
are not buying it from me. It doesn’t show as sales and recognized as finished goods inventory. Fixed
cost is lower, risk sharing, competency reasons. Outsource only when its not your competency part.
The C&FA doesn’t take part in any sort of selling. The transporter arrangement takes care of the
transport and gets it shipped. Even in case when C&FA are doing the transporting, they will be
reimbursed.

Extended Notes

What is the impact of negative and positive reinforcement on price elasticity? (brand based)

More elastic positive

• In case of -ve reinforcement if change in price person is more inelastic. More care about
function than please
• For -ve no loyalty involved – more elastic for -ve less elastic for positive.

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 SDM Session 5-Prof. Govindrajan

• Ratio of highest price to lowest is the measure of elasticity, how much we are willing to
splurge
• Going to a 5 star is splurging for an experience
• +ve reinforcement people tend to splurge more for example homemaker will prefer to
splurge on a perfume rather than a dishwasher
• Deo – negative reinforcement. Marketing team tries to steer it towards positive.
• Shaving – A negative reinforcement. However, Gillette has made it positive and elevated it
by steering it towards smoothness, fashionable. “The best a man can get”
• If car price is compared of course it is huge. Is it only for +ve -ve or because of technology
used and variability. Huge transition. marketing creates “Maya” for example chocolate and
boot polish. Consumers can pay a lot for chocolate as compared to boot polish.
• Paintings of MF Hussain will be sold at a higher rate.

Mohammad: E.g. dishwasher: can a product be a +ve reinforcement because they can afford it and
for functionality of time.

What is the impact of all this on distribution?

None in General trade. But in modern?

• In case of +ve distribution can be eased, less places where it is available, person will search
for it. For -ve it can be made available everywhere.
• This variable has more to do with luxury.
• From modern trade point of view
o Placement of positive reinforcement products more strategically. ) Shelf spacing)
o In -ve they will go and look for it as they need it.
o Decided to buy a perfume(+ve), mother asked for a detergent(-ve).
o Experience, ambience, help of third person to buy +ve reinforcement product.
o Try experiential marketing
o Modern trade layout format are big issues
o positive reinforcement is discretionary spending so experience is important'
o Dhaba vs 5 stars
o Man power more required in +ve reinforcement. Examples skills of sales person
develop across the floors of a mall.
o Forecasting is category specific. More difficult for new categories,

Not fmg travelling from distributor to shop? Indirect accounts

o MT doesn’t buy from distributor directly from manufacturer.

o Store location is important to predict stock moving.
o Frequency may differ

Value/volume= Price / quantity

• Physical nature of the product.

• Examples of brands or categories which have low value and high cost. Examples: cotton and
rice.
• Price of 10 kilo atta = 350 volume = huge. How many pizzas can you fit in it? 15 around so 15
*500 = 7500.
• What is the effect of distribution in it?
o High transportation cost

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 SDM Session 5-Prof. Govindrajan
o Storage cost high (Paying same rent for atta whereas pizza costs so much more)
o ROI per square foot.
o Labour and packaging
o Remember Soura the delivery boy for Nirav Modi wala example.

Parity – Sameness

Candles, matchbox ---? Impacts on distribution?

However, are all cars similar?

What is the effect of distribution when you are selling brands with high parity products?

o Need to be omnipresent, omni channel

o Pick up whatever is most available
o Price matters.
o Among 4 Ps promotion and product are irrelevant
o Two most important are place and price.
o All marketing and brand budget will go in sales and distribution
o Even helmet comes under this category still steel bird is preferred now.
o Nyasa nascent brand – tiffin carriers, etc. attempt to reduce distribution.
o Margins asked for nascent are more by retailer
o cash and carry sells products of their own brands at half the price so that people purchase it.

In case of brand parity place and price re highest but sometimes place is changes. Examples scented
candles. Same as helmet point and Aim match boxes.

CYCLE agarbatti, Marico for coconut oil, Amul for milk → changes commodity product to
differentiated because of branding. In this case budget allocation to distribution will come down.

Band-Aid → synonymous with a brand. Problematic case for the brand. Other examples Mobil,
Xerox.

For GT Food and Groceries:

86% + FMCG occurs via GT, what are the exceptions?

o Premium and mid-premium products

o Frozen food
o Organic products
o Quinoa, olive oil, protein bars.

Loreal: channels?

95% sachets from GT/

o Availability as per basket of goods and visibility. (Joh dikhta hai who bikta hai)
o Chai ka tapri is a GT, CCD is MT

What is difference btw depth and width of distribution?

Retailers def: Assortment (entire line)

Width—Diff SKU’s

Depth – Units in a SKU

-Soura & Apoorva

 SDM Session 5-Prof. Govindrajan
Manufacturer:

Width – coverage, no of outlets we are present in

Depth – Upto which town category our Availability exists.

Large

o Geo scattered: liril manu in Mumbai but available across India

o Cost of GT is very high when it comes to transportation and logistics.
o However, margins are lower than MT
o So total almost balances out.

Physical movement of Stock:

liril manufacturing → company warehouse C &FA(third party godown) → clearing and fwding agent
(if rented)→ super stockist/distributor → Whole saler(bulk)/Retailer(small quantity)(3rd movement
of stock) → consumer buys

Depending on product can there be more channels?

One more layer will explain later.

This movement only applicable to GT(B2c GT)

HUL article app they are launching democrat size buying? HAMARA app(b2b captive ecommerce)

Buying list can be maintained by consumers. So, distributor knows how to maintain SKUs.

If a consignment of 1 ton of liril is dispatched from company warehouse to C&af will it be recorded
as a sale in P&L statement?

No. WHY?

o Holding the stock on behalf of the company.

o Therefore, not taking title, company is paying rent.
o It will show as finished goods inventory which have not been sold yet
o Risks can be shared if leasing out.

Why Amul go-down costly higher than HUL?

Storage air conditioned.

FMCG company one HUL one unknown, who will pay more price?

Per square foot, HUL product may stay longer. Same as tenant and renter.

-Soura & Apoorva

 S&D session 6- Prof. Govindrajan

What is the value provided by C&FA agent?

-Competency skills provided by C&FA to store products which required special skills.
-Demand forecasting is very difficult to estimate
- Transport costs: Let’s take a C&FA in BBSR and it is there in Jatni, it is also a C&FA for ITC. For a full
truck load, it costs less than half truck load. For FMCG product the value/volume ratio is low, so
transportation is cost. So, anything you can save on transportation is really helpful. So, it costs less
for both HUL and ITC when the C&FA transports it combinedly to distributors.

Because of the tax saving purposes, but it is no longer needed for GST implementation.

-Soura & Apurva

 S&D session 6- Prof. Govindrajan

Stockist

It is known as a 3rd party branch office. He does everything you would have done: Promoting,
visibility, taking care of competitors, he doesn’t get salary but gets commission from you, he is
effectively doing all the work which should have been done by branch office. But the work has been
outsourced the sales & distr. to stockist and distributor. Everything the distributor does is in
collaboration with the manufacturer. The distributor knows better than the manufacturer

A stockist is in a commercial contract, the stockist is the last link in the channel who is answerable to
you. He takes a joint exercise with you. He can be questioned on the performance. If I was a retailer
in BBSR, then the prior to 2005 had two sources: one distributor, local whole seller. Now 3rd option is
a retail outlet of reliance. If I am based out of 16 cities having metro cash and carry, I have a 4th
option.

-Soura & Apurva

 S&D session 6- Prof. Govindrajan

Quality of your GT distribution network:

the stockist is what makes or breaks it. Let us understand the agreement. A distributor/stockist is
termed as reselling man. The map of bbsr is marked and the company has chosen you as a sole
reseller for this whole map of bbsr. You as a distributor will calculate the margins and calculate the
overall wt. avg margin and then from there the total revenue he can achieve and assume his costs to
distribute and understand whether it will suit him or not.

There may be some companies who divide BBSR in two, South and North and appoint two stockists
for both regions. A state like Orissa, will have 25 distributors for ITC. HUL will have 60 distributor, 21
Lok Sabha seats, Bengal has 42ls seats, gives us an idea about population. Orissa has 4 crores. P&G
has 1 distributor only for an area like Orissa.

Advantage and disadvantage of having high /low Distributor:

Adv:

• Better reach
• Broader variety of products
• Less burden per distributor
• Quick coverage

Disadvantage:

• Can pair up to charge more (Cartel)

• Channel conflict
• Margin
• Deployment of labour
• Two comps of 2 crore rev each. Comp1 1 distributor, other 2 distributor.
• More profit for less distributor. His share is more.
• Bullying power will be huge.
• Disadvantage of coverage but. It’s a trade-off.

-HUL needs to have a greater focus, so reach, speed and coverage will be much better.
BBSR has 1500 retail outlets, each retail outlet has to be covered in a week? So, you need to call
1500*4=6000 calls, you need 10 salesmen. They will operate out of the distributor points. The salary
can be paid by the distributor and the company increases the margin. It is advantageous since the
HR issues will be less and other companies. If the salary is paid by the distributor you lose the sales
man once the distributor agreement would end. As a salesman you will always be loyal to distributor
If they are paying and if the distributors are taking some wrong steps the salesman wont report. So,
the link with the market is very critical and he needs to be loyal to HUL.

Simran has been chosen as the sole stockist of Marico. It makes saffola, parachute. etc. Marico has
1500 retail outlets and 90 lakh turnovers. What are the typical investments made by stockist? You
have to make the product available, visible and push the product. The more you do the more
margin. (investment vs capex vs opex)
-paid 45 lakhs to Marico for the saffola, parachute etc. 30th of month you bought
-After day 1, you have sold 3 lakhs but you will get on 8th.
-Marico want advancements and the retailers want credit. (two types of investments)

-Soura & Apurva

 S&D session 6- Prof. Govindrajan

If you make the go-down its capex, if you rent its opex.
If you hire a van it is opex, if you buy a vehicle its capex.

Typical operating costs include for reselling the stock is 1500 retail outlets:
1) salaries for 10 salesman
2) cost of transportation
3) IT people, accountants, general admin work
4) cost of damaged goods
5) Interest on working capital

When Marico sells goods to the stockist on 30th of month, she transfers the money and the goods
reach her, it means it will be primary sales. The stock of 45 lac has reached and he tries selling it at
1500 retails. The secondary sales happen when the goods are transferred from distributor to whole
seller or retailer. Retailers to customer sales are called Offtake.

Why Marico will ask for accountability in secondary sales?

Answer

As an ASM, you will have a dashboard and keep a track on the sales of primary and secondary. Has
the retailer able to sell to the consumer? The company purchase data from Nielsen to drive their
decisions.

-Soura & Apurva

 S&D session 6- Prof. Govindrajan

PTD X Quantity sold= Primary sales. Detergent market estimated at MRP X no, of sales value

Who will have more GT outlets? HUL or AMUL

-HUL will have more GT outlets, HUL will have more calls per day.

1500 outlets and 90 lakh products in bbsr for Marico, Price to

-Soura & Apurva

 S&D session 6- Prof. Govindrajan

Excel:

1 sku company.

Min quantity- 45 lakhs.

Day 0: transferred 45 lakhs. (stock of 45 laksh )

Day 1: assumed target achieved 10000 units sold.

PTR: 31.5 31.5*10000= 315000

Margin: 1.5 = 1.5*B7

-Soura & Apurva

 S&D session 6- Prof. Govindrajan

Stock always valued at cost of goods sold. Stock value gone down from 3 lakhs to 42 lakhs.

1.15 lakhs

8th day? Retailers have to pay for stock sold in day 1. Check formulae. Outstandings 7 days money
will come.

Repeat till day 14. You run out of stock.

Order Fresh stock. Additional capital.pumps in 23 lakhs.

Day 29: again, stocked out.

Diff: have enough cash now. So, order fresh stalk.

How to repay loan?

Are the returns worth it?

TIP:

Rev:9450000 (top line) Investment: 72 lakhs. Turnover: 945/72 = 1.31 = rotation

Net margin = check from excel.

The distributor has been able to rotate her capital 1.69 every month

Roi = margin *rotation = 2.22 % = *12 = 26.7

--------------------------------------------------------------------------------------------------------------------------------------

-Soura & Apurva

 SDM Session 7- Prof. Govind Rajan

Let us discuss marketing intervention by which we can increase capital rotation for the distributor?

• Sales promotion - Schemes/Offers, Incentives- targets- awards and recognition (To increase
offtake). Way to increase revenue is sales promotion
• Better credit terms
• Quality of sales effort:
o Adhere to beat plans
o Are punctual
o Rapport with retailer
o Constantly looking for new stores.
• Increase brand pull
• Bulk discounts
• Retailers on board reach can being increased

What is diff between advertising and sales promotion?

Advertising:

• can have multiple reasons,

• (Pull),
• to create impression,

Sales: For money.

• (Push),
• to create reach,
• Not intrinsic to the product,
• short term in nature,
• the moment we start inc for long term brand starts falling.
• E commerce – reseller sells at a lower price brand doesn’t slash prices.

Real estate: Advertising: how to distinguish adv and sales promotion?

Giving a discount to get rid of stock. If available at lower price for a limited period then adv.
 SDM Session 7- Prof. Govind Rajan

Capital rotation with a time constraint?

BBSR example of last class:

• Exactly how much time to spent in each outlet

• Which retailer to push more stalk.

What are adv as mentioned in last screenshot?

If more availability and visibility effect on FMCG?

INCREASE sales (By advertising or disciplined sales.)

Bigger outlets have lesser time as compared to smaller outlets. (ITC)

P&G is opposite.
 SDM Session 7- Prof. Govind Rajan

How to increase net margin?

Increase price or decrease cost of production.

Concentrate of smaller retailers. Why?

• Quantum of sales will be a high num.

• Conversion of market shares will be higher in long run
• Larger retail will buy in bulk smaller will never do that.

6 ways of improving ROI:

 SDM Session 7- Prof. Govind Rajan

• Increase credit → Finance department.

• Margin sales promotion → Brand team needs info (Regional account manager → marketing
manager)
• Reduce distribution
• Inc margin given by company. --> Account & Finance
• Increase brand pull → marketing team (Brand manager to finance)
• Disciplined coverage

2 under your control others interface.

If distributor ROI already high why to improve?

• More sales
• All stakeholders are happy.

ASM responsibility, high return of distributor, with no impact on company

Our roles:
 SDM Session 7- Prof. Govind Rajan

Profit margin: 18444/45000 = 40 %

Cig: 20713/45000 = 70%

If you remove cig then profit declines.

Top line : 12 505 crores

Ebitda – 688 crore

EBitda margin 688/12505 = 5.5 %

 SDM Session 7- Prof. Govind Rajan

What is implication when we say increase credit period on fin statement?

1 % on 5.5 loss. Total cost to ITC is 125 crores. We never face shareholders.

Is there any way we can increase margin to distributor?

No one will do it indefinitely, only as incentive for a particular time period.

If distributor asks for it response should be below. ASM should be convinced.

 SDM Session 7- Prof. Govind Rajan

122.22* = 540 . This promised will cause a loss. Is it worth it?

Distributor has to higher more people for this? To justify that we issue rebates.

You are a custodian, company pays salary, cannot afford to be unreasonable. Never take
irresponsible decisions.

Sales : Top line( In control)

Brand : Bottom line. (out of control)

Every ASM welcomes branding intervention.

 SDM Session 7- Prof. Govind Rajan

For disciplined market coverage it will involve incentivising sales promotion.

May involve consumer perception, data analysis,digital agencies …

Digestive biscuits two packets at the price of one?

Sir will come to this later.

No brand manager takes decisions without consultation of ASM. Asm → last mile deliverer.

Two way street. No centralised decision. Granularity later.

DMART example:bombay as a market, shortage of offtake , not comparable with other areas. When
you allocate money on marketing you could be spending anywhere but you are spending so get your
data correct should be able to justify.

Clearance sale also same example

MDFs that are given by the company to distributors: part of promotion.They are budget for and
allocated.

Golden rule:

Two kinds of obsolence

• Technological
• Fashion

Umang :105 simran:85

Poaching: Inter territory stalking.

Soura : ASM Odisha. Should he bother

his target is sold.?

Distributor might leave partnership.

Competition for ptr prices.

 SDM Session 7- Prof. Govind Rajan

Discontinuity is dangerous:

• Involves training
• Extra expense
• Loss of continuity.

Super stockist used in:

Up country market: Population low.

--------------------------------------------------------------------------------------------------------------------------------------
 SDM Session 8- Prof. Govindrajan
The Wholesaler

All our discussions have been on large wholesalers, like metro cash & carry. Today we are going to
talk about the smaller ones. In thousands the wholesalers in India. Walmart, metro cash & carry
came up very recently. The smaller wholesalers are an interesting creature. A wholesaler is a free
bird in the channel. The wholesaler has no authority because he is just a trader. A distributors job is
of loyalty, but the wholesaler is a mercenary. The only loyalty the whole seller has is for the
transaction.

FMCG’s should even expect him to be a loyalist.

Just like metro cash & carry, the wholesaler comes into picture for quantity discounts. Trade loads
are like discounts on more transactions. The wholesaler buys in bulk and splits this with retailer
which enables him to stock at less price than a stockiest.

He is a typical trader and his main interest is actually how fast he can transfer the items to the
retailer. He operates in low margin but maximizes it through rotations.

Let’s understand this through example:

In reality they have multiple slabs, lets assume the bulk buying PTR is 100, PTR is 101 and hence the
wholesaler have to play within that. So, he thinks of selling to retailer at 100.50 and hence 0.5% of
profit.

A retailer doesn’t want to buy at 100 because he can’t bulk buy since he most importantly doesn’t
have cash to buy it. He is hardly bringing in enough to make the ends meet. He cannot invest that
much and also maybe he wants to minimize risk of offtake. Hence the wholesaler chips in with
becomes a trader.
 SDM Session 8- Prof. Govindrajan
How does the wholesaler then make money? He just makes 0.5% on a transaction

If all the stocks he is buying in 9 am in the morning but he sells everything by evening, hence 365
rotations in a year, and turns out 182.5% throughout.

Hence a smaller wholesaler has the following attributes:

1) Buys in bulk
2) Very low margin
3) Extremely high rotations

What stops the stockiest to sell so that the wholesaler has to chip in?

1) Cost of coverage
2) Temptation of lower cost with bigger order. Loss on margin is saved on transportation
costings

Wholesaler attributes
• For a wholesaler inventory is a grenade with the pin removed, he will throw it to the next
person. That’s his mindset.
• They need to have an efficient supply chain. Anyways people will come to him for reduced
price.
 SDM Session 8- Prof. Govindrajan

Let us try to understand the strategies at play:

For a retailer he will source it from where he will get it at cheapest. A wholesaler understands this
and offers him .5 Rs margin to sell the product at 100.5 to him and hence the retailer agrees to buy
from him. This is the wholesaler strategy to eat into the distributor’s share.

Let us take the second picture into account. For this example, let us consider the first picture talks
about Marico’s product parachute and the second one talks about a local manufacturer who makes
a similar coconut oil. It’s common sensical since the PTD is 96 in first and PTD is 84 in the second.
Because the margin is much more in the second case.

As obvious the first one is a case of Marico’s parachute and the second one a local manufacturer. In
the first case there is only INR 1 for the wholesaler to make a profit and in the second one INR 4. This
signifies that when margin is low, there is pull of product and margin is high so there has to be push.
Parachute has a higher pull. And hence it can give you less margin with increased rotations and vice
versa for the local manufacturer.
 SDM Session 8- Prof. Govindrajan
So also try to understand what will the wholesaler strategy be. A typical wholesaler from BaraBazaar
area in Kolkata will give you a parachute product and tell you whether you are interested to make
more margin on coconut oil. As retailer’s will show interest, he will bundle local products and give
some of his own margin to get you interested there by pushing the local manufactured products and
increasing his own profit by increasing rotations. And you as a retailer will feel you have got a good
bargain!

What will be strategy of a wholesaler when selling to retailer?

Rotation higher for parachute, it is a pull product. Strategy?

• Placement of product
• Higher margins but more local products.
• He bundles slow moving items with fast moving ones.
• He kept more money for himself

Merits of having wholesalers

-if you don’t have a GT network, they will give reach

-for a small manufacturing unit, whole sellers will bundle your product and help you enter
-less responsibility

In case of Marico they have to cover 1500 outlets, here maybe 100 outlets, 100 is easier, each
wholesaler lifts larger quantities. Transportation cost is also saved.

Whole sellers are worried about rotations. They are a drawback if you actually have a good GT
network

Demerits of having wholesaler

-wholesaler can play at any field and eats away margin from your distributors
 SDM Session 8- Prof. Govindrajan
Golden rule:

If you have a strong dist network. Umang is a retailer, dist is Simran. Simran salesman meet umang
and offer 9 re margin for parachute and 50 min later who is chirag give 50 paise cheaper, so umang
is tempted to buy from him

Chirag is wholesaler border of cut – bbsr, buys and sells in bbs, territory div was btw two stockists
but for chirag no boundary, ROI of cuttack dist will fall. Wholesaler can play gadbad for dist.

Should this be a concern for Marico?

Sales have taken place but long run implication will lose a dist.

Golden rule: stockist is your representative and wholesalers are mercenaries.

FMCG MANTRA: Availability, legal representative. Visibility

Discount on a bundle of products how to keep an account of margins?

Software packages. Ignore

Huge investment to become a wholesaler.

B2B

Our coverage for this session, B2B sells actually includes sale to another business. B2B sales
consumer products to institutions. 35% of Brooke bond sales are B2B, (canteens, IRCTC stc). Second
part are software products or hardware machineries. The customers are organizations and not
individuals.

1) Some org use it for consumption or raw material

2) Some buy and resell

Trade terms are important for resellers, like margins, credits and delivery terms. If the person buying
at the end of chain sees the quality then its fine with the reseller

3 buying patterns

1) Straight rebuy
2) Modified rebuy
3) New task

Straight rebuy where a reorder is given to an existing supplier when there is low product and price
volatility. This essential means the product or service has not been technically advanced by a lot.
 SDM Session 8- Prof. Govindrajan
How to create entry barriers?

• Relationship
• Specifications
• Quality
• Exit costs
• Operator inertia (eg modi xerox)

Modified rebuy: one or more can change

• Specification
• Price
• terms
• Supplier

New Task?

• First time buying

Most vital requirement of a salesman:

• Listening.

The funnel complexities are properly explained in the ppts. Go through them for easy understanding.

--------------------------------------------------------------------------------------------------------------------------------------
Difference between straight rebuy and modified new task ?

• St rebuy: No funnel. When consumer buys from same supplier. No prod price volatility.
• Modified new task : goes through Third point of funnel

Two categories of straight rebuy

Housekeeping: long duration contracts, renewal of contract happens.

• For non-incumbents’ awareness is not required. (1st two parts of funnel not needed.
• For incumbents: Build in method by which we are able to keep out others.

Golden Rule:

Keeping a customer is far more important than getting a new one.

Comparing b2b and b2c salesman cost 20000 per month in b2c. In B2b it is much higher. Higher
qualification. High Cost and quality resource.

How much exposure to CLV?

If you are working for a company which has 3 clients who are rebuys, other are modified rebuys. As a
salesperson focus on rebuy first. A bird in hand is better than two.

What can a person who is a non incumbent what concepts are associated that they can come in the
funnel?

First target should be product price and volatility. To create price volatility.

Eg: Tea vendors. Were replaced by tea bags, kitchen requirement went in offices. Disruption
needed.25000 to 30 k range.

Apurva
Question from B2b to B2c.

• What is the roi of your product

• In April 2020 edu institutes realized physical classrooms band hai. Solution: Target group by
zoom was all the teachers of India.
• Via fB , insta and linkedin.
• B2b has become more digital than b2c.
• Target can be defined easily in it.
• Any thing that stops irritation is product innovation.

Degree of comoditiy will dictate price or product volatility.

Group 4 example. Post 2000 data became most important , they protect data theft. 360 degree
protection not just physical protection

Straight:

• Floor cleaners
• Liquid soap
• Paper napkins
• Menu card
• Sauf
• These are headache items( No revenue + fast perishable)

Modified:

• Dehumidifiers:
• Cutlery for new cuisine
• Launching a new scheme with food aggregator.
• Veg/Nveg : Butter oil costliest.
• Fixed money cost but ingredients price change so constantly looking for new suppliers.
(what about quality? Will come to it for metro cash and carry.)

New Task:

• New cuisine
• Robots to be waiters.
• New location.

Apurva
 • MCD standardization: kept local tastes in mind. Entire menu was revamped. Delayed entry
for 6 months as they couldn’t find iceberg lettuce. MCD hired 200 farmers in Haryana
educated them and made them grow iceberg lettuce.
• Two restaurants will shut down bhojori manna and chillies. Their sourcing only from Calcutta
so now they are dead.

• Sauce
• papad
• Mayo
• Chilli flakes
• Sambar chutney etc

Known for Horeca.

• Pain point: Fluctuating Prices of daily use objects in restaurants.

• Go into long term contracts.

Apurva
 • Designed Menu card
• Designed Aprons
• Except Mayfair all follow this in BBSR
• private label products they found high margin products
• Non-revenue items purchase.

Modified buying:

• Degree of knowledge
• Better terms
• New feature

New Task

• Vague Idea
• Security issues.

Check ppt sir has given examples.

Apurva
New Task

• From 1st step of funnel

• Sales guys are technical
• Establish demand

Modified

• Have to create volatility

• Features or specifications are essential
• Superiority in comparison with competitors.

Quadri cycle – Horseless carriage (positioning against generic competition.

Who to ask what platform to deliver in?

Teachers!!

Apurva
B2b :

• Back hand team. Order generation, sales gen.

• Works more closely, less order but higher rev.
• Knowledge of buyer is more than b2c prod.

Apurva
Assume that company is fractal analytics.

• Medium
• Content
o Capabilities
o Pain point addressing
o How to contact

Can it all happen together?

Hul – demand forecasting not an acute pain point.

Milmantra : Mumbai based: operations → More Urgent

Beauty of digital campaigns:

o All stages can be done together.

o It is flexible
o Awareness, information provision, Lead generation (narrower funnel.)

Objective of campaign shows most important fact.

Apurva
How to calculate CLV?

Similar to Discounted cash flow.

When is CPA a more relevant method?

o One-off purchase.
o Cost of implementing a solution by AI/ ML- 20/30 lakh.
o Cost per lead – 45k worst case scenario +other costs.
o More profitable customers are difficult to maintain.
o Every non incumbent will try to create price and product volatility.

What is difference of B2B and B2C product1 funnel:

B2c:

o Easier to try
o First money come where?
o Trial itself (Second stage)
o Second tier in b2c funnel is last stage in B2b funnel

In consumer electronics?

Gap between trial and repeat is longer.

Also truck tyres of fleet operatiors.

Apurva
In b2c fmcg model→ less loyalty how to calculate clv?

Will tell on Sunday.

Is this funnel limited in uneducated purchases?

Part of awareness stage. 100 group target group for vivel 65 aware 30 tried, 35 didn’t. Ratios we look
at why awareness convert to repeat. Will answer next class.

What needs to be fixed if awareness and needs are low?

o Promotion
o Channel

Apurva
Pull strategy while following b2b and b2c funnel. Where does salesman use his skils? Or no rule?

All that linkedin will do is create a lead. You have to convert .

Apurva
Soaps:

• Lux
o Awareness 90%
o Tried? 75% of target
o Repurchase- repeat buy else discard.
o MOUB- most often used brand → family buys 12 a year. If 5 of them are lux then it is
a MOUB
• Vivel
o Awareness 50%/40%
o Tried? 25% of target
o Repurchase- repeat buy else discard.
o MOUB- most often used brand → family buys 12 a year. If 3 of them are vivel

Umang question:

All the bathing soaps he is aware of:

Lux, Dettol, hammam, santoor,

More than 30 → adv budget of more than 5 crores

Awareness:

o Aware – aided
o Use --
o Repeat use – unaided/spontaneous

How does a company do aided recall?

Done by a researcher. Let us say you are lux, 100-year-old brand. → Monthly data → To sales team
about aided unaided purchases.

• For lux → Most important matrix→ top of the mind.

• Recent brand → Most important matrix → Aided or unaided.

Own consumer insight research → do they purchase or own data → Emami aggrotech. (Marketing
Strategic)

• Dipstick survey → Short quick study

Apurva
 • Costly via market agency. Every fmcg has insights team.
• Inhouse → could have biases.

Kolkata → Chennai → Mumbai

Trial / Awareness

Repeat / trial

MOUB/ repeat

Share of voice?

Market share 30 % , same with media.

High awareness could be for sov needs to be indexed.

Apurva
 • Selecting the right media
• Effectiveness of creative execution
• Reach of promotion
• Impression

• How effective your ad was?

• Willingness to buy
• Positioning

IF hul sells 100 Hammams in a year 60 are from TN.

Apurva
 • Meeting customer expectation
• Satisfaction.
• Quality of distribution

Why is cfo happy with high MOUB?

• Vol of cash flows

• Retained customer cheaper than acquiring a new one.
• Word of mouth
• Less ad spends.
• Margin to dist can come down

SOB- source of business - +3 -1 incase loss is more find out the reasons.

12% of HUL profits come from LUX

After how many purchases do we categorize someone as moub?

• Soaps:12 month moving average.

• For FMCD → higher usage period.

Franchising:

Apurva
Storage , op expense.

Quantum of participation of delivery varies accordingly.

Apurva
COCO – not really franchise no third party.

FOFO- Uber.

• Need to standardize offering,

• No brand image
• Knowledge of business and prior experience
• NO other skill other than business acumen
• Venketesh Iyer similar story.
• Is it always standardized? not always example
• When is foco suggested?
• When you have capital but lack skills

GD goenka question:

Apurva & Titiksha

Full franchise will never be given. or else image will be tarnished.

• When no specific competencies. Example ximb cafeteria.

• When companies wants to expand so to lease out operations part
• IIM c and great lakes have subways inside campus , we have X café and that cig point

Service Industry

• Watch the Founder!!

• Petrol pumu – fofo
• Mcd- foco or fofo

Apurva & Titiksha

 • Food
• Retail

When we expand globally can we have same blue print?

nO goegrapgically different

KFC special why?

Asset lite , intangibes, goodwill are assets, (spice mix, salad)

• Asset lite expansion

• Franchiser will enjoy economies of scale
• Improved ROCE
• Wont do any rnd before expansion

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 • SOP
• Existing brand so huge footfall since day one
• First gen entrepreneur, finance is easier (opening a hamburger join 15% , kfc joint 12 % .)
• Good quality raw material , as they are not involved in selection of suppliers, able to acquire
it at much lower cost
• Training from experts so quality is improved
• Hardware is standardized
• Market research is company owned

Risk taking sometimes dna & community specific

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 • High royalty payments
• Zero freedom to experiment with newness
• With time you could have built your own brand

Session 12

We looked at LinkedIn and can be used for different stages of the funnel. How sales and marketing
work together to generate leads at LinkedIn.

Today we will look at how B2C is different from B2B sales funnel-

How to predict that sales are going up or down? There are 4 stages

• How many are aware?

o Whatever number is quoted particular to the targeted group (For eg Lux and Vivel)
where 90% of the targeted group are aware of lux and barely 40-50% are aware of
Vivel
• How many tried?

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 o 70% of 90% have tried lux
o 20% of 40-50% have tried vivel
• How many have repeated?
• How many it as their MOUB (Most often used brand)?
o Average purchase time is 30 days. Average soaps are 12
o Out of 12, 5 happens to be lux and 2 happen to be lyril. Hence Lux is the most
preferred choice
• How many soap brands have 5 crores for their advertising budget- 30 soaps?
• 3 types of awareness:
o Top of the mind- When you to GT to buy(Eg- Lux)- 50 years of brand
o Aided awareness- For a new brand aided recall is okay
o Unaided awareness- where you do not need any external help to remind about the
brand (eg: dettol)

Dipstick survey- It is a quick survey but is an expensive one. All FMCGs have consumer insights
teams. Problems is that biasness can crop up when done in house but inexpensive

Data mining can help in determining the MOUB. CRM programmes are run to capture the data

Computing 3 ratios:

• Trial/Awareness- 0.36, 0.16, 0.3

• Repeat/trial- 0.2, 0.18, 0.375
• MOUB/Repeat-

What all other information is needed?-

• % of the target group (25% of TG of Chennai, 78% TG of Kolkata and 40% TG of Mumbai)
• Advertising budget( suppose 4x in Chennai, 3x in Kolkata, 5x in Mumbai)

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Your awareness scores need to be in tandem with your media spend or share of voice (SOV)

*Sov- How much % of the media spend you have used in your advertising

What aspect of the sales and marketing measure does awareness measure?

• Have you chosen the right media?

• Effectiveness of communication/creative execution

What aspect of the sales and marketing exercise does the ratios measure?

• For Trial/awareness
o Quality of Positioning- Communicating the benefit to the customer
o Quality of creative execution
o Presence of strong competition- or absence of it
o Quality of distribution- Even if you have great promotion but if your distribution is
weak, then you lose your conversion to trial
• Repeat/trial
o How well have you met the customer’s expectations?
o Relevance and differentiation- like fragrance, cost, lathering
o Quality of distribution- How often is your product available
• MOUB/repeat
o Met the customer’s expectations when compared to the competition
o Quality of the distribution- Product availability
o Strongest CLV Cash flows- CFO is happy with MOUB because retaining the customer
is cheaper, word of mouth will increase of volume, cost of advertising comes down,
the cash flows can be predicted and less volatile

Franchising

What is franchising? It is a licence to use the brand in an agreement between the franchisor and
franchisee. The franchisor who owns the brand and the franchisee owns it to generate revenue. The
franchisee does not own the share in the brand

What is the difference in operations between ITC distributor and a KFC outlet run by a franchisee?

• The participation of the franschisor is higher as compared to the ITC distributor

Involvement levels in delivery process:

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 • An ITC Distributor- less involvement
• A Honda Car Dealer- More involvement
• A cool drink bottler- Assembly line
• A KFC Outlet- Every order is a separate order
• Habib’s cutting salon- Higher involvement, quality of the skilled staff is higher as compared
to KFC outlet
• A GD Goenka School- Highest level involvement, Extremely high level of skilled staff

Classify the above in FOFO, FOCO, COFO

What is the impact of higher involvement of the delivery by the franchisee for the franchisor?

• Great the level of standardizing and monitoring- Brand custodian

Eg. Uber is a franchise, is an aggregator and a revenue sharing profit

4 models of franchise:

• FOFO
• FOCO
• COFO
• COCO- Not a franchise model

Session 13

The franchise model

1) FOFO-
a. Franchise owned and operates
b. Pays royalty
If you are good at business but do not have a brand for it. Basically you do not have high
level skills but do not want to take any sort of risks
2) FOCO-
a. Franchise owns and company operates
b. Profit Sharing

They have the intellectual capital but the financial capital is given by the company. Asset light
expansion all over the India but company handles the operations

3) COFO- Company owns, franchise operates

They focus only on branding and outsource their operations.

Service Industry- Maximum delivery is done by whom?

Session on sales & distribution on services:

Major service franchisees in india:

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 • Food and QSRs
• Education
• Heath
• Courier services

Bhubaneswar has a branch office of Blue dart and hence this is COCO. Instead they hire third party
because they own the real estate, then it FOCO

The Franchise model follows the geographic specific and is tailor made campaigns to cater to the
population.

Benefits to the franchisor

• Asset light expansion

• Low risk
• Local market- The knowledge about the market

Drawbacks to Franchisor

• Cause great to damage to the brand if they messes like finding a fly in their food

Benefit to Franchisee:

• SOP
• Brand which is existing
• Marketing supply where the bulk media buying will have quality ads and media and it to
comes to the franchisee
• Easy access to borrowed capital for the first generation invetsors

Drawbacks?

• Royalty can vary

• No freedom of experimenting
• Brand does not belong to them

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