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 service capabilities
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.
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 = 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*$1620
(40 units) =$64800
Sales =200*0.46=92
Total sales =92*45000=$4140000
Cost to Company =0.19*4140000=$786600
 Sales Force:
Gross Margin per unit = $6750+$270-$5400
= $1620
Sales of direct Sales 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
Cost to Company =0.11*1980000=$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 units) =$94500
Sales = 200*0.32=64
Total sales = 64*45000=$2880000
Cost to Company =0.21*2880000=$604800
Recommendations

Distributor Network
 Why?
Distributor Networks earn higher profits than air centres.
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 have better structure than Air Centres and
Direct Sales Force.
Also the cost to company to maintain a distributor network is less
compared to air centre.
Distributors may push the products better than the sales force.