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.