Channel Information

System
MKT508: SALES & DISTRIBUTION
CHAPTER 15
Learning Objectives

 Discuss the importance of information systems for management of

channels
 Elements of channel information systems
 How information systems are used to impact channel service
objectives
 Learn about some types of IT systems
 Performance measures for channels
 Understand principles of channel implementation
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.
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
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
Information Process

COLLECTION

PROCESSING

STORAGE

USE
Information Process
 Collection: acquiring and placing raw data – eg: monthly sales by each
territory
 Processing: analyzing data to get meaning out of it – arranging,
modifying and interpreting the data by the user – eg:comparison of
sales between periods
 Storage: keeping the information intact till it is needed
 Use: application of information for management decision making – eg:
sales data of the last 6 months to forecast the sales of the next month.

Development….
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
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.
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 and the Internet.
 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.
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
 Should not need verification from other sources
 Be fast and totally reliable
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
 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 Spot action while in the market and taken by

possible channel partners or sales people

Impact on Timely action to provide better support to the trade

service and retain their goodwill
IT Solutions

 IT solutions for channel management help in:

 Delivering customer orders faster and on time
 Manage results with the lowest inventory possible
 Reduced freight costs
 Integrate with other business functions
 Reduction / faster resolution of customer complaints
 Improve customer service standards and hence market shares
and profitability
IT and Competitive Advantage
 Strategic difference in costs, speed of communication, reducing lead
times, delivery of customized products and services
 Reduce costs, improve productivity
 Help target a wider segment of customers
 Keep customers informed constantly about the status of their orders
KRAs for IT Systems
 Optimize the level of information that gets processed
 Help launch new products/packs/variants faster into the markets
 Impact of reducing costs and improving productivity on profitability
and market share gains.
 Level of user ownership and commitment to use the systems for the
purpose intended.
Popular IT Systems
 These are meant to help in better sales and channel management
 Efficient consumer response – faster product replenishment
on retail shelves
 Sales force automation systems – to help reduce manual work
and release time for selling
 Extranets – for sharing information with channel partners
 Electronic data interchange – for working with business
partners
Some CIS Systems in Use

 Electronic Data Interchange (EDI)

 Quick Response System (QRS)
 Transaction Based Information System (TBIS)
 Continuous Replenishment Program (CRP)
 Point of Sale Systems (POS)
 Efficient Consumer Response System (ECR)
Collecting Field Data
 Purpose: to collect secondary sales data and other information from
customers / markets

 Data from field sales people required for planning purposes by a

number of departments. Some examples:
 Sales forecasts at channel partner level

 Primary sales data – example: dispatches from C&FAs to

distributors
 Inventory levels at all channel points
 Secondary sales from each channel partner
Use of Hand-held Devices

 Data collection in the field has been simplified and speeded

up by use of hand-held devices – mostly Android smart
phones
 Devices do a lot more analysis than just collection of data
 Some of the data collected include:
 Order booking / secondary sales information by brand /
sku
 Authorized stock returns from the market
 Tracking daily and month to date target achievement
Information Collected….
 Productivity numbers – number of calls and productive calls
 Merchandising and photos of shelf displays
 Trade and consumer promotion details
 Payments collection and credit analysis
 Channel partner performance analysis on agreed parameters
 Route planning
 Category / brands / skus of all goods handled
Information Collected….
 Customer dashboard: date, order booked, payments collected, any
stock returns
 Price to retailer by sku and total value of the bill
 Inventory held by the retailer / wholesaler
 Some of the PDAs also have:
A bar code scanner
Selected training PPTs
Recent commercials
Help with field surveys
 Competitors’ activities
CIS Operational Improvements

 Manage minimum order sizes

 Ensure required retail assortment
 Improves speed of delivery
 Optimize retail inventory levels
 Manage retail promotions
 Measure performance of retail
Sales & Distribution Module –
SAP
 Objectives of the module: manage customer relations from order
booking, quoting prices, order acceptance, billing and despatch
 All processes from order to delivery handled
 Integrates with the SAP modules of materials management and
production planning
S&D Module SAP –
Components
 Master customer data
 Support to sales
 Sales management
 Sales information management
 Managing Key Accounts contracts
 Credit management
 Foreign trade
 Billing and transportation
S&D SAP Module Tasks

 Handling inquiries and price quotes

 Managing sales orders
 Handling sales returns
 Handling consignments and scheduling dispatches
 Credit and debit memos
 Handling rush orders
 Handling back orders and deliveries
Flow Chart 1 – S&D Module

Sales Process for Trading Goods

Flow Chart 2 – S&D Module

SAP Sales and Distribution Process

Channel Performance Evaluation
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.
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.
Evaluation
 Each of the primary criteria can be given a weightage and performance
scores worked

Criteria Weightage Criteria Weighted

%-X score (1 to score X*Y
10) - Y
Sales target achievement 50 7 3.50
Inventory management 15 8 1.20
Selling resources 15 7 1.05
Market coverage 10 8 0.80
Back office support 10 6 0.60

Overall performance score – 7.15

 Evaluation
 Each of the primary criterion can be broken down into
it components and also rated.
Criterion Weightage Score 1 Weighted
%-X to 10 - Y score X*Y
Primary sales 15 8 1.20
Secondary sales 50 7 3.50
Achievement of secondary 20 7 1.40
sales target
Sales growth by period 10 8 0.80
Market share achievement 5 6 0.30
Sales target achievement – 7.20
Performance score
Evaluation Overall Rankings

Channel member Overall performance Ranking

score
A 7.39 1
B 7.20 2
C 7.15 3
D 6.89 4
E 6.56 5
F 5.60 6
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
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. Intensity is more relevant to FMCG, pharma kind
of products and not so much for consumer durables or industrial
products
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
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 – they prefer that the
company should give the products only to some of them
Influencing Factors
 If a brand has a strong consumer franchise, no outlet can ignore it –
HUL 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. Consumer durables and industrial
products prefer selective distribution
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.
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
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
 Generally suitable for durables and industrial products
Key Learnings

 Channel information system 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
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
 For durables and industrial products, selective or exclusive
distribution has advantages.
Key Learnings
 IT solutions for channel management help in:
 Delivering customer orders faster at an optimal cost
 Integrate with other business functions
 Creating competitive advantage in costs, speed of
communication, reducing lead times and delivering customized
products.
 Some of the popular IT systems in use are: efficient consumer response,
sales force automation systems, extranets and electronic data interchange.