Channel Information Systems

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 Learning Objectives
• Understand importance of information systems for management of
channels
• Elements of channel information systems
• How information systems are used to impact channel service
objectives
• Performance measures for channels
• Understand principles of channel implementation

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 Channel Information Systems
Suggested readings:
• Sales and Distribution Management by Havaldar and Cavale, 2nd
edition, Chapter 14.

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 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.

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 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

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 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

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Information Process
COLLECTION

PROCESSING

STORAGE

USE

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

Development….
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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

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 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.

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 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.
• 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.

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 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
• Not need for verification from other sources
• Be fast and totally reliable

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 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

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 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

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Channel Performance Evaluation

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 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.

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 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.

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 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
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 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
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Evaluation Overall Rankings

Channel Overall performance Ranking

member 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
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 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

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 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. This is more relevant to FMCG, pharma kind of
products and not so much for consumer durables or industrial
products

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 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

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 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 – the company should
give the products only to them

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 Influencing Factors
• If a brand has a strong consumer franchise, no outlet can ignore it –
HLL 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

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 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.

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 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

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 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

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