Ingersoll-Rand

Managing Multiple Channels

Hemant Aggarwal 14P081
K.Mohana
14P087
Tushar Sharma
14P114
Urvi Aggarwal
14P116
Kriti Singh
14P
Nimisha Bhadran 14P

Case Brief
Ingersoll-Rand (IR) is a leading firm in the Air Compressor Industry, with a
market share of 30% of a 660 million market.
Ingersoll had multiple distribution channels, each with its own
characteristics that made it suitable to various IR products.

Problem Statement
Ingersoll has developed a new 200 hp Centrifugal Compressor and has to
decide whether to distribute it through the IR Sales force or through the
distributor network.

Factors affecting Product allocation to a channel

End User
i. Cater to specialized oil free market
ii. Provide good service and repair capabilities
. Other Factors
i. Prevent competitive encroachment
ii. Prevent Loss of sales in other product lines
iii. Spare part requirement only 2-3% of initial cost

Channel Separation by Product Line

Sales Force

Products that
requires high degree
of technical
expertise and
coordinated sales
effort

Product Segment:
Recip above 250hp
Rotary above 400hp
All centrifugals

Distributors

Large customers that

had relatively
sophisticated buying
behaviour

Product Segment:
Recips below 250 hp
Rotaries under 450
hp

Air Centers

Manufacturers
Reps

Buyer behaviour is
less complex and
specifications less
demanding.

People who use the

compressors for
small jobs. (Mainly
small contractors
and plumbers).

Product Segment:
Recips below 250 hp
Rotaries under 450
hp

Product
Segment:Selling
mainly DIY Products.

Pros

Distribution Network Channel- Independent Distributors

-Increase in medium
range portfolio
-High penetration. (Target
Value: 44 million)
-Operating cost are very
high at 21%.
-Cost to Company
amounts to 15.8 million
(21% operating cost +
15% on gross margin)

-Low spare parts

requirement
-Poor service
-Risk of being dependent
on channel that cannot be
controlled

Cons

Distribution Network Channel- Air centers

-Better management
Control
-Operating Cost is 19%
-Total Cost to Company is
around 17.16 million
Saves $450 dollar per unit

-Low Penetration
-20% commission to Sales
Rep

Air centres provide

better sales, also saves
$450 per unit to the
company and cost to
company is less when
compared to
Independent
distributors

Distribution Network Channel- Direct Sales

Well established
service capabilities
Can serve as an
addition to the
shrinking line of
direct sales
products
Currently the only
distribution channel
selling a centrifugal
compressor

Less penetration.
DSF Performance
declining over the years.
Sales of centrifugal
compressors has remained
constant from 1982.
May create diversions for
sales people as they
handle key accounts.