Channel Information Systems

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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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
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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

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 Source Action possible Impact on service Plan day to day corrective action to protect market shares and shelf space Trade, channel partners and sales people Spot action while in the market and taken by channel partners or sales people Timely action to provide better support to the trade 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 %-X Criteria score (1 to 10) - Y Weighted score X*Y

Sales target achievement Inventory management Selling resources Market coverage Back office support

50 15 15 10 10

7 8 7 8 6

3.50 1.20 1.05 0.80 0.60

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Overall performance score 7.15

Evaluation
Each of the primary criterion can be broken down into it components and also rated.
Criterion Primary sales Secondary sales Achievement of secondary sales target Sales growth by period Market share achievement Sales target achievement Performance score Weightage %-X Score 1 to 10 - Y Weighted score X*Y

15 50 20 10 5

8 7 7 8 6

1.20 3.50 1.40 0.80 0.30 7.20

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Evaluation Overall Rankings

Channel member Overall performance score Ranking

A B C D E F

7.39 7.20 7.15 6.89 6.56 5.60

1 2 3 4 5 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 freeriding 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 members 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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Key Learnings
Channel information systems 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
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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 Under specific circumstances, selective or exclusive distribution has advantages.
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