Chapter 9

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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 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

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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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 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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