INGERSOLL-RAND (A)

GROUP NO:5

ASHUTOSH KUMAR SINGH

MOHNISH SINGH
GAURAV SHARMA
NEERJA MALIK
KISHORE SRIRAM
PRITAM KUMARI
OBJECTIVES : TO UNDERSTAND MULTIPLE DISTRIBUTION
CHANNELS IN INGERSOLL RAND. WHEN ,WHO AND HOW ?
VALUATING AND DECIDING THE MARKETING CHANNEL FOR THE
200 HP CENTRIFUGAL COMPRESSOR
 INGERSOLL RAND:
LEADING FIRM IN STATIONARY AIR COMPRESSOR INDUSTRY.
MARKET SHARE = 30% OF $660 MILLION MARKET
MULTIPLE CHANNEL DISTRIBUTION
DIRECT SALES FORCE
INDEPENDENT DISTRIBUTORS
COMPANY OWNED DISTRIBUTORS AIR CENTERS
MANUFACTURERS REPRESENTATIVES
BY AND LARGE THERE WERE NO TERRITORIAL OVERLAPS.
EVEN THOUGH THE PRODUCT LINES FOR DIFFERENT CHANNELS WERE CLEARLY
DEFINED, CHANNELS AT TIMES COMPETED WITH EACH OTHER
 DIRECT SALES FORCE
SELLS
ALL CENTRIFUGAL COMPRESSORS
ROTARY COMPRESSORS ABOVE 450 HP
RECIPROCATING COMPRESSORS ABOVE 250 HP
SALES REPRESENTATIVES WERE PAID COMMISSIONS OF 1% TO 3% ON SALES
REDUCED TO 26 REPRESENTATIVES FROM 35 DURING THE PERIOD OF 1980-1985
(ECONOMIC CONDITION)
MACHINE SOLD FOR LESS THAN $5000 WAS NOT ECONOMICAL FOR DIRECT SALES
APPROACH.
SERVE LARGE COMPANIES REQUIRING LARGE COMPRESSORS QUOTATIONS, TECHNICAL
EXPERTISE AND COORDINATED SALES DEMANDS FOR DIRECT SALES FORCE
COST TO COMPANY 11% OF SALES
SALES REP COMMISSION IS VERY HIGH (UPTO 70% OF THE TOTAL COMPENSATION).
 INDEPENDENT DISTRIBUTORS
SELLS
ROTARY COMPRESSORS BELOW 450 HP
RECIPROCATING COMPRESSORS BELOW 250 HP
80 INDEPENDENT DISTRIBUTORS
CARRY OTHER COMPANIES PRODUCTS ALSO
INVOICED AT 20% OFF LIST PRICE
EARN 10-15% GROSS MARGIN ON COMPRESSORS AND 30-35% ON SPARE
PARTS COST TO COMPANY 21% OF SALES
REVENUE IS REALIZED @ EX-FACTORY PRICE.
 AIR CENTERS
SELLS ROTARY COMPRESSORS BELOW 450 HP RECIPROCATING COMPRESSORS BELOW
250 HP
19 AIR CENTERS
ONLY IR COMPANY PRODUCTS
INVOICED AT 20% OFF LIST PRICE
EARN 10-15% GROSS MARGIN ON COMPRESSORS AND 30-35% ON SPARE PARTS
WERE STARTED BECAUSE OF UNAVAILABILITY OF INDEPENDENT DISTRIBUTORS IN SOME
PLACES
COST TO COMPANY 19% OF SALES
CENTRALIZED ORDER ENTRY SYSTEM AND INVENTORY TRANSFER FACILITY BETTER
MANAGEMENT
PRODUCT INVOICE AFTER SALE TO THE END-CUSTOMER
 MANUFACTURERS REPRESENTATIVES
SELLS DO-IT-YOURSELF (DIY) PRODUCTS, MAINLY RECIPROCATING
COMPRESSORS LESS THAN 5 HP.
5 MANUFACTURERS REPRESENTATIVES SELL TO RETAIL CHAIN STORES AND
CATALOG HOUSES.
PAID 3% COMMISSION ON SALES.
HAVE EXTENSIVE MARKET CONTACTS AND LONG EXPERIENCE IN SELLING
 CENTAC 200
200 HP CENTRIFUGAL COMPRESSOR COSTS
COST OF CENTRIFUGAL $225COMPRESSOR PER HP
COST OF CENTAC - 200 = 200*225 = $45000
INSTALLATION COST = 12% * 45000 = $5400
COST OF CENTAC 200 WITH = 45000 + 5400 INSTALLATION = $ 50400
SPARE PARTS AND MAINTENANCE = 2% *45000
COST PER YEAR = $900
 CENTAC 200 ON DIFFERENT DISTRIBUTION CHANNELS
DIRECT SALES FORCE
GOOD ADDITION TO A SHRINKING LINE OF DIRECT SALES PRODUCTS
DIRECT SALES FORCE RUN AFTER BIG-ORDERS THE CENTAC-200 WOULD BE ON THE
LOWER END OF THEIR LINE. HENCE, THERE IS A RISK OF THE SALES REPS IGNORING
THE CENTAC-200.
INCURS HIGH COMMISSION
DISTRIBUTORS AND SALES REP WERE BUDDIES.
LEAST POSSIBLE OPTION
AIR CENTRES
ONLY 19 AIR CENTERS AVAILABLE
VERY LESS PENETRATION IN THE MARKET COMPARED TO DISTRIBUTORS.
EXTENSIVE TRAINING REQD. FOR THE TECHNICAL SUPPORT TO THE PRODUCT.
 CENTAC 200 ON DIFFERENT DISTRIBUTION CHANNELS
INDEPENDENT DISTRIBUTORS
CENTAC-200 WOULD BE A GOOD REWARD TO ITS LOYAL DISTRIBUTORS.
INCREASE IN EXISTING MEDIUM RANGE PORTFOLIO FOR THE DISTRIBUTORS.
LOW SPARE-PARTS REQUIREMENT IS NOT LIKELY TO ATTRACT DISTRIBUTORS.
ANOTHER WAS THAT SINCE THE CENTAC-20 OPERATED AT HIGH SPEEDS (50,000
REVOLUTIONS PER MINUTE), INADEQUATE REPAIR CARRIED THE RISK OF SERIOUS
DAMAGE. IT RUNS THE RISK OF INCONSISTENT TECHNICAL SUPPORT THE
DISTRIBUTORS WOULD PROVIDE.
THERE IS A RISK OF BEING DEPENDENT ON A CHANNEL THAT CANNOT BE
COMPLETELY CONTROL
 EVALUATION

Air Centres Independent Distributor Sales Force

Management Control Full Partial Full

No. of Distributors 19 80 26
Market Penetration Low High Low
Cost $45000 $45000 $45000
Margin 6750 6750 6750
Installation Cost 5400 5400 5400
2-3% of 2-3% of
Cost for Spare Parts 45000=$1350 2-3% of 45000=$1350 45000=$1350
Effective Margin on
Spare 405 405 405
GROSS MARGIN 1755 1350 1305
TOTAL MARGIN ON
SALES of 200 Units 70200 94500 78300
RECOMMENDATION
INDEPENDENT DISTRIBUTOR CAN BE THE RIGHT OPTION IN TERMS OF HIGH
MARGIN AND FUTURE LARGE MARKET .