COURSE NAME: MARKETING

MANAGEMENT
CASE: INGERSOLL- RAND (A)Managing Multiple Channels: 1985

Submitted by
Group No: A2
`

Aakanksha Thete
Antony Attakoran
Rajgopal Balabhadruni
Sachin Kulkarni
Swetha R

15F101
15F110
15F140
15F142
15F156

1. What are the various logical arguments for I-Rs

multiple channels?
Ingersoll- Rand impressive performance can be attributed to multiple factors- one
important factor being multiple channel distribution system. I-Rs distribution
system included1.
2.
3.
4.

Direct Sales Force

Independent Distributors
Company Owned Distributors- Air Centres
Manufacturers Representatives (MRs)

Direct Sales Force sells all types of centrifugal compressors, rotary

compressors above 450hp and reciprocating compressors above 250 hp through
26 sales representatives. This distribution channel serves large compressor so it
demands sales force with high technical expertise that in turn is highly
commission driven (i.e. 70% of total salary).
Independent Distributors sells rotary compressors below 450 hp and
reciprocating compressors below 250 hp through 80 independent distributors.
They keep compressors of other brands as well. They earn 10-15% of gross
margin on compressors and 30-35% on spare parts.
Company Owned Distributors sells rotary compressors below 450 hp and
reciprocating compressors below 250 hp through 80 independent distributors. It
has same margin as Independent Distributers but it has got better system as i.e.
centralized order entry system and inventory transfer policy.
Manufacturers Representatives sells Do It Yourself (DIY) products through 5
Manufacturers representatives. They have extensive contacts and long
experience in selling.
The rationale for the four- channel distribution system was purely due to
economic reasons as explained by a company manager. Also, the differences in
the buying behaviour among several types of customers and an attempt to serve
their different needs can be attributed to having multiple distribution channels.
I-R operates in the market of compressors with multiple product lines requiring
technical expertise ranging from small to high , capacity ranging as small as 3 or
4 hp to as high as 6000 hp.
Compressors requiring low technical expertise and lower capacity (<25 hp) such
as stationary air compressors faced intense price competition and can be
reached out to customers through retail outlet channels.
In the case of medium and small capacity compressors, demanding less
specifications requires off-the-shelf availability as well as quick delivery (within a
week). Such type of compressors are economical and easy to sell through
independent distributors channel since it is easily accessible, turnaround time for
the customer is less when a fault occurs in a product.
Technically complex, high capacity (about 300 hp) and costly compressors
require sales force with sound technical knowledge and high personal benefit
pool to drive sales of complex products. Because it is driven by high sales

commission, it is economical for I-R to sell such products only through Direct
Sales Force channel.
I-R also maintains company owned Air Centre distribution channel to showcase
all product lines in the areas where its presence is poor. This would attract first
time customers through better pricing and make them to feel the difference
amongst the rest of brands. This would also suffice the company in adverse
conditions when conflict arises with independent distributors.
2. Was I-R right in its move in transferring products

regularly to its distribution channels?

The evolution in the distribution channels was gradual. During the 1960s the
company had only 2 distribution channels, direct sales team for recips above
50hp and the independent distributors for recips below 50hp. There was one
category of distributors who sold recips up to 125 hp. They were called master
distributors.
In 1968 a new technology introduced, the product was sold exclusively by the
direct sales team.
But this plan did not seem to work well for the company because of consumer
behaviour. The consumers approached the distributors to trade up their smaller
machines for larger ones. /hence it compelled the company to make the recips
upto 150hp available to the distributors as well. The availability of wider variety
with the distributors was a good move for the company. It helped to expand its
reach. More customer involvement was achieved and the cost of selling via
distributors also was more economical.
As the number of products produced increased the need for better reach and
efficient sales channels increased. The target segment for each product was
different. The large machines were more complex and the sales personnel
required a thorough knowledge of the machines. It was not possible to provide
the knowledge to the independent customers. Thus the direct sales was the right
way to go about it. But the small and less complex machines were cheaper and
the target segment was not so technically qualified so the sales representative
was not required to be highly knowledgeable. Hence the channel used for the
distribution was independent distributors.
The acquiring of the Independent distributors during the recession was a move
that affected the company in the short run. But it proved to be beneficial in the
long run. These centres were called air centres.
Slowly but steadily the main intention of the company was to cut costs on the
selling and distribution through direct method and off load it to independent
distributors to maximize profit, enhance customer satisfaction by easy
availability by cutting down on the wait time and wide distribution. The large
number of distributors also helped increase the visibility of the company in the
desired market.
Thus the move to transfer products to its distribution channels was good.

3. From the distribution strategy perspective, how

would you look at moving CENTAC-200 to customers?