Implementing Channel

Design
Issues to be taken care of while managing the channel

• Infrastructural requirements
• Sales man & other staff members
• All other things
• Proper callage
• Right number of calls
• Market expansion
• Range selling
• Credit management
• Proper reporting system
Contd….
• Inventory management
• Credit
• Sales promotion
• Merchandising and display
• Any other sales related activities
Work on ROI for the Dealer

• ROI for a distributor is:

(Income-Expenses/Investment)*100
• ROI based selling is more objective than subjective
and gives direct reason for effective management.
Trade ROI
• Trade member looks at his ROI on the Brand / SKU.

• ROI is calculated as follows:

ROI = Margin % * 365/ Sales cycle

•Based on the following data, calculate the Sales (cash to

cash) cycle:

Entity A Entity B

Purchase Credit 30 days 20 days

Average Inventory 45 days 10 days

Sales Credit 30 days 0 days

6
6
 Margin, Inventory and Servicing : The FMCG Experience
Super
Distributor Wholesaler Retailer
Distributor

Wholesale Sales % 100 50 25

Wholesale margin % 3 3 1
Retail Sales % 0 50 75 100
Retail Margin % 0 5 2 10
Blended margin % 3 4 1.75 10

Inv in Stocks - days 20 30 10 10

Inv in Credit - days 10 5 10 -4
Inv in Claims - days 5 5 0 1
Total Inv - days 35 40 20 13

Gross ROI % 31.3 36.5 31.9 281 %

Costs % 8 12 6
Nett ROI % 23.3 24.5 25.9
Other factors for Trade ROI
• Trade member looks at the Rs he earns by selling each unit
of SKU

• He calculates his investment (depending on your frequency

of servicing and his estimate/ experience with that
category) and gets a measure of his ROI – this determines
his investment level in the SKU.

• His other considerations may be:

• Space
• Infrastructure / Refrigeration
• Returns policy
• Marketing
• Company reputation
• Schemes
• Distributor reputation
Ways and means of increasing commitment

• Willingness to sacrifice (offer schemes)

• Shared values
• Increasing the value of the channel outcomes
• Better communication
• Avoid opportunistic behaviors

Move from Channel Management to Developing Channel

Certain variables interfering in Channel Commitment

• Size of the Business

• Length of Association
• Level in the Channel
• Strength of the Brand
Schemes which can ensure Channel Commitment
• Schemes Related to Customer Satisfaction
• Range of products/brands being offered
• New product launches
• Consumer education
• Sales promotion scheme
• Schemes aimed at System Orientation
• Computerization of supply chain
• Settlement of complaints
• Good service to channel
• Information about company
• Schemes for support
• Exclusivity
• Providing market information
• Ensuring ROI
Contd….
• Schemes towards building an alliance
• Rerouting Institutional Business
• Information about new techniques
• Training of the channel people
• Involvement in target setting
• Schemes towards building goodwill
• Trade schemes in tune with PLC
• Joint advertisements
• Shop displays
• Soft loans
• Annual rewards
Certain suggestions/guidelines
• Retailer
• Customer satisfaction schemes
• Building goodwill schemes
• Higher channel Level members

Levels of Shorter Association Longer Association

Moderating
Variables
Large Business From Support to System Schemes for building an
Size Orientation schemes alliance along with system
orientation schemes
Small Business Build goodwill and move on From Building an alliance to
Size to support schemes Systems orientation schemes