Ingersoll-Rand (A)

Problem Statement
To decide the distribution channel to use for the Centac 200, the new 200 hp centrifugal air compressor. Whether the distribution be handled by the direct sales team or use the distributor/air centre channel. Also, the case highlights merits and demerits of each of the channels in detail.

Decision
Clabough should opt for the direct sales team channel.

Rationale for Decision

y Experience - Historically, the centrifugal air compressors have been handled by the direct sales team only owing to their large hp size and technical expertise required. They have the required experience to sell centrifugals. Competition - Also, the nearest potential competition to Centac 200 is from the Z series rotary compressor from Atlas-Copco s which is being sold by distributors. So by opting to sell through the direct sales team, IR can avoid head-on competition and also completely differentiate a rotary from a centrifugal in the market. Expertise - Considering that it is the first medium centrifugal, the direct sales team is better positioned to supply the technical expertise. They have well established service capabilities. If IR chooses the distributor channel, it will have to incur additional costs(and time) on intense distributor training. Attractiveness - May not be attractive to distributors owing to the very low spare part requirements in centrifugals. Apart from that, IR would not want the attention of distributors to be shifted from the smaller compressors, which form a big share of its total revenues.

y y

Recommendation
In order to combat the risk of sales reps ignoring the Centac 200, IR may choose to offer higher sales commission to the direct sales team on Centac 200 sales. Also, the Full Partner Program can be extended to centrifugals too where the distributors earn commission on references made to the sale team, thereby also involving the distributors in the process.