Decision Sheet: Ingersol Rand (A)

The objective of the case was to understand the multiple channels in Ingersol Rand and to
evaluate the decision of choosing a marketing channel for Centac 200 hp centrifugal
compressor keeping in mind the effect of the same to various stakeholders.
Ingersol Rand is a leading firm in stationary Air Compressor Industry with a market share of
30% of $660 million market. Its multiple channel distribution includes direct sales force,
Independent Distributors, Air Centers (Company owned), and Manufacturers
Representatives. It was observed that there were no territorial overlaps for the multiple
channels. However, the channels competed with each other even though their product lines
were clearly defined.
For Centac-200, 200 hp centrifugal compressor various costs were evaluated as follows to
understand the implications:
1.
2.
3.
4.
5.

Cost of centrifugal compressor per hp: $225

Cost of Centac-200: $45000
Installation Cost (2% of Centac-200): $900
Total Cost: $45900
Spare Parts and Maintenance Cost per year (2% of Cost of Centac-200): $900

The implications of addition of Centac-200 to various channels are described below which
will help in deciding the appropriate channels:
1. Direct Sales Force: Centac-200 is a good addition to a shrinking line of direct sales
products. Since, the product is on the lower side of the price spectrum, direct sales
force would not be interested in selling this product. Centac-200 addition would mean
higher commission for Ingersol-Rand. Therefore, it is the least possible option for the
company.
2. Air Centres: There are only 19 centres available. Therefore, market penetration will
be significantly lower compared to distributors. Also, extensive training is required to
provide technical support for the same.
3. Independent Distributors: Centac-200 will be a good reward to its loyal distributors. It
also increases the range of portfolio for the distributors. However, low spare parts
requirement is not likely to attract the distributors. Also, it runs the risk of inconsistent
technical support from the IDs across the country.
Thus, our primary cost-benefit analysis would include Air Centre (AC) and Independent
Distributor (ID) to decide upon the desired channel:
Cost to Company: 19% (AC), 21% (ID); Management Control: Full (AC), Partial (ID);
Number of Distributors: 19 (AC), 80 (ID); Market Penetration: Low (AC), High (ID);
Installation Cost: Borne by the company (AC), Borne by the distributor (ID); Effective
Margin to IR per unit: $6075 (AC), $5625 (ID).
As it can be observed that the company can save $400 per unit through Air Centres.
Therefore, with an overall market of $9 million and 200 units sold, total margin stands at
$90000. As a result, Air Centre would be the best choice of channel as it presents with a
better opportunity for sales and maintain the technical support uniform across regions.
Submitted By: Abhik Paul (PGP 15004)

Submitted By: Abhik Paul (PGP 15004)