1. Group Gp 5 1

2. Ingersoll Rand
• Deals in Stationary Air Compressors
• Market Share – 30%
• Manufactured
Cost ($ 200-300) Spares/ Maint per Yr
 Reciprocating 6%
 Rotary 2.5%
 Centrifugal 2%
• 200 hp Centrifugal Model – CENTAC 200 introduced
2

3. Stationary Air Compressor
Market
• Sizes
– Small (below 25 hp)
– Medium (25 to 300 hp)
– Large (above 300 hp)
• Market Size (1985)- $660 Mn
• IR leading US Supplier - 30% Mkt ($ 198 Mn)
except small recips for DIY Mkt
• Other Players – 10-12% Mkt
– Joy (Centrifugals)
– Sullair (Rotary)
– Atlas Copco (Stationary)

4. Distribution System
 Direct Sales – 26 Territories
• Large Compressors >250 hp Recips & 450 hp Rotaries
• All Centrifugals
 Independent Distributors and Air Centres
• Medium & Small Compressors
• < 250 hp Recips & < 450 hp Rotaries
• Gross Margins- 10 – 15% on compressors and 30 – 35% on
spare parts/ services
• Sales Reps Commission-20% of Gross Margins
• 600 Large Distributors (Air Houses) – Med & Small
• 5,000 Small Gen Line Dealers - Small
• DIY and Industrial
 Merchandising Teams. Sales of Recips < 5hp & under

5. Salient Issues - Distribution
System
• Sales Index by Channel of Distribution (1985)
– Direct Sales 30%
– Independent Distr 35%
– Air Centres 20%
– Merchandising Team 15%
• Over 50% of revenues & profits of independent
distributors were derived from I-R lines
• No territorial overlaps between sales force and
distributor network
• Spare parts business was competitive with “pirate parts”
vendors

6. Buying Behaviour
• Direct Sales
– Large Compressors (>300 hp) – purchased by Contractors -
custom made
– Quotations contained detailed specifications
– High degree - technical expertise & sales effort
– Service requirements - complex
– Lead time of 6 – 8 weeks
• Distributors & Air Centres
– Medium & Small Compressors – less demanding specifications
– Spares/ support available locally
– Lead time of 1 week to 6-8 weeks
• Merchandising Teams
– Small machines (<5 hp)
– Plumbers, Small contractors –small jobs

7. Deductions
• Each system's relative ability to develop different types of
selling skills for the manufacturer – often overlooked
• The system in I-R allowed for concentrated attention on one of
the other set of selling skills in different channels
• Drawing the line between direct and resale channels by
product category conflicted evolution of reseller capabilities
and customer purchase criteria
• Multichannel system is a choice concerning kinds of conflicts
and channel- management issues a manufacturer will
encounter
• The issue is not how to eliminate conflict, but how to manage
it productively and profitably

8. CENTAC 200
• 200 hp centrifugal compressor
• Spare parts requirement very low (2 % of
initial cost per yr)
• Operates at very high speeds – 50000 rpm
• Inadequate repair carried risk of serious
damage
How should Centac 200
be distributed ?
Through Direct Sales or Distributors & Air Centres

9. Through Direct Sales ?
• Advantages
– Established network
– Expertise - servicing centrifugals
– Availability - Spare parts
– Company can closely monitor/ influence induction
• Disadvantages
– Sales Force – ‘Elephant hunters’ - prefer large orders
– Existing customers – >200 hp (large segment)
– Network constraints - Difficult to tap new customer
segment -
– Independent Dealers - will feel left out

10. Through Distributors/ Air
Centres ?
• Advantages
– Product consistent with hp assigned to distributors
– Beat Atlas Copco Z Series Rotary Compressor
– Reward for Distributor
• Incentive of capturing oil free market
• Make up revenue (spares/ maintenance), through higher sales &
incentives
• No need to increase/ decrease number of Air Centres
– Well established Network
– Loyalty from dealers - Overcome spurious spares problem
– Promotes sound, durable & mutually productive
relationship with IR
Willingness to participate subject to understanding product potential

11. Through Distributors/ Air
Centres ?
• Disadvantages –
– Dealer may have apprehensions to sell Centac 200
– Due to slow initial growth - low profits - dealers
may get demoralised
– Intense technical training required
– Risk of over- dependence on dealer channel

12. We Want to Do What is Right
and Best for the Company
• Go ahead with distributors
• Provide necessary training
• If Distributors fail to give results – Takeover
distribution through own channels
• Approach is ethically supported and in line with
company policies/guidelines
• Makes Business sense - vast network increased sales