Godrej Appliances Division: Channel Management
It was early 2015, and Sudevan Manickan (Sudevan), Head of Business Planning and Analysis at Godrej Appliances Division (GAD), was excited to receive the letter of appreciation and an invitation for the annual event where he and his team would be acknowledged for their achievements in front of the Business Executive Committee. He had a sense of satisfaction as he remembered the journey leading up to the execution of the new channel strategy. Competition from MNCs, the proliferation of products, consumers’ changing preferences, uncertain demand due to seasonal effects, and the rise of new channels in the digital arena had resulted in a complete overhaul of the channel strategy at GAD. Sudevan had spearheaded the initiative over the last three years and implemented the revised strategy by experimenting with innovative ideas. The event would be attended by board members, top management and all functional heads. He was contemplating his speech as he wanted to utilize the occasion to lay down his plans for future scope of improvements in the company’s channel strategy. He was aware of digital marketing, and it’s potential. He wanted to leverage the digital platforms such as smartphones and social media to stay in touch with customers throughout their decision and purchase journey.
About the Company
Godrej Appliances Division (GAD) forayed into appliances in 1958 and since then has been a leading player in refrigerators, washing machines, air conditioners, and microwave ovens. Godrej Appliances one of India’s most trusted brand enjoyed the patronage of over 600 million Indians across the fields of consumer goods, real estate, appliances, agriculture and more. GAD’s objective of ‘Godrej in every home’ resulted in the addition of many new products and services to its portfolio to reach millions of consumers in many Indian households...............
Competition
The major international and local players in Indian consumer durables industry were LG, Samsung, Whirlpool, Videocon, Voltas, Blue Star and IRC Electronics amongst others. LG was the major player in the consumer durables market, with leading products including Air Conditioners (ACs), Home theaters, DVD players and Smartphones. Samsung was another leading player in the consumer durables and electronics market, most notably possessing a major market share in smartphone technology..............
Emerging Consumer
Access to international brands with better technology, aesthetic design and features led to increasing demand for MNC brands among the middle class and younger consumers. Modern trade became the preferred channel for purchasing lifestyle products among young consumers. Customers had turned “tech-savvy”, and preferred smartphones as their first gadget in the purchase list..............
Channels used by Consumer Durables Industry
Consumer appliances were a rapidly evolving industry influenced by consumer lifestyles, emerging technologies, and statutory and regulatory requirements. In this dynamic industry, the key to success was an organization’s ability to align itself to the emerging trends and needs of its customers. By 2013, organized retail chains such as Aditya Birla Retail and Reliance Retail had expanded their networks across the country. Organized retail chains accounted for only 10% of the total retail sector...........
Godrej’s Channels of Distribution
Traditional channels for home appliance sales were distributors, authorized dealers, and independent regional retail stores. Distributors generally did not have their retail outlets. They catered to independent retailers directly or through sub-dealers. Sub-dealers were small agencies authorized to deal with GAD products. GAD authorized dealers known as independent retailers earned the maximum share in the channel because of their physical proximity to customers in the regional market. However, dealers had limited financial capacity, procurement power and non-professional staff..............
Revamping Channel Strategy at GAD
GAD aspired to acquire new consumers and expand the current customer base by aggressively marketing to Indian households. GAD wanted to achieve greater control over how its products were displayed and sold across its distribution channels. Sudevan realized that, due to emerging competition in the digital landscape, GAD’s greatest need was to focus on channel expansion, and enhancing the productivity and profitability of existing channel partners...............
Selection of Channel Partners at GAD
Channel selection, at GAD, was based on market potential and market coverage of the channel, which was primarily determined by channel reach and productivity. GAD kept track of the total volume of appliances sold in a particular territory to determine regional market potential. Market coverage was determined by the financial strength and network of trade partners in a given territory...........
Channel Performance Evaluation
In the annual business plan, every parameter, including seasonal fluctuations, was factored into the decision-making process regarding channel partners. The annual business plan comprehensively mapped out the GAD product portfolio, business modalities and targeted trade partners to sell the products. All trade partners were evaluated on a 2x2 matrix for internal performance evaluation followed at GAD that categorized partners based on their performance (Refer Exhibit II)..............
Channel Performance Management
Reviewing and plotting the matrix was done by a monitoring mechanism through zonal business reviews conducted by the management. If any trade partner fell below expectations (i.e., low in generating profit and turnover), salespeople were tasked with determining the reason and developing an appropriate plan of action to rectify the situation. GAD salespeople were made responsible for ‘hand-holding’ the channel partners to improve their performance and raise them to B category............
GAD’s Channel Expansion & Integration
Competitors like LG Electronics explored to target rural markets by opening up remote area offices, using vans, road shows, participating in rural market place like haats, melas and mandis, by tie-up with ITC and DCM Shriram Consolidated Ltd (DSCL) during 2014-2015, and by roping in distributors of commonly purchased items such as fertilizers and two-wheelers..............
GAD’s Salesforce
Additional retail sales officers (RSOs) were recruited to visit and extend their services to retailers. Retailers’ meets were organized regularly to strengthen GAD’s relationships with their trade partners during product launches and festival seasons. The objective of these meets was to educate retailers about new products and promotional schemes. Dealers with the highest contribution in terms of volume and turnover were offered greater support...............
Managing Channel Conflict
By 2014-15 integrating multiple channels resulted in resistance and channel conflicts. Sudevan, with the support of top management, implemented a new “Different Model Different Channel (DMDC)” strategy to resolve channel conflicts, which essentially meant that different channels would have dedicated models developed and designed for a specific trade channel. In this strategy, the GAD product portfolio was divided across channel partners...........
Channel Incentive & Training
Trade partners who achieved their targets and gathered maximum points qualified for incentives in the form of gifts. Before the launch of every new product, training was provided on product features to ensure that the sales and service teams had adequate and accurate information about the product. Training on soft skills was given to both the sales team and channel partners................
Channel Communication & Support * Company Report
Sales team members were made responsible for maintaining contact with the channel partners. Sales and marketing teams organized various communication forums for the channel partners. The channel partners were treated as Godrej’s brand ambassadors. An annual dealer satisfaction study was conducted to evaluate the needs and expectations of the trade partners............
Celebration of Success
Revamping the channel strategy resulted in tangible outcomes in terms of sales and growth (refer to Exhibits VIII, IX, X, XI, and XII). As his brainchild, Sudevan was excited to witness the success of the new channel strategy. He felt satisfied while reflecting on the journey he had taken with his team to implement the new channel strategy. Thanks to the efforts of his team and channel partners Sudevan was able to execute the new channel strategy successfully...............
Assignment Questions
I. What mechanism was used at GAD to select, evaluate and improve the performance and productivity of channel partners?
II. Why did Sudevan Manickan felt the need to revamp GAD’s channel strategy? How did he address the need?
III. .............
Exhibits
Exhibit I: Market Share of Companies 2013-14 (%)
Exhibit II: Channel Evaluation and Performance
Exhibit III: Aligning Product Strategy with Channel Strategies
Exhibit IV: GAD Product Channel Alignment
Exhibit V: Channel Description
Exhibit VI: GAD Channel Evolution
Exhibit VII: Door to Door
Exhibit VIII: GAD Sales Value in INR
Exhibit IX: GAD Growth in Refrigerator
Exhibit X: GAD Growth in Washing Machine
Exhibit XI: GAD Growth in Air Conditioner
Exhibit XII: GAD Growth in Micro Wave Oven
