Enter Vadodara through tool dealers?
Before the decision
Workshop buyers currently borrow demonstration kits from a neighbouring district. A distributor says workshops will buy once they can try the kits on-site. The sales team has a short list of larger workshops that would prefer training from the manufacturer.
The problem
Should the team choose Field sales or Dealer network for the next 12 months?
Decision owner: The business unit lead.
Dealer stocking can exaggerate end-user demand until warranty registrations arrive.
Option economics
Scroll the table to see all figures.
| Option | Volume (kits) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Field sales | 7,400 | 1100 | ₹40 lakh | ₹41.4 lakh |
| Dealer network | 11,000 | 740 | ₹22 lakh | ₹59.4 lakh |
Make the call
- Calculate net contribution for Field sales and Dealer network. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer kits, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Dealer network. It contributes ₹59.4 lakh after fixed costs and leads by ₹18 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Separate demand you can reach from demand you can serve reliably. Test reorder behaviour before using the full-year forecast.
- Calculate both options
Field sales: 7,400 kits × ₹1,100 less ₹40 lakh in fixed costs gives ₹41.4 lakh. Dealer network: 11,000 kits × ₹740 less ₹22 lakh in fixed costs gives ₹59.4 lakh.
- Stress-test the forecast
Dealer network leads by ₹18 lakh in the base case. If Dealer network delivers 10% fewer kits (9,900) at the same margin and fixed cost, it contributes ₹51.26 lakh. Holding the other option constant, the stressed result still leads. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, Dealer network needs at least 8,568 kits to match or beat it under the model. Tie dealer rebates to installations and request proof of the first reorder.
Dealer stocking can exaggerate end-user demand until warranty registrations arrive. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | Field sales | Dealer network | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹33.26 lakh | ₹51.26 lakh | Dealer network |
| Base assumptions | ₹41.4 lakh | ₹59.4 lakh | Dealer network |
| Both gain 10% of volume | ₹49.54 lakh | ₹67.54 lakh | Dealer network |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.