Eureka Forbes Ltd: Managing The Selling Effort: A Case Study On

A Case study on

Eureka Forbes Ltd : Managing the Selling Effort

Submitted By ANIRBAN KAR Roll no : EPGP – 12A – 022 Marketing Management-1

Question need to be answered from the Case •

Should Goklaney roll out the new 'Bettering the Best' program through entire sales organization? What changes, if any would you like to recommend to the current plan?

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Define the role of the Euro Champ? What sales tasks Euro Champs undertake?

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What are your views on the current approach to compensation? Does the new program change this approach? How?

Company Overview Eureka Forbes Ltd. (EFL), a joint venture between Forbes Group and Electrolux formed in 1982, is the leading company in India in consumer durable products like vacuum cleaner and water purifier. Over the years, EFL has effectively utilized the direct selling approach by setting up the largest field sales force in Asia comprising of 5000+ sales representatives called EoroChamp, for its two main products EuroClean vacuum cleaner and AquaGuard water purifier. The image of an EoroChamp, wearing a white shirt and a dark tie, with a demo kit in his bag, going from door to door, has been ingrained in the minds of Indian consumers permanently. This goes with the motto of the company to consider the customer as “A Friend for Life”. By late 2003, however, the company was faced with multiple issues like declining sales volumes, falling sales closure rates and high sales representative attrition. The company also witnessed a declining performance of the sales force across many of EFL’s territories. There were instances of missing sales and other such irregularities by the EoroChamps. To counter this, Mr. Suresh Goklaney, the CEO of the company, came up with a new sales representative evaluation and compensation system called “Bettering the Best”. The new system called for rewarding sales representatives for process adherence and sales both, in contrast to the earlier system based on sales. The key decision facing the EFL management team is to assess the effectiveness of the new system and decide whether to rollout the system nationwide and across all product lines. The company will also have to determine the manner of rollout of the new system.

The Current System The task given to the Euro Champs were result oriented i.e. sales was the prime and sole objective. There was no importance as to how they could do the same. The process was neglected and the only the result mattered more. Even the compensation of the EoroChamps were based on the same philosophy. Some other observations regarding the existing system are: •

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• • •

The selection of the EoroChamps was not based on academic criteria. It is mainly based on the subjective judgements of the people. Due to this it may be possible that an efficient EoroChamps may not be recruited due to poor judgement skills of the recruiter. Training received was not apt and was certainly inadequate. They focused how to increase the customers and how to talk to so that they could give a demo at the potential customers home, but they ignored the art of responding to the customer objections. The commissions were directly related to the sales. If there is no sale happening then, EoroChamps prefer to exit the company swiftly. Less attention given to build customer relationships. The job is a very high-pressure job. Too much emphasis on target sales have led to psychological pressure on the sales reps.

Strengths of the current system 1. 2. 3. 4. 5. 6.

Highly result oriented system, where commissions directly impacted by the number of sales. Direct contact with customer is possible as there is no middle line of distribution. There is no limit to the commission one can earn, as it is dependent on the number of sales. Transparency in the compensation system. Recognition of high achievers Limitations Achieving maximum sales was the sole objective, how it was achieved is not important.

The Challenges with the current system and possible causes The Challenges High end “Concept” products, generally not well known to the consumers

Possible Causes Improper training from seasoned reps and team leads

No option to retail as it required extensive presentations, demos, customer handling

This can be due to stringent targets/lack of time to senior reps

Goklaney found following disconnects: Sales guys missing easy sales, missing simple cues, unclean & damaged demo equipment, inability to handle customer objections

Senior reps have no incentive to train new reps who would encroach on their targets subsequently

Territory conflicts between seniors and juniors

Saturation in territories, competition amongst employees Focus only on targets/sales

Less attention by EuroChamps on relationship building

The High Attrition rates Turnover data Jan’02 – Dec’03 shows a attrition rate of almost 82%, which is considered to be astonishingly high with respect to industry standards Periods

Available Reps

Resigned

Attrition%

Initial recruited 0-6 months 7-12 months 13-24 months

180 60 37 32

0 120 23 5

66.7% 12.8% 2.8%

Possible causes

1. Data is inadequate on how much of it is due to natural sieving process 2. ELF staff a hot target for companies looking for “sales talent” – owing to their formidable reputation in direct sales 3. Due to inadequate support from senior reps 4. Saturated territories, high targets like minimum 40 sales to go from probation to confirmed 5. Almost 12hrs rigorous duty hours.

The New compensation system- “Bettering the Best”: The New compensation system was designed to give award points to the sales person for successful completion of various stages of selling process, like making a call, giving a demo, closing the sale etc. The compensation was linked to the points scored by the salesperson. The scheme also included daily recognition of the EoroChamps couple with a maximum monthly reward of Rs.500. Table: Bettering the Best: EFL’s New Compensation Plan, Points Allocated, January 2004

Criteria

Points

Criteria

Daily Target

Active Door Knock

5

per door knock

30

Appointment for the Day

10

per appointment

5

Gift-a-Smile (GAS)

30

per call (if achieved)

1

Service Request

10

Demos Sale: Standard

100 300

per service request / complaint logged per demo per sale

Sale: High end products

600

per sale

Reference

50

per reference

Friend-Get-a-Friend (FGF)

3,000

for interview

Meetings

200

attend all meetings

1

Commercial Appointment (w/ a business entity)

50

per appointment

1

2 3 1 1

The idea behind the new system was to reduce the sales pressure on the sales people and to change their focus to improving the process of selling. This would also improve the chance of sale as the overall customer handling improves, thus, improving sales productivity and reducing the growing attrition rate amongst the EoroChamps. However, the system entailed some pitfalls as well in the form of additional workload on sales people and the leads to record and monitor the daily activities of sales. Also, it was felt that the rewards were not commensurate with the amount of effort put in by the sales rep for the same. Another point against the scheme is that while we can measure the number of sales calls or demos done, we cannot measure the quality of salesperson interaction with the customer.

1. 2. 3. 4. 5.

Pros Reduction of sales pressure. Lower attrition rate. Improve sales process in terms of customer experience. Improved customer acquisition and retention. Improvement in sales productivity per person. Daily recognition will lead to greater motivation. Better training system with proper support from seniors.

Cons 1. Time spent in daily filing of reports. 2-3 hrs of extra filling the form job. 2. Possibility of overstating of efforts. 3. Possible high compensation with low sale for process points. 4. Not possible to measure qualitative aspect of selling. 5. Resistance to computer training

Recommendations I recommend that new scheme should be implemented at EFL. The scheme will be helpful in increasing the overall quality of customer interaction, which in turn, will lead to increased sales. It will also be helpful in reducing attrition rate at EFL due to increased sales productivity leading to higher compensation per salesperson. A nationwide implementation of the scheme would require complete commitment from regional sales heads and their team. I propose a few modifications / additions to the scheme as follows: 1) Increase the financial rewards linked to various sales processes. This will provide greater incentive to the sales people to follow the processes. This is a way to equalize the compensation process even when the sale is not made. This way a EuroChamps who has 1200 points out of two sales(600 points each) and the EoroChamps with 1200 points with only 1 sale would be compensated the same . This would bring about discrepancies in the recognition achieved for a sale. Hence, differentiation in rewards for a sale should be made. 2) Find means to measure the qualitative aspect of customer interaction. This can be achieved by periodic customer surveys.

3) Incentivize middle levels of EFL’s sales hierarchy for retaining sales people and achieving targets. The current scheme is only focused towards EoroChamps. 4) To reduce time spent on recording, promote self-reporting by salespersons with penalties for incidents of incorrect reporting. 5) Use the new scheme in the recruitment advertisement to attract potential candidates. 6) Ratios like call conversion should be analysed territory-wise and weights should be adjusted accordingly. 7) High chances were there that these points would be inflated, therefore a strong code of conduct should be in place to avoid malpractices. 8) A proper feedback mechanism for seasonal reps and team leads should be there to ensure the quality of training for EuroChamps. 9) Maintenance of customer database to be included in the new system: - It would help EFL maintain relations with customers even after the reps leave EFL - It would help understand the potential and other demographics in each territory. The company should monitor the results of the new scheme on a periodic basis. While there may be some short-run effect on the sales numbers due to the focus change, but in the long-run, the sales productivity and numbers hopefully will increase.