Varun Jain 1301-431 Section-A Assignment – Session Session 15
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 5,000+ sales representatives called „Eurochamps‟ for its two main products, EuroClean vacuum cleaner and AquaGuard water purifier. The image of a Eurochamp, 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 co nsider the customer 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 rep attrition. The compan y also witnessed a declining performance of the sales force across across many of EFL‟s territories. There were instances of missing sales and other such irregularities by the Eurochamps. 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 reps for process adherence and sales both, in contrast to the earlier system based on sales on ly. 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 eurochamps were based on the same philosophy. Some other observations regarding the existing system are:
The selection of the eurochamps 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 eurochamp 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, eurochamps 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. Highly result oriented system, where commissions were directly impacted by the numbe r of sales done. 2. Direct contact with customer is possible as there is no middle line of distribution. 3. There is no limit to the commission one can earn, as it is dependent on the number of sales. 4. Transparency in the compensation system. 5. Recognition of high achievers Limitations 1. Achieving maximum sales was the sole objective, how it was achieved is not important. 2. The conversion rate was
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 ca ll, 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 Eurochamp couple with a maximum monthly reward of Rs.500. 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 chances
of sale as the overall customer handling improves, thus, improving sales productivity and reducing the growing attrition rate amongst the Eurochamps. 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. Pros 1. Reduction of sales pressure. Lower attrition rate. Improve sales process in terms of customer experience. 2. Improved customer acquisition and retention. 3. Improvement in sales productivity per person. Daily recognition will lead to greater motivation.
Cons 1. Time spent in daily filing of reports. 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.
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 EF L 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 t eam. 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 equal ize the compensation process even when the sale is not made. This way a Euro champ who has 1200 points out of two sales(600 points each) and the Eurochamp 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 a chieved 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 Eurochamps. 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. 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 will increase.
