Eureka Forbes Ltd.

: Managing the Selling Effort

Eureka Forbes Ltd. (EFL), was started in 1982 as a joint venture between Forbes (India) Group
and Electrolux of Sweden. In 2000’s it is the leading company in consumer durable products
like vacuum cleaner and water purifier in India.

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 the customer as “A Friend for Life”.

By late 2003, the company has been facing multiple issues like declining sales volumes, falling
sales closure rates and high attrition rate for sales representative. The company also witnessed
a declining performance of the sales force across many of EFL’s territories. CEO of Eureka
Forbes Mr. Suresh L. Goklaney has found the instances of missing sales by Eurochamps along
with some irregularities, then he along with V. Mathialagan, Regional manager came up with
a new sales representative 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 only.

Currently, EFL Management team is assessing the effectiveness of new sales representative
compensation system, Bettering the best on the basis of Pilot run. On the basis of assessment
management team has to decide whether to rollout this new system or not ? if yes, then in which
manner.

The Current System

The task given to the Eurochamps were result oriented i.e. sales was the prime and sole
objective. There was no importance as to how they are going to do. The process was neglected
and the only thing that mattered was result. Even the compensation of the Eurochamps were
based on their sales.
  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

 Result oriented system, commissions were directly impacted by the number of sales.
 Direct contact with customer is possible as there is no middle line of distribution.
 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 of the current system

 Objective was to convert more and more sale as no weightage was given on how they are
selling ? to whom they are selling ?

The New compensation system- “Bettering the Best ”

The new compensation system was designed to give award points to sales person at each point
of selling process like, calling customer, Demo of product, Selling product to customer. Then
these points were used to provide compensation to the Eurochamps. This system also included
a daily recognition of Rs. 500 to Eurochamps once in a month at CRC Level.

The idea behind the new system was to reduce the sales pressure on the sales people and to
change their focus to improve 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 interaction quality between the customer and the
salesperson.

Pros and Cons of New Compensation system

Pros
 Reduction of sales pressure means Lower attrition rate.
 Improve sales process in terms of customer experience.
 Improved customer acquisition and retention.
 Improvement in sales productivity per person and Daily recognition will lead to greater
motivation and satisfaction.

Cons
 Time spent in daily filing of reports.
 Possibility of overstating their efforts.
 Possible high compensation with low sale for process points.
 Not possible to measure qualitative aspect of selling.

What Can be done

Based on the qualitative analysis The scheme should be launched but after filling the pitfalls.
The scheme has potential to help 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.

Few Modifications that Can be implemented to make the new system more better:

1) Increase the financial rewards linked to various sales processes. This will provide greater
incentive to the sales people to follow the processes. There is a way to equalize the
compensation process even when the sale is not made. Suppose 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 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 Eurochamps.

4) To reduce time spent on recording, promote self-reporting by salespersons with penalties for
incidents of incorrect reporting.

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.