1. Eureka Forbes Case Submission Submitted By: Itisha Sharma | Madhur Bhatia | Rachit Bhatnagar | Vishvender Singh

2. Situation Analysis Alarm bells were ringing for EFL as the sale of their vacuum cleaner EuroClean had softened over the past year and a half, sales closure rates had decreased substantially while attrition at the EuroChamps level had shot up. The sales system adopted by the company was based on direct selling and did not avoid any middlemen. As a result, it was possible for the company to establish better relationships with customers and also avoid sharing profits with distributors or retailers. In 2004, the revenues of EFL had crossed the INR 5 billion mark. The company had 116 sales offices in 92 cities and over 5000 sales representatives pushing the two main company products – EuroClean Vacuum Cleaner and AquaGuard Water Purifiers. AquaGuard sales and after sales services accounted for 64% of the company’s revenues while EuroClean contributed to 22% of the revenues.

3. Situation Analysis EFL’s primary target market comprised of households with monthly incomes in excess of price of its products. Only 18 million households in India met this criteria in 2004. The current penetration of the company was about 25% of the market hence there was tremendous potential for the company to grow. A major challenge for the company was that most consumers did not see vacuum cleaner as an essential item and thus the concept of having a machine do the cleaning at home had to be sold before the product. Most of EFL’s competitors sold their products through distribution channels involving distributors and dealers. The advantage of selling the products through such channels was that customers could visit the stores for demonstration and see the entire range of products on display and choose the one that met their requirements most appropriately.

4. Product Details In 2004 the EuroClean vacuum cleaner by EFL was priced at around INR 6500. The price was greater than the prices of similar products sold in the retail market. However, the company believed that its products were sturdy and tailor made for the tough Indian environment. Over 150000 units of EuroClean were sold in 2004 and the company had a market share of over 70% in the vacuum cleaner category.

5. EFL’S Sales Approach In 2004 the sales team of EFL made 24 million sales calls, conducted more than 2.4 million demonstrations and sold more than 500000 units of EuroClean and Aquaguards. The company targeted housewives by making cold calls in the day and usually conducted demonstrations during the evening when there were male family members at home. The company preferred demonstrating products at home as it believed customers had the time and leisure required to enjoy the demonstration only at home. The company invested heavily in advertising locally as well at regional and national levels and was able to reach out to at least 80 million existing or potential customers annually.

6. EFL’S Sales Organization

7. The job of the EuroChamp was to focus solely on sales however the employees working at the next three levels in the organizational structure focused on selling as well as managing the sales force. Almost all the company employees had started their careers at EFL as EuroChamps. The company faced enormous difficulty in maintaining homogeneity among the EuroChamps as they all came from different backgrounds. Homogeneity was critical to the company as the EuroChamps were the face of the organization.

8. Tasks performed by EuroChamps The EuroChamps were required to meet their group leader in the morning and discuss with them their plan of action – the number of calls to be made, the number of demonstrations to made etc. and also perform cold sales calls. At midday they were required to complete their activity reports, deposit payments and update their knowledge about latest product improvements. During the evenings they visited households for demonstrations and tried to close maximum number of sales. At night they had yet another field meeting. The EuroChamps worked 6 days a week. The EuroChamps who maintained motorbikes under the OYBS system at EFL were required to maintain minimum productivity of 15 units per month.

9. Training & Supervision EuroChamps were usually paired with other EuroChamps or senior sales representatives to learn the art of selling and demonstrating the product at customers’ homes. Apart from the on-field training, new recruits were also made to go through a seven day program called ‘My First Week at EFL’ in which they were made familiar with the company’s products, policies and history.

10. Evaluation & Compensation The compensation of a EuroChamp at EFL had the following components – fixed salary, rent allowance, holiday bonus, medical reimbursements and travel reimbursements wherever applicable. Commissions were issued on the basis of sales made by the EuroChamps and were provided over and above the salary. Commissions was a variable component and effective salespeople at EFL were able to earn commissions up to 70% of their salaries. EuroChamps who sold over 22 units every month consistently for six months were inducted into the Silver club for that year and were rewarded at annual meetings.

11. Challenges being faced currently The current challenges faced by EFL were as follows: Despite huge investments in advertising, the company was not able to penetrate the market aggressively. There was no formal training program for the EuroChamps as a result of which the EuroChamps were not able to close really simple sales calls at times. Of the 24 million cold calls made, the representatives were invited for demonstrations only 10% of the times and only 21% of the demonstrations led to placing of orders The attrition rate at the EuroChamp level was very high particularly in the first 6 months of appointment.

12. Pros & Cons of The New Evaluation System PROS The system allowed the senior management to be more involved in the evaluation of performance of EuroChamps. Exact loopholes in the training program could be identified and targeted. The attrition rate could be brought down. The employees could be motivated more effectively. CONS The system required lot of paperwork and thus overstressed the already overstressed senior staff at the company. Many senior sales managers believed that the system would take the focus away from selling to earning brownie points and earn incentives. The system did not integrate the overall tasks to be performed by EuroChamps with the smaller tasks for which points could be earned.

13. Recommendations Tweak the new system to reduce paper work to be done by the group leaders. Ensure integration of key activities with overall tasks of the sales force. Adjust incentives to better motivate the EuroChamps.

14. Thanks!