185697987 Final Report on Water Purifiers

Sales and Distribution Management

Project Report on Water Purifiers Submitted to: Prof. Bhalendar Singh Nayyar

Submitted by: Group 10, SDM-E Pratik Jain  –  211099 Rahul Garg –  211107 Shreshtha Gupta  –  211136 Shubham Jain  –  211138 Varun Arora  –  211158 Aanchal Mahajan  –  211160 Lavi Aggarwal  –  211170

Table of Contents Part –  Part –  I –   I –  Industry  Industry Scenario ................................ ................ ................................ ................................ ............................... ............... 6 Industry Growth over last five f ive years ............................................................. ................................................................................................... ...................................... 6 Changing market share of different companies: ................................................................................ 6 Industry growth for next three years............................................................ .................................................................................................. ...................................... 6 Method used ................................................................................................................... ................................................................................................................................... ................ 6 Environment Scan o f the last two years: ............................................................................................ ............................................................................................ 7 Pestle Analysis: ............................................................................... ................................................................................................................................ ................................................. 7 Political and legal: ........................................................................................................................... ........................................................................................................................... 7 Economic:.................................................................................................. ........................................................................................................................................ ...................................... 7 Social: ........................................................... .............................................................................................................................. ................................................................................... ................ 7 Technology:..................................................................................................................................... ..................................................................................................................................... 7 Environmental:................................................................................................................................ ................................................................................................................................ 7 Porters Five Force for the industry: .................................................................................................... .................................................................................................... 7 Supplier Power: ............................................................................................................... ............................................................................................................................... ................ 8 Buyers Power: ................................................................................................................................. ................................................................................................................................. 8 New Entrant: ................................................................................................................................... ................................................................................................................................... 8 Threat from substitute: .................................................................. ................................................................................................................... ................................................. 8 Competitive rivalry: .............................................................................................. ......................................................................................................................... ........................... 8 Major changes in target market profile and consumer behaviour ..................................................... 8 Target Market ................................................................................................................................. ................................................................................................................................. 8 Shift in target market profile and consumer behaviour ................................................................. ................................................................. 9 Deprived:................................................................................................... ......................................................................................................................................... ...................................... 9 Major Changes: ............................................................................................................................... ............................................................................................................................... 9 Aspirers: .................................................................. ........................................................................................................................................ ........................................................................ .. 9 Major Changes: ............................................................................................................................... ............................................................................................................................... 9 Seekers:........................................................................................................................................... ........................................................................................................................................... 9 Major Changes: ............................................................................................................................... ............................................................................................................................... 9 Strivers: ................................................................... ......................................................................................................................................... ........................................................................ .. 9 Global Indians: ................................................................................................................................ ................................................................................................................................ 9 Overall Major Changes:.................................................................. ................................................................................................................... ................................................. 9

Part –  Part –  II –   II –  Sales  Sales Organisation ................................ ............... ................................. ................................ .......................... .......... 10 Eureka Forbes Limited ...................................................................................................................... ...................................................................................................................... 10 Territory design at EFL ................................................................... .................................................................................................................. ............................................... 11 1|Page

Table of Contents Part –  Part –  I –   I –  Industry  Industry Scenario ................................ ................ ................................ ................................ ............................... ............... 6 Industry Growth over last five f ive years ............................................................. ................................................................................................... ...................................... 6 Changing market share of different companies: ................................................................................ 6 Industry growth for next three years............................................................ .................................................................................................. ...................................... 6 Method used ................................................................................................................... ................................................................................................................................... ................ 6 Environment Scan o f the last two years: ............................................................................................ ............................................................................................ 7 Pestle Analysis: ............................................................................... ................................................................................................................................ ................................................. 7 Political and legal: ........................................................................................................................... ........................................................................................................................... 7 Economic:.................................................................................................. ........................................................................................................................................ ...................................... 7 Social: ........................................................... .............................................................................................................................. ................................................................................... ................ 7 Technology:..................................................................................................................................... ..................................................................................................................................... 7 Environmental:................................................................................................................................ ................................................................................................................................ 7 Porters Five Force for the industry: .................................................................................................... .................................................................................................... 7 Supplier Power: ............................................................................................................... ............................................................................................................................... ................ 8 Buyers Power: ................................................................................................................................. ................................................................................................................................. 8 New Entrant: ................................................................................................................................... ................................................................................................................................... 8 Threat from substitute: .................................................................. ................................................................................................................... ................................................. 8 Competitive rivalry: .............................................................................................. ......................................................................................................................... ........................... 8 Major changes in target market profile and consumer behaviour ..................................................... 8 Target Market ................................................................................................................................. ................................................................................................................................. 8 Shift in target market profile and consumer behaviour ................................................................. ................................................................. 9 Deprived:................................................................................................... ......................................................................................................................................... ...................................... 9 Major Changes: ............................................................................................................................... ............................................................................................................................... 9 Aspirers: .................................................................. ........................................................................................................................................ ........................................................................ .. 9 Major Changes: ............................................................................................................................... ............................................................................................................................... 9 Seekers:........................................................................................................................................... ........................................................................................................................................... 9 Major Changes: ............................................................................................................................... ............................................................................................................................... 9 Strivers: ................................................................... ......................................................................................................................................... ........................................................................ .. 9 Global Indians: ................................................................................................................................ ................................................................................................................................ 9 Overall Major Changes:.................................................................. ................................................................................................................... ................................................. 9

Part –  Part –  II –   II –  Sales  Sales Organisation ................................ ............... ................................. ................................ .......................... .......... 10 Eureka Forbes Limited ...................................................................................................................... ...................................................................................................................... 10 Territory design at EFL ................................................................... .................................................................................................................. ............................................... 11 1|Page

Sales force skill set Analysis .......................................................................................................... .......................................................................................................... 11 Recruitment of o f EuroChamp .......................................................................................................... .......................................................................................................... 12 Selection of EuroChamp................................................................. ................................................................................................................ ............................................... 12 Training & Development ...................................................................................... ............................................................................................................... ......................... 12 Training for Leaders ...................................................................................................................... ...................................................................................................................... 13 Other Trainings ................................................................... ............................................................................................................................. .......................................................... 13 EFL Compensation Structure......................................................... ......................................................................................................... ................................................ 13 Prospecting, Reporting & Degree of sales force automation ....................................................... 14 ION Exchange (Zero B) ........................................................... ...................................................................................................................... ........................................................... 15 Recruitment & Selection ............................................................................................................... ............................................................................................................... 15 Training & Development ...................................................................................... ............................................................................................................... ......................... 16 Skill Set Analysis ......................................................................................................................... ............................................................................................................................ ... 16 HUL Pureit ......................................................................................................................................... ......................................................................................................................................... 16 Sales Organization and Territory Design D esign .............................................................. ....................................................................................... ......................... 16 Sales Organization ..................................................................................... ......................................................................................................................... .................................... 17 Territory Design .................................................................. ............................................................................................................................ .......................................................... 17 Skill set required for front line sales people ................................................................................. ................................................................................. 18 Recruitment and Selection S election process o f the sales people ............................................................ ............................................................... ... 18 Effectiveness of various training m ethods for the sales staff ....................................................... 19 Compensation Structure ............................................................................................................... ............................................................................................................... 19 Method of prospecting and reporting with degree of sales force automation............................ 19 TATA SWACH ............................................................................................................ ..................................................................................................................................... ......................... 20 Sales organisation and Territory Design ....................................................................................... ....................................................................................... 20 Sales Structure S tructure for Online Sales: .............................................................. ................................................................................................... ..................................... 21 Sales Structure for Croma & other Modern Retail outlets: .......................................................... 22 Skill Sets S ets required for Sales S ales Staff by Supervisor: ............................................................. ........................................................................... .............. 22 Skills set required for the Area Sales Manager by Zonal Manager: .............................................. 22 Recruitment and Selection Policy Po licy for sales people: ...................................................................... 22 Training given to the Sales staff and its effectiveness ............................................................... .................................................................. ... 23 Compensation Structure ............................................................................................................... ............................................................................................................... 23 Method of Prospecting and Reporting with the degree of Sales F orce Automation ................... 23 Kent ............................................................... ........................................................................................................................................ .................................................................................... ........... 24 Direct sales division (DSA’s) - ........................................................ ........................................................................................................ ................................................ 24

Retail channel sales-................................................ sales-................................................................................................................... ...................................................................... ... 24 2|Page

Corporate sales division- ............................................................... ............................................................................................................... ................................................ 25 Territory design- ............................................................................. ............................................................................................................................ ............................................... 25 Analysis of the effectiveness of the current sales strategy: ......................................................... 25 Hierarchy of the organization ( Sales division) .............................................................................. 26 Ranking of skill sets required for sales staff by supervisors................................. supervisors.......................................................... ......................... 26 Recruitment and Selection S election of sales people ......................................................... .................................................................................. ......................... 26 Effectiveness of different training methods for sales staff ........................................................ ........................................................... ... 26 Compensation structure of the sales force.......................................................... ................................................................................... ......................... 27 Method of prospecting and reporting with degree of sales force automation............................ 27 WHIRLPOOL....................................................................................................................................... ....................................................................................................................................... 27 Retail channel sales: ........................................................... ...................................................................................................................... ........................................................... 27 Corporate sales division: ...................................................................................... ............................................................................................................... ......................... 27 Recruitment and Selection S election of sales people ......................................................... .................................................................................. ......................... 28 Compensation structure of the sales force.......................................................... ................................................................................... ......................... 28

Part –  Part –  III –   III –  Distribution  Distribution Network ................................................................... 28 Eureka Forbes Limited ...................................................................................................................... ...................................................................................................................... 28 Traditional Retail channel ............................................................................................................. ............................................................................................................. 28 Business Partner (Franchisee) ................................................................... ....................................................................................................... .................................... 29 New Channels ............................................................................................................................... ............................................................................................................................... 29 Rural Channel (described in Changes over last five years) ........................................................... ........................................................... 29 Supply Chain ................................................................................... .................................................................................................................................. ............................................... 29 Retail Channel ............................................................................................................................... ............................................................................................................................... 29 Direct Sales Channel..................................... Channel........................................................................................................ ................................................................................. .............. 29 Changes in Distribution policies over last 5 years......................................................................... 30 Channel Conflicts ............................................................... .......................................................................................................................... ........................................................... 31 Retail: Pull Strategy .............................................................................................. ....................................................................................................................... ......................... 31 Direct Selling: Push Strategy S trategy ......................................................................................................... ......................................................................................................... 31 Trade Margins and Other Discounts .......................................................................................... ............................................................................................. ... 32 Impact of o f Modern Retail on Distribution ............................................................. ...................................................................................... ......................... 32 Impact of o f Internet over distribution .......................................................................................... ............................................................................................. ... 32 Ion Exchange(Zero B) ........................................................................................................................ ........................................................................................................................ 33 Trade Margins and Other Discounts .......................................................................................... ............................................................................................. ... 33 Cooperative Advertisement .......................................................................................................... .......................................................................................................... 33 ...................................................................................................................................... ...................................................................... 34 HUL Pureit’s ................................................................ 3|Page

Distribution Network .................................................................................................................... 34 Main Impact .................................................................................................................................. .................................................................................................................................. 35 RURAL Segment ............................................................................................................................ ............................................................................................................................ 35 Service Output demand for Water W ater Purifier Industry:- ............................................................... .................................................................. ... 35 HUL Pureit’s SERVICE OUTPUT DEMAND and Its Application: - .................................................... 36

Marketing flows considered important by the customers for the category ................................ 36 Areas of vertical and horizontal conflict and possible solutions .................................................. 38 Solutions to these conflicts confl icts .................................................................................. ........................................................................................................... ......................... 38 Impact of modern retail on distribution ....................................................................................... ....................................................................................... 38 Trade margins and other discounts .............................................................................................. .............................................................................................. 38 Impact of internet on distribution ................................................................................................ ................................................................................................ 39 Supply chain of the industry ......................................................................................................... ......................................................................................................... 39 Level of o f Cooperative Advertising ............................................................................................... .................................................................................................. ... 40 TATA Swatch ............................................................... ..................................................................................................................................... ...................................................................... 40 Distribution Network .................................................................................................................... 40 Major Changes in i n Distribution Policies in past 5 Years .............................................................. ................................................................. ... 41 RURAL Segment: ............................................................................................................. ........................................................................................................................... .............. 41 SERVICE OUTPUT D EMAND and Its Application............................................................................ 41 Marketing flows considered important by the customers for the category ................................ 42 Areas of Vertical and Horizontal Conflict ............................................................. ...................................................................................... ......................... 43 Impact of modern retail on distribution ....................................................................................... ....................................................................................... 44 Trade Margins and other discounts .............................................................................................. .............................................................................................. 44 Impact of Internet on Distribution ............................................................ ................................................................................................ .................................... 44 Supply Chain ................................................................................... .................................................................................................................................. ............................................... 45 Level of Cooperative promotion in Tata Swach .............................................................. ............................................................................ .............. 45 Kent ............................................................... ........................................................................................................................................ .................................................................................... ........... 45 Marketing flows considered important by the customers for the category ................................ 46 Trace the route back from retailer to manufacturer to determine levels and intensity of distribution.................................................................................................................................... .................................................................................................................................... 47 Trace any major changes in the distribution policies over the last 5 years and their impact ...... 47 Identify areas of vertical and a nd horizontal conflict and possible solutions ..................................... 48 ....................................................................................................................... ........................................................... 48 Horizontal Conflict ............................................................ Impact of modern retail on distribution ....................................................................................... ....................................................................................... 48 Trade margins and other discounts .............................................................................................. .............................................................................................. 48

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Impact of internet on distribution ................................................................................................ 49 Supply Chain of the Industry ......................................................................................................... 49 Level of cooperative advertising ................................................................................................... 50 WHIRLPOOL....................................................................................................................................... 50 Sales organization and territory design ........................................................................................ 50 Recruitment and Selection of sales people .................................................................................. 50 Compensation structure of the sales force................................................................................... 51 Distribution ................................................................................................................................... 51 Trade margins and other discounts .............................................................................................. 51 Areas of vertical and horizontal conflict and possible solutions .................................................. 52

Possible Solution ........................................................................................................................... 52 Impact of modern retail on distribution ....................................................................................... 52 Impact of internet on distribution ................................................................................................ 52 Supply chain .................................................................................................................................. 53 Level of cooperative advertising ................................................................................................... 53

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Part – I – Industry Scenario Industry Growth over last five years Year 2012-13 2011-12 2010-11 2009-10 2008-09 Source: Adi-Media Publication, Economic Times.

Turnover 1650 Crores 1400 Crores 1142 Crores 980 Crores 840 Crores

Changing market share of different companies: RO Based water purifiers

% Share value-wise Aquaguard (EFL) 44.3% Kent 38.8% Zero-B 10.3% Fig. % share of major players in RO based water purifiers (2010-11) Offline Based purifiers

% Share value-wise HUL 73.62% Aquasure (EFL) 17.60% Kent 8.14% Fig. % share of major players in Offline Based water purifiers (2010-11) Inline/UV based purifiers

% share value-wise Aquaguard (EFL) 65.64% Aquasure (EFL) 19.77% HUL Autofill 5.46% Fig. % share of major players in Inline/UV based water purifiers (2010-11) The market leader of course is Eureka Forbes‟ brand Aqua guard with 57 per cent share in the RO, 75  per cent in UV and 20 per cent in the storage category (Aquasure). Overall, it has 54 per cent share in the industry (as of 2012).

Industry growth for next three years Year 2013-14 2014-15 2015-16

Market size(Rs crore) 1989.6 2387.52 2865

Method used Assumption- Water purifier segment in India will grow at a compounded annual growth rate (CAGR) of about 20 per cent due to the rising demand for water purifiers and increasing disposable incomes of the people. We do not take the 25 percent growth due to the high penetration and stagnation of the RO segment. Therefore taking the actual industry size of 1658 i n 2012-13 and applying the CAGR of 20%, we get the forecast for the next 3 years. Formula used FV=PV (1+R/100) ^n

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If we take both the organized and the unorganized sector, the current market size is around 3200 crores and taking a CAGR of 20 percent, the size in the next 3 years for 2013-14, 2014-15, 2015-16 will be Rs 3840crore, Rs4608 crore, Rs5529.6 crore respectively. In 2013, taking in account RO filters grows at 17% CAGR = 49.28cr In 2014, taking in account RO filters grows at 16% CAGR so does whirlpool = 57.17cr In 2015, taking in account RO filters grows at 15% CAGR = 65.74cr

Environment Scan of the last two years: Pestle Analysis: Political and legal: “Water Quality Association” has taken a step to maintain a minimum quality standard for the industry, in the back drop of increasing home grown low quality product companies. The country is going through a politically stable period which is good for the industry. Economic: The economic condition is still better as compared to the global condition, although the growth has slowed down to 5% the water purifier industry is growing at a rate of around 20% annually. Countries middle class is still growing and the buying capacity of consumer is increasing. The value of rupee is falling in comparison to dollar which in turn deterrent for small companies which imports purifier parts from China and other nations. Social: Awareness of ill effects of tap water is increasing among the consumer which in turn is increasing the sales of water purifier. Reach of pure water in rural area is less as compared to urban areas which is again increasing the sales of water purifier. The consumers are becoming more hygiene conscious and hence water purifiers are becoming  basic necessity. Technology: Tata Chemicals has launched a low price water purifier based on Rice Husk technology to serve the masses. Eureka Forbes has partnered with Water Security Corporation to launch a low cost purifier  based on NASA technology. Environmental: India is rapidly growing with this there is pressure on every natural resource and as such large scale deterioration is taking place in the quality of water. Rivers are flooded with industrial waste also the quality of ground water is decreasing with these high level of harmful content the sales of water purifier is increasing. 

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Porters Five Force for the industry:

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Supplier Power: The supplier power is low as the components used in manufacturing of water purifier are basically commodities which are easily available to all the companies. Also the market is fragmented with no company having a share of more than 60%. Buyers Power: The buyer power of consumers is high in water purifier industry because there are many firms in the market selling almost similar product with same price tag. Also power of distributors is high as most of the sales of water purifier takes from this channel. New Entrant: The industry is still in its growth phase and as such many new consumer durables have entered the market and some are still planning to enter the market, also the investment requirement in this industry is low as compared to returns that are possible and hence we can see many home grown companies like Kent Ro in the market which are performing well. Hence the treat of new entrants is high. Threat from substitute: Substitutes like boiling water and other methods are still used by the consumers, also as these methods do not require any additional investment this will be a viable substitute for water purifiers. Lack of electricity, replacement of batteries, and maintenance requirement of water purifier make the substitute better for the consumers. But the consumer behaviour is changing and more people are shifting towards water purifier, hence treat from substitute is medium. Competitive rivalry: The industry is growing at a very rapid pace and hence, has seen the entrance of industry giants like Tata Chemicals, Philips, Videocon etc and also many new players like Kent Ro have come up in the market. Hence we can see that all the companies are trying to grab as much share in the market by using their competency like high capital investment capability (Tata Chemical), innovation (Kent Ro), distribution network (HUL) etc. Hence we can say that competitive rivalry in the water purifier industry is high.

Major changes in target market profile and consumer behaviour Target Market As per 2011 Census, total number of households in India is 246,692,667 (24crore). Out of this Rural households are 167,826,730(16crore) and Urban households are 78,865,937 (8crore) . Potential target user for EFL‟s products is any household which does not have access to safe drinking water. This means a potential target of 40 crore people which is almost 10 crore households. According to the 11th Five-Year Plan report, there are about 2.17 lakh quality-affected habitations in the country, and about 66 million people are at risk due to excess fluoride in 200 districts of 17 states. As of 2012, EFL had a customer base of 9 million households and with the after sales service demands of the customer these households also form a part of target segment. EFL follows full market coverage and has a differentiated product offering suiting the needs and demands of different types of consumers. Major factor that differentiates the products is whether they are in electrical or non-Electrical segment. The non-electric segment also called the Inline or Storage based segment is targeted towards semi urban and rural areas which do not have a regular electric supply. Since regular water supply is not needed for storage segment, it is suited for areas where water and electric supply is unpredictable.Since, the water problems are more profound in the Ti er II and III cities and rural areas  products have been designed specifically keeping the needs of such areas in mind. Aquaguard Water shops have been set up in rural areas to educate consumers about the hazards of drinking unclean water. Certain products like Aquaguard Integra 7 which is a seven stage water purifier was designed keeping in mind the specific drinking water problems faced in Delhi and neighboring region (Geographic Segmentation). The low-cost offering of high-end durables targeted at households in small t owns and rural India are the water purifiers from the house of Eureka Forbes and Hindustan Unilever. Both are becoming increasingly popular because they are effective and affordable. Also, they do not run on electricity or 8|Page

require continuous water supply and, therefore, are ideal for locations where water and power supply is unpredictable. Other aggressive brands available in the offline category are Kent, Zero B, Bajaj, and Tata. Market was divided so as to cater the need of every individual. First segmentation was done on the  basis of Annual Income of the family. On the Basis of Annual Income

Households in Millions

Deprived

< Rs 90000/-

85

Aspirers

Rs 90,000/- to Rs 200,000/-

135

Seekers

Rs 200,000/- to Rs 500,000/-

11

Strivers

Rs 500,000/- to Rs 1000,000/-

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Less than 1.5 Millions >Rs 10,00,000/Global Indians Source: Adi-Media PublicationEthnic Consumers Consulting, Economic TimesIvey Case Study Shift in target market profile and cons umer behaviour Deprived: This segment mainly consists of Subsistence farmers and unskilled labourers. These  people are not concerned of taste of the water; these are just concerned about water being not contaminated and fit for drinking. Since these households are daily-wage earners, so they cannot afford to miss work. These people lives in rural areas and are deprived of Electricity resources as well. These people do not have continuous supply of water, they generally stores water in mud-pots or steel  buckets. Major Changes: Numbers of Deprived are getting reduced because of development and growth.  Aspirers: This segment mainly consists of Small scale shopkeepers, farmers who owns small piece of land and industrial workers. These people are also not concerned about taste but only health. Many of these households are not deprived of electricity but they never get continuous electricity and they also do not get continuous supply of water. Major Changes: With the development of rural India and schemes for benefitting the deprived  people, many of this segment has risen and are looking for better basic necessities. Seekers: This segment consists of Young college graduates, Government employees at intermediate level and owners of small to medium sized businesses. These types of people are not only concerned about health of the family but also about taste of water and have continuous supply of water and electricity. Major Changes: With the increase in buying appetite of these people, this segment has also rising and falling into strivers segment wherein they look forward for making their life much better. Strivers: This segment consists of Senior Government employees, owners and managers of individuals. These people concern about health and taste of water, they also think water purifier as a style statement. Global Indians: This segment consists of Senior Executives in Large corporations, owners of larger  businesses, politician and rich farmers with large land holdings. These people are concerned about health of the family, taste of water and design of water purifiers as they want it to be fully automatic and sleek in look. Overall Major Changes: It is reported that groundwater in one-third of India's 600 districts is not fit for drinking as the concentration of fluoride, iron, salinity and arsenic exceeds the tolerance levels. With increasing number of people becoming conscious of the risks of drinking contaminated water, the demand for water purifiers is rising rapidly. The rising prosperity in rural India means people may  be willing to pay more for safe water. So HUL Targeted each segment by offering water purifiers at all ranges mentioned in the table below: 9|Page

Part – II – Sales Organisation Eureka Forbes Limited Sales force at EFL has been grouped into three divisions –  Direct Sales division Retail Sales division Professional Sales division Possible reasons for this division can be as follows –  Different selling process –  Professional sales period is typically longer as compared to direct and retail divisions. Different selling skills needed by the sales force –  Direct Sales rep needs to have an in depth knowledge of the product as compared to Retail Sales rep. More focused approach to cater to customers –  Retail and Professional sales divisions posting strong growth rate (55.75% in retail and 40.38% in Industrial division as of 2006-07).   

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1. Direct Sales Division The Direct Sales division comprises of 8000 plus salesmen . To avoid competition with a parallel Retail sales division, only high end products like “Aquaguard Total” and “Aquaguard Genius” are sold via the direct sales route. This seems logical too because the high end products which are more expensive and loaded with extensive features need proper demonstration possible only via door to door demonstrations. Direct Selling is expensive, so it is suited for higher value products. As of 2012, there are over 200 direct selling centres in over 100 cities commanding a base of more than 6 million customers (source : Economic Times dated Nov 2, 2012). 2. Retail Sales Division EFL Water Purifiers have presence in 15000 outlets through which primarily mass market  products priced around Rs. 1600 like non electric resin based purifiers (AquaSure) are sold. The outlets are spread over 600 Indian cities with a dedicated sales force of over 150 people. (Source:  Economic Times dated Nov 2, 2012). Decision to shift focus from direct sales to retail was taken because of change in people‟s lifestyles and increased competition. Nowadays, both husband and wife are working, so t here is no one at home and therefore the direct sales force is unable to reach a l arge segment of people. As per Mr. MarzinShroff, CEO of direct sales and senior vice-president of marketing, EFL is selling several models, both premium and mass segment , across national and regional stores and Canteen Department Stores. Moreover, it is manufacturing certain products only for the retail channel. However, price of products sold in retail stores is less than those sold by direct route  because customers look for good value for money products in the retail outlets. 3. Professional Sales Division EFL appointed a fully functional B2B sales division by 1990s. The sales force had to reach the customer directly and through the distributors. By 2007, t he professional sales division grew to a sales force of 100 salespersons servicing over 9000 workplaces including schools, institutions, offices etc. Direct Sales force hierarchy at EFL is as follows –  1.  National Head 2. General Manager 3. Area Sales Manager 4. Divisional Sales Manager 5. Deputy Divisional Sales Manager 6. Branch Manager 7. Head of location 8. Team Leader 9. Group Leader 10. Customer Sales specialist 10 | P a g e

Retail sales force hierarchy at regional level is as follows –  1.  National Sales Manager 2. Regional Sales manager 3. Zonal Head 4. State Head 5. Area Head 6. Territory Sales Executive a. ISP Co-ordinator i. In shop promoter  b. Territory head i. Field Sales officer

Territory design at EFL Territories are designed by the upper level management through considering 4 parameters: 1. Selecting a basic geographical control unit 2. Determining the sales potential present in each unit 3. Combining units into tentative territories 4. Adjusting the differences in coverage difficulty Clover leaf territory shape is used in which customers are located randomly in the territory. Due to the effective territory design, 10000 plus demonstrations happen in India each day. Over 40000 kitchen visits are done each day by the service team. With the existing territory design, EFL‟s direct sales force is able to cover 8 cities and 149 towns in Tier I, II and III. This comprises of 63% of SEC A& B households. Off late, a shift has been observed with the territory allocation parameters. Apart from the geography and sales potential, the local water quality i s also taken into account. Salespeople of areas in which TDS (Total dissolved salts) is less e.g. Mumbai are given the task of selling UV based products and not RO. Sales force skill set Analysis Sales Managers are involved in three key processes: Recruiting, Training and Managing. Sales Managers therefore have identified some skill sets that they look for while recruiting. Expectations from Sales Executive (Sales Person) for Direct Sales: Knocking/meeting prospective customers. Convincing the customers about the benefits of Aquaguard water purifier and Euroclean Vacuum cleaner Writing daily activity report. Issue of units and clearance. Depositing payments in Accounts. Late afternoon commercial knocking. Product deliveries and collection of payments. Evening demonstration and sales closing. Though the company saw a drop in the quality of sales people in 2006-07 as much skilled talent was  being taken away by the other employment sectors offering better income and lifestyle. In 2006, EFL faced high attrition rate of 40%. But EFL has been able to combat this issue by offering better salaries and better opportunities to grow in the organization. Now EFL considers its 8000+ sales force as an asset and consider them to be “Solution Providers”. To maintain a sales force with great skill sets, EFL at their annual Eurochamps ceremony send over 1000 performing young salesmen abroad to  places like Phuket, Hong Kong and Macau. EFL now believes that apart from money, their motivation and appreciation techniques have helped to retain salesmen with appropriate skills and have made Eurochamps go beyond their roles and raise the bar. Expectations from Sales Person for Retail –  Demonstrate company‟s world class products Sell products in high numbers  

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Foster Relationships Grow in organization through the route of professional selling and meeting people one to one. Put in hard work and enjoy with generous contributions from the company. Expectations from Institutional Sales Executive: Sales: achieving revenue targets from the territory. Generation and business development in the assigned territory. Proposal submission.  Negotiation. Payment collection.  New account development and management. Structured Reporting: Weekly   

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Recruitment of EuroChamp Recruitment refers to the process of finding and hiring the best-qualified candidate (from within or outside of an organization) for a job opening, in a timely and cost effective manner. It is the most important function because unless the right types of people are hired even the best plan and organization system would not do much good. Systematic recruitment of salesman leads to greater  productivity. In Eureka Forbes, first of all recruitment policy is established when it is found that there is a need for a salesman. First, the information is sought about the prospective employees from the  present or former employees of the organization. The evaluation of the information collected is done and a decision is made to select or reject the prospective salesman. The company also gives advertisement in local newspaper, journals and magazines. Interviews are held up as per a proper selection process. Selection of EuroChamp Selection is the processes in which candidates for employment are divided into two classes, those who offered employment and those who are not. While selecting the salesman in Eureka Forbes, following qualities are taken into consideration: Physical Qualities Social Qualities Mental Qualities Moral Qualities The different channels of recruitment at Eureka Forbes: Friends Get a Friend‟ scheme  Newspaper Advertisements Recruitment Through Campuses Employment Exchanges    

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Apart from all these methods, Eureka Forbes has also started approaching rural and semi urban communities, through NGOs and people who work in this field especially in the areas like Maharashtra, Madhya Pradesh. They interact with the rural and semi urban communities, shortlist  people, and conduct training for selected people. Training & Development Mix of Training Methods is used like Lectures, Mentoring and Job Instruction. All the new people are first of all made familiar with the company. They are first of all briefed about the company in detail. After this they all go through a week long Training Program known as “My First Week”. It comprises of Orientation on the Company Selling Skills This training covers both Soft Skills and the Hard Skills. It is a mix of Classroom training and Field training. Half of the day is on classroom training  and second half on field training  in which they all  practice what all they have learnt. This training involves:  

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Prospecting How to make a door entry How to interact with customers How to demonstrate the product How to handle customer‟s objections How to close sale Employees practice this on field and come up with doubts next day. At the end of the training program, test is conducted to check how much they have learnt. In this way follow up can be easily taken up and required change and improvement can be suggested. For initial 2-3 weeks, new employees work with the senior executives and learn practically from them. Once the senior executive think that now employees can handle a call, they are given their targets. The problem with this Mentoring Method is It is not necessary that senior executives have good mentoring skills. Senior Executives can also take it as a burden. But on the other hand, this training method leads to optimum utilization of time and is cost effective.      

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Training for Leaders EFL has a culture of grooming employees to leaders. They don‟t recruit people from outside but groom the present pool of employees. For this Lecture Method and Role Plays are used. Training for 2-3 days is imparted on Managerial Skills, Recruitment Skills, and Mentoring etc. This motivates the employees to perform better and will inculcate the feeling of Pride and Satisfaction as these training grooms an employee on a personal front. Other Trainings Salesmen are sent for MBA so that they can develop managerial skills which can be used in  performing their job in a better way. Undergraduates are given opportunities to study further and become graduates. As new product is launched, all the employees are trained about the features and functioning of that very product. All this will lead to Employee Satisfaction because of personal development and will lead to a culture of Continuous learning  in organization. Despite of so many effortand cost involved in training, the attrition rate among Euro Champs is high due tothe sales target. Compensation is variable and based on the t arget achieved. As a result people don‟t get enough motivation to work and there in these training processes also do not contribute in motivating employees to work. Another problem is that the supervisors are many times not comfortable with training or mentoring the new employees as their focus is solely on meeting their targets and this responsibility of new employees comes up as a burden. All the training methods in EFL aim for development of employees and company which helps it maintaining its market leadership. 

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EFL Compensation Structure Compensation Structure:  60% Fixed/ 40% Variable Eurochamp Income (In INR) Fixed Component –  A Basic 3200 House Rent Allowance 800 Leave Travel Concession 200 Medical 75 Fixed Expenses 13 | P a g e

Group Leader

(in INR) 4100 1150 250 75

Bike Maintenance Bonus Provident Fund Special Pay or Allowance Special Promotion Expenses Total – A Variable Component –  B Holiday Bonus Sales/Service related Expenses Petrol Quarterly Commission Commission (monthly for BM) Group Commission Contingency Compensation Performance Incentive Productivity Bases Incentive HCRC Allowance Friendship Chain Total B Total A+B

100 500 250 250

100 700 350 250

5375

6975

200

200

1000 500

3000 700

1600

1500

900 3500 8875

600 6000 12975

Position

Monthly Salary Range (INR)

Service Coordinator Team Leader Territory Head (HCRC)

6687 – 7285 15000 – 18000 36300 – 39000

Monthly Average Salary (INR) 6900 16800 37250

In its early days EFL followed a compensation structure of 50:50 with respect to its fixed and variable components respectively, but that structure was subsequently replaced by a 60:40 compensation structure. This change is in tune with EFL‟s new found principle of rewarding the process rather that result. As a result of this structure the Eurochamps are less burdened with the final conversion rate and are more focused towards the customer satisfaction and problem solving. More over this structure has greatly reduced the high turnover ratios which EFL was earlier suffering from. Since the Eurochamps are now greatly rewarded for the various steps they follow during a sales pitch their overall performance has improved, resulting in improved sales for EFL. Prospecting, Reporting & Degree of sales force automation At EFL the prospecting are done in the following ways –  a) Customer Enquiry –  The EFL advertisements generates customers enquiry which is then converted into prospects by following up on them and telling them about the benefits of the  products  b) Household Knocking –  The Eurochamps go from door to door in the areas they are allocated and then do random household knocking asking the people about interest in their products c) Telemarketing –  The telemarketing division at EFL gives random calls from yellow pages and then if any person shows any interest then that interest is converted into prospect. d) Chain prospecting –  The prospect who is interested to buy the product or the ones who are converted into sales are further asked for recommendation for prospects if any of their friends or family are interested in buying the EFL products. e) Call Connect System  – A consumer fills out and submits a “lead form” online, an automated  process identifies his or her location based on the pin code supplied. The system then identifies the nearest sales team, makes an outbound call to a salesperson and one to the customer. The system then connects the two calls -- all with an expected hold time of less 14 | P a g e

f)

than 30 seconds. “There is often a lag between a customer filling out a lead form and the team getting back to him. This system cuts down the lag time drastically. It also works on SMS and telephone. Leads from Facebook and website –  EFL currently gets only four to five leads from Facebook every month. But it manages 35,000 leads a month through organic traffic and an additional 40,000 leads a month from its brand display campaigns. The conversion of leads from hits on EFL‟s own website are high -- 40% to 45% of total leads. It‟s brilliantly cost effective. The cost of each lead is the lowest as compared to advertising or door knocks. The company web-site and call centre (manned by disabled individuals), provides the salesmen with thousands of referrals every month.

 Steps in Prospecting –  

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Identify and qualify prospects Company qualifies the leads by contacting them by mail or phone to assess their level of interest and financial capacity 'Hot' prospects are turned over to the field sales force Warm prospects to telemarketing units It takes about 4 calls on a prospect to accomplish a business transaction Eurochamps are then required to learn as much as possible about the prospect before approaching them Then the EuroChamp are required to set up call objectives, i.e. to qualify the prospect, gather information and/or make immediate sale Eurochamps them initiates the contract by making a phone call to the prospect to take an appointment for the demonstration After that the sales person tells the product "story" to the buyer using features, advantages,  benefits and value approach Handling customer's psychological and logical resistance. To handle such objections t he Eurochamps needs to have positive approach. Eurochamps are required to negotiate on issues regarding price, contract completion time, quality of goods and services offered and product safety. The last and one of the most important parts is closing the sales. This includes closing signs from buyers i.e., physical action, statements or comments and questions. Eurochamps also  provides buyer with minor choices such as colour or size, or indicate what the buyer will lose  by not placing the order now.

Reporting – Briefing is till 8 o'clock in the morning 8:15am to 11:15am is household knocking 12noon-2pm is reporting including lunch time 2pm-4pm commercial knocking 4pm-5pm is reporting 5pm-8pm demos if any/fresh knocking Last reporting The Eurochamps have a cycle of 28days and sets target accordingly and they have a weekly closing of 7 days at the end of which there is again reporting.       

ION Exchange (Zero B) Recruitment & Selection At ZERO B (ion exchange), the opportunities for the job of sales executive are open for one and all. The application for the hiring of sales executives is posted on the company‟s website and also communicated to many applicants via the existing employees of the organization. The applicants are required to clear two stages to get the job: the first one is the i nterview by the Human Resource 15 | P a g e

department of the company. If the applicant clears this interview, he/she moves on to the next step which is the interview by the Head of relevant department (in this case, Sales). The employees having  prior experience are valued. The candidate, who clears both the stages, negotiates the salary and is then arranged for a training  period of limited duration to get acquainted with the new job and working environment. The r esponsibilities for the job are basically the fulfill ment of sales quotas and monitoring and reviewing of the dealers and customer‟s satisfaction. The company has introduced a system of performance appraisal against objectives or key result areas, set and reviewed jointly, half-yearly and annually. The appraisal process is considered important because it helps identify the strengths of a person, the  potential for development and growth, areas of improvement and training required. It also serves as a tool for long term human resource planning and development. Training & Development Zero B focuses on the training of employees on three aspects: Product Training Application Training Functional Training Most of the trainings are done on-the-Job and through structured group programs . Initially, when an employee joins the company, 3-4 days orientation training i s given so that employee gets familiar with the organization. Along with that employees are given proper knowledge about the products and its functioning. Whenever new product is launched, training is imparted to the employees accordingly. Technical and Managerial Training is imparted from time to time. Such trainings are provided by the HRD department. Some of the trainings are outsourced to external institutions.   

Skill Set Analysis Expectations from sales executive –  To do institutional sales, corporate sales. To visit Hotels/ Hospitals/ builders/ architecture/ Govt.sector To handle dealers and pull business through them. To increase business by generating enquiries To contact customers, give demonstration and sell range of water purifiers.     

HUL Pureit Sales Organization and Territory Design

National Sales Head

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Area Sales Manager(North)

Business Developer

Territory Sales Officer

Sales Representative

Area Sales Manager(South)

Business Developer

Territory Sales Officer

Sales Representative

Area Sales Manager(West)

Business Developer

Territory Sales Officer

Sales Representative

Area Sales Manager(East)

Business Developer

Territory Sales Officer

Sales Representative

Sales Organization

North

States

Zones

Districts

South

States

Zones

Districts

East

States

Zones

Districts

West

States

Zones

Districts

India

Territory Design The above diagrams show the Sales Organization and Territory design at HUL Pureit. India geographically has been divided into four regions by the companies which are as follows:  North South East West Each region comprises of six to seven states and each state is further divided into various zones. For example-In case of Delhi, the division is such that the entire state is divided into four major zones, where Noida, Ghaziabad and the whole of South Delhi come under one zone and similarly, the same is applicable for Gurgaon and Faridabad as well. Division of the state depends upon not just the population of that state but also t he total area of that state. For example- big cities like Uttar Pradesh is further divided into two parts and similarly, Rajasthan is also divided into four parts. At the same time, interestingly, Delhi, though is relatively a smaller state in terms of area but it is divided into 4 zones because of its high and growing consumption capacity. Thus, it‟s not just the population that the company keeps in mind while creating zones for a particular state, but also its population and hence the consumption capacity.    

•Territory Area Sales Manager The number of Area Sales Managers responsible for a particular state is on the basis of its area and  population. For example- In case of Delhi, there is one Area Sales Manager, who is responsible for the entire sales and distribution of the state. • Business Developer Business Developers work under the purview of the Territory Area Sales Managers. They are responsible for the sales and distribution for particular zones in a state. For example-In case of Delhi, there are four Business Developers for four different zones in the state, i.e. North, South, East and West.  Noida and Ghaziabad area are under the same Business Developer who is responsible for Faridabad and Gurgaon. Big states like Rajasthan are divided into four parts connecting major cities. Each part comes under one Business Developer and there are about two to t hree Territory sales officers who report directly to Business Developers and are responsible for their particular regions. 17 | P a g e

• Territory sales officers They are responsible for one particular region. Although, most of the times, these Territory Sales Officers come under the purview of the Business Developers, however, in some cases, they directly report to the Area Sales Manager. Also, Territory sales officers are in direct contact with the distributors and sales representatives, which are outsourced to the third parties by HUL. Pros and Cons of the sales structure and territory are as follows: Pros:  All the people under Area Sales Managers are not under the payroll of Pureit as it is outsourced; hence the cost of recruiting and firing i s less.  There is normally one Territory sales officer for one distributor, hence the service given to each distributor is not compromised Cons:  The Territory sales officers are outsourced; hence the motivation level in them is less.  The Territory sales officers are managed by another company hence there is always a chance of conflict between Pureit and the outsourced company.

Skill set required for front line sales people  Good communication skills: It is very important for the sales persons at HUL Pureit to have good communication skills since this ensures clarity of words and thoughts. A salesperson with good communication skills can very easily explain all the details to the customer well and similarly, handle all the necessary queries well  Good Negotiation Skills: Good Sales personnel must have good negotiation skills in order to understand the customer requirement well and make a good decision on the part of both, the company as well as the customer. At HUL Pureit, negotiation skills play a very important role at every step of the sales process.  Intellectual Ability: Presence of intellectual ability in sales people cannot be ignored since in field of sales, speed and consistency matters. It is not only important for the sales person to be speedy and consistent in his performance, but it is also important to have agility or in other words to be flexible enough to deal with various kind of customers and work under various situations.  Prior experience in Sales: It is considered very good to have a sales person who has prior work experience in the field of sales since this prior experience of the employee helps the company serve their customers better.  Relevant Experience in Water Purifier Industry: At HUL Pureit, one of the most important skills required in a sales person is his/her specialized experience in the water  purifier industry. Sales Personnel having such relevant experience are given the first  preference. Since such a sales personnel understands the industry very well, it becomes easier for the company to put him at work get the desired performance and thereby the results out of him.  Good in Distribution Management: It is very important for a sales person at HUL Pureit to handle the entire distribution network under his control efficiently and reliably. Correct and timely delivery to the customer is always of utmost importance in any company. Also, at HUL Pureit, past specialized experience in the Water Purifier industry is the most important factor when it comes to selection of people especially, for the post of Territory Sales Officer and Business Developers. Recruitment and Selection process of the sales people  Recruitment of Area Sales Managers, Business Developers and Territory Sales Officers Recruitment for the above mentioned posts are done through Employment consultancies or through the organic route, i.e. internal promotion of the employees from within the company. However, the company is now also focusing on recruiting the Territory sales Officers through „on the campus recruitments‟ at various reputed Business Schools.  Recruitment of sales personnel/Front line sales personnel: 18 | P a g e

HUL basically recruits Male Sales representatives The recruitment for the front line sales personnel is done through getting them from companies like Ikea, Mafoi etc. These companies are responsible for generating sales lead for HUL Pureit. The Process for selecting is through Interview which is a 3 round process 1. In this round, Interviewer makes the interviewee comfortable and asks him to talk as much as he can. 2. This is the stress round, in which interviewer shows the real face of the market by using harsh or abusive language. 3. In this round they are asked to compare the products and are strictly told not to say a bad word about competitor. Effectiveness of various training methods for the sales staff  Training for front line sales personnel: Currently the training program at HUL Pueit mainly focuses on the product development abilities for the front line sales people. These training programs are usually outsourced to another company, which specializes in conducting such training programs. In case of HUL Pureit, the training programs are conducted by Hufs. The training needs are identified and specified by the company to Hufs and on the basis of these needs and requirements; Hufs creates a tailor-made program for HUL Pureit‟s employees. This is a three month program in which 15 days is induction, in which company details are shared and also how a water purifier is made. Then after induction 75 days is field training.  Training for Business Developers and Area Sales Managers: Interestingly, for the Business Developers and the Area Sales heads, the company designs and executes an in-house designed program itself. Compensation Structure  The front line sales people get compensation of around 2 to 3% per product. However, it varies from case to case. The salary structure of a sales representative is as follows: Total Salary = Fixed Salary + Incentive + Commission on every machine. Commission on Machines is as follows: For, UV = Rs 480 per Machine * number of machines sold RO = Rs 680 per Machine * number of machines sold Pureit offline = Rs 20/40 per Machine (depends on the capacity of the machine) * number of machines sold  PPL(pureit premier league), which is organized by HUL during the IPL, where they reward their retailers on the basis of points earned by each retailer through selling HUL pureit  products and at the end of the PPL, HUL calculates points of each and every retailers and rewards the top 10 retailers with gifts and trips to various places.  Distributors also have a compensation structure based on various preset parameters and points are given to parameter.  For Distributors and Territory Sales officers, the compensation part is mostly fixed, whereas for PWE (Pureit Water Expert), it is more of variable rather than fixed. Method of prospecting and reporting with degree of sales f orce automation The channels are basically divided into three sub-channels in HUL to avoid conflicts and to cater different target customers 1. Symphony Channel: In this channel, PWE are hired to work at Exclusive outlets and Multi-brand Outlets. This is done to give demonstration to customers about the product inside t he shop. 2. MT Channel: This channel is called Modern Trade channel; this is basically for Malls and Shopping Complexes. 3. DTH Channel: This channel is called Direct to Home channel; this i s basically for direct selling. 19 | P a g e

There are two ways of prospecting and reporting with degree of sales force automation, which are as follows:  Pureit Water Expert (PWE): One is through PWE (Pureit Water Expert), these people are assigned to each retail outlet of HUL Pureit and whenever customers enter the outlets, their responsibility is to entertain and attract the customers by giving them demonstrations and assisting them in purchasing Pureit Water purifier. These People are given a Samsung Tab by the company, on which Pureit Software is pre-installed. Thus, whenever a customer buys or makes an enquiry about HUL Pureit, the PWE‟s responsibility is to do “child entry” or in other words, to f ill all the necessary information of the customer into the database through this software and the data is then directly transferred to their Central Database, from there the technical team traces the customer for changing of filters at appropriate time by generating a  pop up on these PWE‟s TAB screen so that they can contact those customers and remind them of the  problem. Also, whenever a customer visits these outlets and assures the PWE of purchasing Pureit after 3 days then this information is also stored at the central database through these TABs and on the 3rd day a  pop up is flashed on these PWE‟s screens, so that they can contact the concerned customer.  Ace Channels: Secondly, it is through their “Ace Channels” or HUL Pureit Call Centre. Wherein a customer calls to these center and requests for demonstration and fixes a date for these demonstrations. So Customer‟s information is stored at the central database, where the company traces their sales representatives, which are on HUL payroll, whether they have given t he demonstration to the respective customer within 3 days of the call made by the customer or not. If the demonstration has been made the, what are the chances of selling Pureit Water purifier and if the demonstration have not been made then what is the reason of not giving demonstration. Interestingly, PWEs and Team Leaders at every retail outlets are changed every month.

TATA SWACH Sales organisation and Territory Design

Zonal Sales Manager(North)

Area Sales Managers

Zonal Sales Manager(South)

Area Sales Managers

Zonal Sales Manager(West)

Area Sales Managers

Zonal Sales Manager(East)

Area Sales Managers

National Sales Head

Territory Executives Territory Executives Territory Executives Territory Executives

Technical Staff

Technical Staff

Technical Staff

Technical Staff

Sales Structure of TATA Swach The above image shows the sales organisation structure of TATA Chemicals for Water Purifier Division, the organisation is managed by National Sales Head Currently Mr. APS Ahluwalia takes this post. The whole country is divided into four zones namely North, East, South and West. All zones are headed by Zonal Sales Managers. Currently North zone is headed by Mr. Manish Gupta. All the zones are further divided into 4-5 Areas with one Area Sales manager representing each Area. Under every Area Sales manager (ASM), there are 5-6 number of Territory Executives. Under every ASM, there are 1-3 Technical Staff. Both the Technical Staff and the Territory Executives are not under the  payroll of TATA Chemicals. Technical Staff is there not to generate orders but to focus on client 20 | P a g e

servicing, demonstrations, return etc. The company is also planning to remove all the technical staff and open service outlets in the near future, but the decision is pending and also it is not clear if the technical staff will be placed in the outlets or not. Pros:  All the people under Area Sales Managers are not under the payroll of TATA Chemicals, hence the cost of recruiting and firing is less.  The structure has a separate team i.e. combination of Territory Executive and Technical Staff for returns and hence the conflict during returns of defective units is less.  The sales team basically focus on channel sales and not direct selling; hence the main purpose of the sales team is servicing distributor and retailers  There is normally one Territory Executive for one distributor, hence the service given to each distributor is not compromised  The sales force is not direct to the customers hence the cost of the sales force is less as number of sales person required are less. Cons:  Due to less number of Sales people, many retailers are not happy with the service of t he company  The Territory Executives (TE) and Technical Staff (TS) are both outsourced; hence the motivation level in them is less.  Both the TE & TS are managed by another company hence there is always a chance of conflict between TATA Chemicals and the outsourced company.  The company have no direct sales force to create awareness and demand; more dependent on the Ads by the company or word of mouth. Sales Structure for Online Sales: This section is only explanatory about the online sales, made through TATA‟s own portal for sale of water purifiers, and not other e-commerce players

1

2

3

4

• Online Sales through www.tataswach.com • Sales redirected to regional Distributor • Distributor ships the product • Distributor is credited with the amount

The sales generated by the company‟s website are passed to the distributor belonging to t he area from where sales are generated and the distributors deliver the product to the customer. The distributor is then credited with the amount of rupee which he charges the dealer; hence the distributors are not affected by online sales. Also the management of online sales is easy from company‟s point of view. Advantages:  Absence of channel conflict as the sales through company‟s website does not affect the distributor‟s sales.  The company has no extra sales team to manage online sales, hence cost is less.  Distributors are also happy as they get extra sales with no extra efforts. 21 | P a g e

Sales Structure for Croma & other Modern Retail outlets: The company has a separate team for managing the Modern retail outlets which is in Mumbai and also the sales of TATA Croma. These outlets are not mixed with retail division. The sales of TATA Croma are managed through ERP Software which automatically generates sales order when t he inventory reduces to a particular level. Advantages:   No separate team of Sales person in different territories, hence the cost of managing modern retail is less.  The sales of TATA Swach in modern retail is managed by a separate team, hence the quality of service is good.  Absence of conflict with traditional retail channel. Skill Sets required for Sales Staff by Supervisor: Area Sales Managers manage Territory Executives and also the Technical Staff, both the Territory Executives and the Technical Staff are not under the payroll of TATA Chemicals. These are hired by a different agency and also paid by the agency itself. Different Skill set required for the Sales Staff by the Supervisor are as follows:  Prior Work Experience: It is better to have a sales person who has prior work experience it also helps them to service the distributors and the customers.  Specialised Work Experience in Water Purifier Division: This is one of the most important skill required in a sales person, it is definitely not a necessary part to become a TATA Swach Sales person. The contacted Area Sales Manager informed that a sales person who have prior experience in Water purifier industry understand the business better and generally gives better result than a sales man, who has no or experience in other industry  Technical Knowledge of Water Purifiers: The knowledge about the product is must for every sales person, the company imparts this knowledge during the training period and explain the functionality of water purifiers and also teaches them how to service these equipments  Communication Skills: Area Sales Manager always see that the sales person are good in communication skills, and are they capable in dealing with the distributors and the retailers or not. English is not important for the Technical Staff and Territory Executives as they basically deals with retailers and distributors, but definitely good communication is a must for them to effectively handle the channel partners  Convincing Abilities: As is the communication ability so is the case with convincing ability, this is also an important ability for a sales person, they ought to have a good convincing ability to convince the channel partners and generate sales. Skills set required for the Area Sales Manager by Zonal Manager:  Prior Work Experience of at least 3 years: All the Area Sales Managers are recruited internally from TATA Chemicals or from referrals, and the first condition for t hem to hold this position is a work experience of at least 3 years. This is necessary because an ASM handles a team of around 20-25 sales person under him, hence if he has no prior experience he may not be able to effectively utilize the sales people time.  Managerial Ability: This point has similar logic as the above point, managing ability is of utmost important for ASM‟s as the sales persons are in the field most of the time, hence to manage the efforts of all the sales person ASM has to have a good managing ability.  Communication Skill: It is imperative on the part of sales person to have a good communication skill, he basically deals with the sales staff or the distributors, hence he need to convince and also make sure all the people under him understand their work properly. Recruitment and Selection Policy for sales people : Recruitment of National Sales Head and Zonal Sales manager: The recruitment of National Sales Head and Zonal sales manager is done by internal sourcing from TATA group itself. It is to be noted that these post can be filled by other TATA Business Units also and not only TATA Chemicals. Recruitment of Area Sales Managers: This is done by two methods 22 | P a g e

a)

Internal Sourcing from other departments of TATA Chemicals, managers with experience more than 3 years can be chosen for the post of ASM  b) Employee Referral program in which employee can refer someone who fulfils the requirement can be recruited for the post. The benefit of this method is that the cost of recruitment is less and also there is some non-monetary benefit for the employee who refers Recruitment of Territory Executive and Technical Staff: The territory executive and technical staffs is not under the pay roll of TATA Chemicals and are hired by another firm and outsource them to TATA Chemicals. But even then the selection of these sales staffs are done on the parameters discussed above as the basic skill set required for the sales staff  Issue of Non Performance : The Company handles the issue of non-performance in a manner so as to reduce the number of terminations. ASM first discuss with the sales person about the difficulties he/she is facing in the field. Then he clarifies what TATA Chemicals is expecting from him, after that the sales person is allotted a time in which he has to complete certain number of sales, generate some new retailers and also handle certain number of customer inquiries. The company very rarely puts a person out of his job, and sales staff is given every chance to continue the job. This is a good practice as this increases the employee morale in TATA Swach, but then it also reduces the competitiveness of sales staff Training given to the Sales staff and its effectiveness Training program for ASM: Area sales managers are given a one week induction program in the Head office were they are introduced to different products, facilities and National Head of Water  purifier division. After the initial training the ASM‟s are given field training. Training for Territory Executive and Technical Staff: The training of Sales staff is about a month long, the training starts with a formal in-office training explaining product portfolio, product features and industry standards. After the initial tr aining the next 26-28 days sales staffs is trained on-field, this training is given by the ASM under which he/she shall be posted. ASM gives the sales staff firsthand knowledge about their roles. During the training ASM also clarifies the expectation of the company from the sales staff. The training is effective as it clearly defines the roles and responsibility of the sales staff, also it is basically given on the field where sales person will be posted hence the sales staff get a chance to understand the work from the perspective of ASM and also from his own  perspective. Compensation Structure Compensation structure of ASM: The compensation of ASM is a mix of fixed salary with travelling allowances; the travelling allowance has an upper l imit based on the region and area of the ASM. The affect of fixed salary is directly seen in the motivation level in the ASM‟s which is manifested by the large number of complaints lodged by the r etailers about the service level of TATA Chemicals. The compensation is made of 90% fixed and 10% variable depending on tangible and intangible metrics administered by Performance Management System (PMS). The PMS takes into account many things like sales generated, new retail outlets roped in for sales of TATA Swach etc. The details of weights given to different variables were not available with the ASM and the Territory Executive Compensation structure of territory Executive and Technical Staff: The compensation of Territory Executives and Technical Staff is composite of only fixed component and travelling allowances. The technical staff is given a salary upwards of Rs. 6000, and territory executives are given a salary upwards of Rs.10000. The compensation structure is not much motivating but in the same time it also does not put undue pressure on the sales staff, which may be the cause of low employee turnover. Method of Prospecting and Reporting with the degree of Sales Force Automation  Degree of Automation: TATA Chemicals is currently not using any type of ERP software and/or Sales Automation Applications for the sales force. Hence the sales force is still collecting the orders in forms. The sales force uses no t ype of handheld devices to take orders

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Reporting by Territory Executives: The territory executive reports to the area sales manager twice daily and also give a formal weekly and monthly report. The morning report gives the information about the planned activities for the day, whereas the second report gives the information about the work done through the day. The report also contains the activities done by the technical staff under the territory executive. The daily reports are usually made through phone calls and messages.  Reporting by ASM to Zonal Manager: Area Sales Manager reports monthly to the Zonal Managers, but the Zonal Managers maintains a constant contact with the ASMs and hence the reporting of the ASM is generally on the points describing the sales and customer inquiries. The Zonal Manager is also in some contact with distributors to make sure that he/she always knows and understands the condition of the market.

Kent Kent RO Systems Ltd is a leading company in manufacturing of health care products like purifiers, which started its journey way back in 1999. It has a diversified group interest under various categories with strong presence in selling water purifiers like mineral ROs, gravity purifiers and water softeners. Pioneer in bringing revolutionary Reverse Osmosis (RO) technology to India for the first time, Kent, started in 1995 in Noida, India. Despite a humble beginning, today Kent RO Systems Ltd i s a strong organization with offices spread across major cities of India The sales of Kent water purifiers is done mainly through 3 channels Direct sales division (DSA’s) - This sales division or direct sales agents caters to the demands of the households and sells them the Kent water purifiers by going to the homes of the customers. The  process of door knocking, cold calling, fixing appointments, giving demonstrations at homes and selling the product to the customers is handled by this division. This division of sale is more prevalent in the Delhi/NCR region (which is the major market for the Kent water purifiers) and is not prevalent in the other cities and towns of India. The company provides free installation and free service for 1 year. Outside Delhi the service is provided by t he service franchisees. For this division the company has 18 branch offices (direct sale offices) in Delhi alone and each  branch office has about 5-6 sales representatives, therefore the total number of sales reps in the Delhi region which caters to the demands of the households is around 100. There is a separate sales force that looks after the after sales services. Around 10 sales reps from the after sales division report to each branch office in Delhi, from where they are sent to the homes to cater to the queries of the customers. The company has its warehouses in various parts of Delhi from where the sales reps pick up the  products for selling. 

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Retail channel sales- This sales division also caters to the demand of the household through retailers/ dealers. The company has a strong dealer network and sells a lot of water purifiers through these dealers/retailers. There are a lot of customers who do not buy the water purifiers despite the demos given by the sales representatives; therefore the customers go these retailers to buy the water  purifiers. The company has distributors in the and the company also appoints its sales reps to handle the needs of dealer stores. This division of sale is more prevalent in the cities apart from Delhi/NCR i.e. majority of the sales in India except from the Delhi/NCR is through the retail channel sales. The company has around 14-15 main distributors in Delhi.The dealers are the electrical shops, water purifier dealers and the other private dealers. Recently Kent has set up its own exclusive Kent Shoppes which only sells the Kent water  purifiers. Some of the main distributors have been asked to sell only the Kent products and are  being converted into these exclusive shoppes. The company appoints its own sales reps at these shoppes. The Kent shoppe can only sell to the consumers. The company is also selling their water purifiers through the modern retail stores chroma, big  bazaar, next stores, vijay sales, etc. The company has been selling their products in around 6,000 multi- brand and large format stores across the country. The company sends its ISP‟s there for the demonstrations to the customers. 

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The company sends its own sales reps or the ISP‟s (in shop promoters) to the dealers who are able to sell more than 10-15 Kent purifiers in a month. Kent also sells its products through the army canteens across the country. There is a different canteen sales division for this segment known as the Canteen Sales Division mainly managed through the corporate office. A purchase order is released by the army for requirements of water purifiers in various parts of the army canteens, the head office takes care of this requirement and products are released from the head office to these places. The company has recently also tied up with the HP and Indian oil gas agencies to act as the distributors of Kent water purifiers.

Corporate sales division- This division caters to the demands of the institutions and companies which require the Kent water purifiers. There is a separate sales force for the institutional selling which sells the water purifiers to the schools, colleges, offices, hospitals, etc. The sale force for this division in Delhi for instance directly goes from the Noida head office to make the sales. The sales reps of this division are not present in the direct sales offices of the domestic consumers. The company has to give large discounts to these buyers as the quantity amount is very high. This channel also takes care of the MBO(multi brand outlets) Big Bazaar, Next, Croma , Vijay Sales etc. with which company has a tie up . For the rural regions the sale is made only through the retail channels and there are no direct sales agents. The company has a good dealer network for the towns and the rural areas and is trying to  penetrate more in the rural areas by the introduction of low cost water purifiers. Territory design- The Delhi/ NCR region is divided into 4 regions south, west, north and east. Similar regional division is followed in the other Indian states as well. The states are divided into 4 regions. The area sales managers are responsible for these regional areas, headed by the Regional manager.  Analysis of the effectiveness of the current sales strategy: After observing their sales organization and territory design it has been observed that Kent is a major  player in the northern region and their main focus is still in the Delhi-NCR and have setup a direct sales force in this region. The major products of Kent are their products with RO,UV and UF membrane products which provide triple filtration. They account for major sales of Kent‟s products. The company in its product portfolio has around 35 products in gravity, r esin, UV and RO range. Kent Grand has been their star product , recently the launched Kent supreme to reduce the water wastage which is a major problem with the RO products. Awareness about water purifiers is quite high among urban population of India. Major. The company should have a direct sales team other than Delhi to have a stronghold in these major cities of India. Kent has branch offices in all the major cities to cater to the need of the retail channel. Kent do not have a after sales team outside of Delhi and they have outsourced their aftersales and maintenance outside of Delhi-NCR which is a cause of concern, it has been noticed that lots of complaints regarding aftersales have been noticed with Kent after we did some analysis through secondary sources so they should setup a aftersales team and a direct sales in major cities where demand is high and cities where ground water is the major .With the current sales strategy they are able to expand pan India but still real focus is constrained in the Delhi –   NCR region although on papers they cover all over India but in reality they really focus in this region with huge turnover being reported the company should make the most of it and look to expand in all over India in an effective manner while setting up own after sales team to look into after sales in an effective manner.

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Hierarchy of the organization (Sales division)

Chairman VP sales General manager Deputy general

manager Regional manager Area sales manager Branch manager Senior sales executive Sales executive

Ranking of skill sets required for sales staff by supervisors While recruiting the sales reps for the company, the company has a priority for the following skill sets which are necessary for the sales reps to have in order to sell the water purifiers. Enthusiasm Confidence/ Motivated Extroverts and convincing skills Good communication skills Less time constraints/ willingness to work stretch     

Recruitment and Selection of sales people The company recruits people who have t he willingness to work as the sales executives. The minimum requirement is graduation for the sales reps and the company recruits by giving advertisements on the various job sites like Naukri.com. The initial interview is taken by the branch manager and 1 more interview by the general manager before the final selection. The sales representatives are promoted to the senior sales officers based on the work performance and experience. The recruitment for the manager level positions is entirely different and the minimum requirement is post graduation/masters with relevant work experience. The interviews are taken by the GM of t he company. Effectiveness of different training methods for sales staff The sales representatives after being interviewed and recruited by the company are sent t o the head office where they are given a minimum 3 day intensive training. This involves the training on the  products sold by the company, the technology used and all product and market related queries. After the 3 day training programme, the sales representatives have to clear an exam after which they are  permanently recruited in the company. The duration of this training may extend depending upon how much the executives learn and the test that they clear. After the 3 day training the sales representatives are sent to the respective branch offices where the branch manager trains the sales reps on the selling techniques, handling customer queries, demos, sales, etc. The duration is normally 4 days. After this the sales reps are sent to the field and are constantly monitored by the branch managers. The training helps the sales reps in getting knowledge about the sales techniques.

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Compensation structure of the sales force The sales representatives on being permanently recruited into the company are given a fixed salary of Rs 10,000 per month while the rest is the variable component which includes some incentives and commissions. On being promoted as a senior sales officer, the employee is given a fixed salary of Rs 15000 per month. Variable component of the salary1. Rs 150 travelling allowance which is given on every product sold 2. If a sales representative is able to do 10 sales in a month, then after the 10th sale he is given Rs 250 on every product sold. 3. There are also some different slabs for the Kent products for which the variable component may increase in case the products are difficult to sell or have a low demand. To motivate the employees the branch managers look after the needs of the sales reps in case they face any problems regarding conveyance, mobile phones and other problems. The branch manager further gets help from the regional managers in order to solve the problems of the sales reps. The sales reps are also given medical benefits in case they fall sick. There is no such fixed policy of the company regarding the rewards and monthly incentives. Analysis: The company recruits graduates from almost any field as long as they willing to work as sales representatives. Companies major products are RO water purifiers which are costlier products serving a premium customer base who probably would like to graduates with good conversation skills and well groomed but this portion is not taken care of much during training as focus of training is on product knowledge and sales knowledge and diction and grooming is not a much important part. The fixed component in salary is quite high and variable component is quite less and sales executives do not seem to be much enthusiastic to do sales in the market. They are quite content with completing their target of 3 demonstrations of RO products and 3 demonstrations of other products. The variable component should be increased with experience and point based system need to be implemented and monitored by the branch manager .The morale of sales representatives seem to be quite low after a certain period of time as it was noticed after a conversation with a senior sales executive that even after getting a tag of senior sales executive after working for 2-3 years there was no monetary benefit and prospects of gr owth after that. Method of prospecting and reporting with degree of sales f orce automation In the Kent purifiers company, each sales rep has to make atleast 6 demonstrations in a day. 3 demos should be of the RO water purifiers and 3 can be the other water purifiers. The sales reps directly report to the branch managers about the number of demonstrations, sales done, customer complaints resolved. The degree of sales force automation is less in the company though the company has an online system called DRS through which the sales reps can enter the data of the demonstrations and sales in a day.

WHIRLPOOL The sale of Whirlpool water purifiers is done mainly through 2 channels: Retail channel sales: This sales division also caters to the demand of the household through retailers/ dealers. The company has a decent dealer network and sells a lot of water purifiers through these retailers. In the present scenario many customers visit the retail shops to buy water purifiers. The company has distributors in the cities and towns which provide the water purifiers to the dealers and retailers, which further sell to the consumers. The company appoints its sales reps to handle the needs of retail stores.  The company sells its product through shops like croma, big bazaar etc.  The retail store on an average has around 8-9 sales reps who sell are goods like refrigerator, air conditioner and also water purifier.

Corporate sales division: This division caters to the demands of the institutions and companies which require the Whirlpool water purifiers. There is a separate sales force for t he institutional selling 27 | P a g e

which sells the water purifiers to the schools, colleges, offices, hospitals, etc. The sale force for this division in Delhi for example directly goes to the corporate office in Gurgaon where they enquire about whirlpool water purifier and gives them order about how many units they want for their institution. The order will be handled by area sales manager who intimate the sales force about the latest order and send them to the respective institution.

Share % of Corpor various channels ate Sale 10% Moder n Retail 20%

Retail Chann el

Table 1.1: Percentage share of sales of Whirlpool water purifiers in Delhi Recruitment and Selection of sales people The company recruits people who have the willingness and passion to work as the sales reps. The minimum requirement for selection is 12th class and when you want to move on to higher position graduation and post graduation are important. The company recruits by giving advertisements on the various job sites like Naukri.com, through newspapers etc. The interview for the j unior post is taken  by senior sales executive and for the senior post the interview will be taken by Area Sales Manager or  by Branch Manager. Compensation structure of the sales force The sales representatives on being permanently recruited into t he company are given: Fixed Salary: 9200 Variable Salary (Incentives and commissions): 2000 Variable component of the salary: Commission on normal days on sale of 1 purifier= 250 Commission on Saturday and Sunday of 1 purifier= 400 If a sales representative is able to do more than 30 sales in a month, then after that his incentives get doubled. For ex- If he sells the 31st product on a weekend then his commission will increase from 400 to 800.

Part – III – Distribution Network Eureka Forbes Limited Traditional Retail channel This includes selling through regional general retail outlets. These outlets are small to medium size consumer shops with limited target customers. Shops involved in this channel are primarily consumer durable shops like home appliances (ACs, fridge etc.), home furnishing etc. The route is Manufacturer (EFL) to distributor/dealer to retailer. Some dealers may do both door to door purifier installation and  providing retailers too. EFL Water Purifiers have presence in 17430 outlets, spread over 125 cities and 400 towns across India through 5,000 strong dealer sales network and 75 Distributors (2012 figures). Traditional retail contributes to 60% of entire durable business (Consumer Division).

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Business Partner (Franchisee) In the past, Franchisees comprised of the non-selling division of Consumer Division. The division takes care of after sale servicing part. They are generally independent business units which specialize in servicing consumer durables. There are roughly 20 Business partners in Delhi. The servicemen are trained by Eureka Forbes. However, off late franchisees have started taking sales orders and installing  products door to door with the help of Euro champs. EFL is trebling its franchise partners to 80 from 26 to ensure better sales and distribution of its product -- Aquasure. In total there are 324 Franchisee operations called Euro Partners. Apart from thi s there are 402 Franchisee Direct Operations. Together they provide 1100 service partners and 5800 trained technicians all over India. New Channels These are further classified into NC1, NC2 and BPCL. They contribute 22% of entire durable  business. o  NC1 –  Distributing products to Modern organized retail which consists of organized retail outlets like Hyper City, home shop etc. These are managed by different managers and distributors. Contributes to 15% of entire durable business. o  NC2 –  This is small scale retailer selling. Products are sold through shops other than consumer appliances like utensils, furniture etc. o BPCL –  This division takes care of distribution via BPCL gas network. The delivery people of BPCL were trained by EFL as salesmen of water purifiers. Some profit percentage was shared with BPCL. Rural Channel (described in Changes over last five years) Supply Chain Retail Channel Manufacturer

Regional Warehouses (2)

Distributors (4) Franchisee (8)

Retailers

Consumers

Direct Sales Channel Manufacturer

Regional Warehouse

Dealers

Direct Sales

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Aquaguard brand is sold through Direct Sales as well as Franchisees and Aquasure brand is sold through retail.  No. Of warehouses in Delhi= 2 (Mayapuri and Badarpur) The products are manufactured at Aquamall factories. Aquamall Water Solutions Ltd is a 100% subsidiary Company of Eureka Forbes Ltd. The company has four Manufacturing facilities have been established at Baddi (H.P.), Bhimtal (Uttarakhand), Banglore (Karnataka) and the Latest & the biggest in Dehradun (Uttarakhand). Apart from this Eureka Forbes has forged a 50:50 joint venture with UK based Waterlogic to develop premium water purification products and solutions. From these manufacturing units, products are transferred to regional warehouses on the basis of quotation given by the state heads. EFL operates in 125 cities and 400 towns across India through 5,000 + strong Dealer Sales Network and 75 Distributors. Area head and Territory sales-in charge are responsible for the orders taken by the distributors once the stock reaches the regional warehouse. Distributors  distribute the stock among retailers on the basis of orders and the retailers sell off to the consumers. However distributors for every category of product are different. There are generally different distributors for electric water  purifiers and non-electric water purifiers. Dealers are responsible for the direct sales channel. The dealers are given the responsibility of getting stock from warehouse and maintain the direct sales and distribution To manage its Distribution Network Business, Eureka Forbes has implemented an in-house software solution - BAMS. This software captures information related to the day-to-day functioning of the  business. The BAMS primarily handles the following areas –  Sales Transactions and related Returns made to t he Distributor Material Purchase & Material receipt by the Distributor Material Return (Purchase Return) and Credit Notes Other Claims and Credit Notes etc. Current Issue With vigorous growth plans, the company wants to closely integrate its operations with that of the distributors and simplify operations of its distributors. Many EFL distributors do business with multiple products and a large section of these distributors use Tally (ERP9 software) to manage their  business operations. EFL wishes to integrate its BAMS application with Tally.    

Changes in Distribution policies over last 5 years 1. New Retail channels EFL started setting up new and alternative retail channels in 2009 to increase penetration of water  purification devices which stands at 9%. Its retail division is now extending its products to chemists, CSDs (Canteen Stores Department) and general merchandise stores to reach out to households which do not use water purification devices. Defense personnel stores contribute to 3% of entire durables  business. 2. Shift in focus from Direct Sales to Retail Eureka Forbes, better known for its sales agents giving demonstrations of products such as vacuum cleaners & water purifiers at homes, has changed its marketing strategy. The company, with close to 8,000 door-to-door sales force, largest in Asia, now focuses more on selling products through retail outlets. Conversation with senior marketing manager (Delhi/NCR) revealed the change in people‟s lifestyles and increased competition was driving the shift for the company, which till a few years back relied exclusively on direct sales. “Nowadays both husband and wife are working, so there is no one at home and therefore the direct sales force is unable to reach a large segment of people.” 3. Distribution in Rural market via Water Shops Another change has been observed is the distribution in rural areas via Water Shops. A business investment of Rs. 50 lakh has gone into rural areas till date. (Forbes India article dated April 1, 2013). Eureka Forbes provides the hardware, the Panchayat provides the land, the state provides the water, and locals are trained by NGOs to run the plant and sell the potable water. One of the challenges which EFL is facing is rural areas is the acceptability of the idea to pay for pure water. In some areas, less than 20 percent of the people pay for RO filtered water even after t he water shop has 30 | P a g e

 been operational for quite some time. Additionally, disease rates have not gone down because many continue to cook with the untreated water even though they drink purified water. Eureka Forbes‟s own research shows that there was no significant fall in diarrhoea cases. Channel Conflicts Channel conflict at EFL may arise due to the two different methods of selling being followed i.e Direct Selling Model vs The Retail Selling Model. This results in Vertical Channel Conflict between the Manufacturer and a distributor/franchisee/retailer, happening due to poor communication, lack of role clarity as Sales force of each division feels that they end up competing against one another. Two separate divisions Retail Sales division and Direct Sales division selling similar products in same area. In this case, there is sort of channel cannibalization of Direct Sales against Retail sales. Solutions: To overcome this conflict EFL adopts the following strategy:1. Keeps separate product line for separate channel, for example, Aquasure is sold via retail outlets and Aquaguard via Direct sales. 2. Different Target Segment for each channel. The strategies for both the channels are explained as following:Retail: Pull Strategy 2003 –  2012. Targeting those Urban (B &C category towns) & Rural Markets which have never used water  purifiers before. Since these places are also suffering from dearth of running water and electricity therefore the  products offered are 1. Storage type 2.  Non –  Electrical, Gravity purifiers 3. Cheap –  INR 1800 onwards. 4. Do not remove Hardness (caused by heavy metals etc), Pesticides, Arsenic and Fluoride. Aimed at increasing the market penetration which is assumed to be as l ow as 9%. Retail Selling is more conducive for Multi  –   products  selling. EFL has increased its  products from 1 to 30 in the past decade. Contribution: Retail contributed about 22.7% of all Water Purifier’s sales  of EFL in 2012. 2013 onwards: Advanced Models of AquaSure. Targeting working couples at Tier 1 cites and Metros as well as to counter increased competition from contemporaries and new entrants. Both electrical as well as non electrical models can be purchased at retail outlets of such cities. Prices wary from INR1800/ –  INR 26,000/ 

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Direct Selling: Push Strategy 

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Targeting upper middle class and rich class customers who are looking for highest levels of  protection. Direct selling is more expensive form of selling, therefore suited for higher value products. Thus only high end products like “Aquaguard Total” and “Aquaguard Genius” are so ld via the direct sales route. 1. Running water type, with 8 –  10 liters of storage facility. 2. Electrical type, with tempering with taste of water facility also available in some models. 3. INR 12000 onwards. 4. Proclaims 100% pure water. Direct Selling Reps are more like Solutions Providers. So they suggest products based on the user‟s requirements. Direct selling more conducive for Single –  Product selling, it gets complicated otherwise.

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Contribution: Direct Selling contributed about 77.3% of all Water Purifier’s sales of EFL in 2012. On May 16th  2013 EFL acquired majority stake in Swiss company  –   Lux International to  become the largest home product direct sales company.

Trade Margins and Other Discounts Trade Margins offered to Distributors by EFL: 4% - 5 %. Margins offered by Distributors to Retailers: 10% - 12%. Margins offered by EFL to Franchisees: 12% - 14%. Impact of Modern Retail on Distribution Eureka Forbes has been known for its Direct Selling Approach. In the water purification market it started with Direct Selling of its product in UV segment and became the market leader. It is still a market leader in this segment. But as the Retail Sector is growing, EFL has shifted its resources towards this sector and not relying completely on Direct Selling. The major reasons for shift are as follows: 1. Water Purifier product category is well known to people. 2. Direct Selling creates potential customers which enquire about EFL products at later stage in Retail stores. 3. India being a vast country, it is very difficult and expensive to cater to whole country through Direct Selling. 4.  Nowadays both husband and wife are working, so there is no one at home and therefore the direct sales force is unable to reach a large segment of people 5. Increasing competition from retail channel like HUL, Kent, etc. All this made EFL enter into Retail Channel as well. Currently, EFL is dealing in 3 categories UV, RO, Resin. UV and RO technology is dealt through Retail Channel as well as Direct Channel but Resin technology is present only in the Retail Channel. CURRENT SCENERIO EFL is dealing in both Retail Channel and Direct Selling. It sells only entry-level products through the route. All the high end and premium product are under the brand name Aqua Guard are sold through Direct Selling. These are premium products for high segment that needs personal attention and are fit for direct selling. Being a premium and flagship product of EFL, people want to get assure about the  benefits of the product by demonstrations before spending money to buy it. For the Retail Channel, brand of EFL names  Aqua Sure. It is available in all the three technologies. These products are 20 to 30% cheaper than the products which are sold through Direct Channel as in retail as people are looking for good value for money products. Also, there is a severe price competition in Retail Channel by companies like Kent, HUL, etc. In Resin technology, EFL is at poor second position. HUL is the market leader with a large difference. HUL is having an intense distribution network and to compete with it EFL is concentrating on developing strong distribution network. Impact of Internet over distribution Three routes of selling through internet adopted by t he companies: 1. Company‟s own website 2. E-tailers (Electronic Retailers) 3. Click n Brick Modern Trade Outlets EFL provides customers with an option to buy from their website as well as from other major e -tailers and websites of modern trade chains. Through their own website they allow customers to buy  products of Aquaguard brand only whereas through e-tailers and modern trade chain websites, they sell the Aquasure brand only. It fits perfectly with their distribution strategy. The direct sales team which is responsible for Aquaguard brand is integrated with their website and hence Aquaguard brand on their website. Since the main purpose of website right now is customer lead generation, as according to EFL human interaction can never be replaced with the Internet, the key component of EFL‟s digital transition has been its Call Connect  System. When a consumer fills out and submits a 32 | P a g e

“lead form” online, an automated process identifies his or her location based on the pin code supplied. The system then identifies the nearest sales team, makes an outbound call to a salesperson and one to the customer. The system then connects the two calls -- all with an expected hold time of less than 30 seconds. Thus Aquaguard brand even after being provided through their website is retained with the direct sales division only and direct sales distribution network is used for deliveries even for the  purchases made online. The conversion of leads from hits on EFL‟s own website is high approximately 40% to 45% of total leads. This can eventually develop as the main selling model, as it will include home visits for demo purposes, replacing the current direct selling methods. For major e-tailers such as flipkart, homeshop18 etc. and modern trade outlet websites such as Chroma, EFL sells only Aquasure brand. With these they have a B2B transaction where all the sales orders are centralized but distribution however is decentralized and distribution is made to the clients‟ warehouses in the major cities. The requirement is provided by the clients for particular cities and Eureka Forbes distributors for retail chains make sure the delivery of water purifiers to warehouses in their respective cities. In this way Aquasure brand is retained with the retailer division only. Eureka Forbes Limited has awarded its digital strategies and social media mandate to Digitas Indi a of the PublicisGroupe. Digitas will be responsible for an integrated and end-to-end solution to strengthen engagement with customers across digital platforms like electronic customer relationship marketing (e-CRM), ecommerce, online relationship management (ORM) and social media. E-commerce will play an important role in the company's digital strategy as Eureka Forbes is strengthening its presence not only in direct sales but also retail and B2B space as well.

Ion Exchange(Zero B) As ion exchange has entered the water purification segment only recently and is therefore a new  player in the concerned segment, it is currently immune to Hassles like channel conflicts. Ion Exchange currently has a corporate office in Mumbai, and 11 Branch/Regional offices across 10 cities in India. Trade Margins and Other Discounts Trade Margins offered to Distributors: 4% - 5 %. Margins offered by Distributors to Retailers: 14% - 15%. More over unlike Eureka Forbes Limited, Ion Exchange does not follow Direct Selling therefore it is solely concentrating on consolidating its Distributor/Retail Channels. During our primary research we were constantly reminded of Ion Exchange‟s newbie status in the market as it was mighty difficult to locate a Zero –  B water purifier. Ion Exchange uses its own websites just to provide details about its complete product range. Though the company doesn‟t allow user to purchase directly through website, it just allow customers to ask for demo or call for more details. It is not leveraging the complete power of internet yet as according to the company, though there is a huge customer base that checks details online, very few people in India are comfortable with e-commerce and hence do not purchase online. Thus they are still waiting for the market to get evolved to start selling online. Since they do not allow purchase of products through their website, they have not kept a different distribution network for internet. However the company has made Good Life as its authorized sales partner. Good Life website features many  products including water purifiers of every brand and for them Zero B is just one of the partners. For Good Life, Ion Exchange operates through B2B distribution network. Good Life maintains the stock in their warehouses based on the sales and demand forecasts. Ion Exchange products are not featured on other major e-tailers such as Flipkart, Homeshoppe etc. and also not on major modern trade outlet websites such as Chroma. Cooperative Advertisement At Eureka Forbes the advertisements are mainly done by the manufacturer itself where distributors and retailers play a very minor role. The cooperative advertisements done by Eureka Forbes distributors and Retailers are as follows:-

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1. Banners and Posters –  Eureka Forbes distributes banners and posters through its channel which is to be displayed by retailers at their store. These banners and posters are being put at the retailers  by the Area Sales Managers (ASM). 2. Consumer Awareness Training –  The ASM trains the salesmen at the retail outlet regarding the  benefits of the product. These salesmen pass the same knowledge to the consumers thus helping them to sale the product. 3. Display –  The ASM visits the retail shops and sets up the display according to their need.

HUL Pureit’s Distribution Network

Manufacturers

Depots

Distributors

Retailers

Sales Rep

Depots

Distributors

Retailers

Distributors

Sales Rep

Retailers

Sales Rep

Distributors

Retailers

Sales Rep

Figure 1

Percentage of sales through different channels For water purifiers Retailers--81-84% Sales Rep--2-3% Modern Retails-- 14-16% For Refilling Cartridges Retailers--72-76% Call Centre or Service --14-16% Modern Retails-- 10-12% There is no fixed number for distributors for Pureit; it all depends on the capacity of the distributor. For e.g. there is only one distributor in South Delhi while there are 3 in East Delhi. Retailers and Sales Rep are in direct touch with the distributors of their respective territories, which are appointed by the company (i.e. HUL in this case) Above Distributors, there is a networks of Depots (or in simple term Warehouse), from where all the  products are delivered to respective Distributors And finally above Depots, comes the Manufacturers from where the parts of products are produced and assembled in their own vicinity as per HUL design and specification related to each categories of  product, which are different for all these three categories of HUL Pureit, which are RO, UV and Offline one.

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As per A.C Nielson  survey some years back on water purifier industry, water purifier was not even considered as a category or segment to have distribution network. Level of intensity in distribution is high on the distributors end as they are getting targets, which they have to fulfill as per decided by the company, which they pass on to retailers. But in case of retailers, it is not that intense as they are independent entities. Depots are solely responsible for the delivery of goods or water purifiers on time and to keep check on the arrival of these finished products from manufacturers and have to maintain their inventory level. There is no major change in the distribution policies in this industry in the l ast 5 years as this is still in its nascent stage and it is growing tremendously. Only change we can observe is that it was purely through door to door distribution networks, but now it is more or less through organized distribution network, which start from Manufacturers, than depots, than distributors and finally retailers or Sales Rep.

Main Impact of this distribution network is that now a day‟s these water purifiers also get space on the display counters of the retailers, which was not there previously and companies also understand the importance of these display counters, so they are offering different scheme to get more space, which ultimately result in increasing their sales. RURAL Segment

Pureit has low presence in rural se gment as market potential of Tier I, Tier II and Tier III cities is very high so according to us they might think of getting into rural segment. We were not able to find any data about it from any of the primar y or secondary sources, will make sure to search more on it and try to cover this in final report. Service Output demand for Water Purifier Industry:As we have seen the demand for water purifiers and selling strategy for HUL, the demand for water  purifiers is high but people buys it once in 5 years because it is a high involvement product. It is a spatial convenience type of Service output demand as people today considers it as a necessity rather than style statement. This is high involvement because of cost of the product. Since product is categorized for different segments and each segment is from different socio-economic class, so cost of the product matters a lot. Segment Name / Product

Service Output Demand Bulk Breaking

Spatial Convenience

Delivery / Waiting Time

Assortment / Variety

Customer Service

Information Provision

Offline

High

High Available mostly at every store

Low customers don't wait

Low

Low

Low-Only through outlet

UV

Low

Low Available at exclusive stores or sold through direct channel

Medium Customers can wait but not too long

Low

High - As customers are high value since the cost of  product is very high

High Customers get information through MBO's, EBO's and also through Sales representative during Direct Selling.

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Low

RO

Low Available at exclusive stores or sold through direct channel

Medium Customers can wait but not too long

Low

High - As customers are high value since the cost of  product is very high

High Customers get information through MBO's, EBO's and also through Sales representative during Direct Selling.

HUL Pureit’s SERVICE OUTPUT DEMAND and Its Application:This service output demands are analysed below for HUL‟s Pureit Bulk breaking: - High for Pureit as it is low cost product, so only volume sales will generate revenue i.e. why it is present in every nook and corner; it is done through extensive distribution by HUL. Spatial convenience: - It is low for online products like Marvella RO and since it is high in cost, people are ready to travel much distance for t his but since HUL wants to create an entry  barrier for new players and also because of intense competition, HUL is selling this through all three distribution networks. But spatial convenience for Pureit is very high. Waiting or delivery time: -  Since competition is very high and revenue is only generated through volume sales, waiting time or delivery time for HUL‟s Pureit is very low but if customers are loyal, which is very rare, this can increase. Product variety and assortment: -  Since HUL wants its product to be available at every store be it Multi-Brand Outlet or a small grocery store, and variety is very less as only three categories can be seen i.e. Offline, UV and RO so assortment is very less for HUL. Customer Service: - Very High for Online product but very low for offline products as Profit  per equipment is very low so company cannot borne the cost of customer representative. Information Provision: - Low for HUL‟s Pureit and information provision is only done through outlets. HUL is in three channels of distribution i.e. through Symphony, Modern Trade and Direct to Home, and due to intense competition the product availability is the major issue. There are factors which are taken into consideration while choosing a distribution channel Cost vs Customers willingness to pay and channel profit, since offline product, Pureit is only  profitable if it is sold in bulk and for that availability is very much important for this product. Competitor‟s aggressive strategy forces HUL to make it available at every nook and corner. Since product is similar for competitors, its unavailability will create a lot of problem for HUL. Ease of entry for new players are there in this segment but since HUL has extensive distribution channel, it has made a barrier for new players to come. This service output demand has helped HUL in designing its distribution channel and sales force structure, only after analysing and understanding the customer and market. It has segregated each of its distribution channels for customers and has made Pureit available everywhere. 

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Marketing flows considered important by the customers for the category S. No Marketing Flow Cost represented 1

Physical possession

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From Manufacturer to depots and from depots to distributors, the cost of transportation is incurred by the company and in this case it is bear by HUL Pureit Storage cost at depot is bear by the Depot owner as depots are management by third parties not by HUL in water  purifier case.

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2

Ownership

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3

Promotion

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4

Negotiation

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5

Financing

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6

Risking

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7

Ordering

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8

Payment

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But from Distributors to Retailers, the cost of transportation and storage cost at distributor end is bear by distributors. Inventory carrying cost is bear by the depot owner, when goods are at depots. Inventory carrying cost is bear by the distributors, when goods are at distributors end. Same apply with the retailers and online portal. Personal selling through sales rep, advertisement of the  products, Sales promotion, publicity and PR are handled by the company (HUL Pureit), distributors and Depots owners are exempted from this activity. Mostly Margin level for all distributors across country is same as a result negotiation on the basis of price is very less from company‟s end but in many case when there is a bulk order company may relax some norms. There is a separate sales team for negotiation for the stores like big bazaar, Next , Croma etc. At distributor level negotiation can be done on the basis of order as distributor use to give high margin to bulk order it give high margin to snap deal and other modern retail shop which deals with distributors.  No credit is provided by the company to distributors. All transactions are on advance payment. But in case of retailers, credit facilities are given by the distributors, for which the company is not responsible. It is totally on distributor risk There are targets set by the company for the distributors, which they have to fulfill and for the same company  provide scheme or discount to their distributors. As Retailers are independent, so there is less pressure on them to fulfill these targets and also get advantage of this schemes/discount which is passed on to them by the distributors from the company. Price guarantees, warranties, insurance, repairs and after sales service are all look after by the company with the help of distributors, who takes the damage product from retailer, who in turn take it from the customers and then distributors return that damage good to the company, who will replace it in 15 days time period or repair it as per warranties terms and conditions.(there is a different department to handle all these query.)  Neither Distributors nor retailers are at risk of bearing these addition cost. Order processing cost through customer care or internet are  bear by the company. Order processing cost through retailers are bear by the distributors At company end, products are delivered from depots only after payment is paid in advance, so there is no problem in  payment collection and no bad debt cost incurred. At Distributors end, not every transaction took place on advance payment, as they provide credits to the retailers. Online portal like snap deal take take products from

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distributors on a credit of 15-20 days based on their operating cycle of product. There is a possibility of bad debt cost with the distributors as there may be a case when retailers will not be able to clear the credit amount.

 Areas of vertical and horizontal conflict and possible solutions As seen from their vertical structure, we came to know t hat maximum part of their distribution network is outsourced to third parties, from manufacturers to depots and retailers. So the possibilities of conflict are less among these channels. But in case of any conflict among the employees in the designing team or t eam related to specification or at distributor levels, there is a possibility of Horizontal conflicts among them, which are as follow: Major reason of conflict is retailers do not get timely delivery of product from distributor. Coverage area among distributors. Different scheme for distributors in one region. There is also a possibility of conflict interest among retailers, but it is handled by the distributors, not by the company personals.    

Solutions to these conflicts provided by the company is through their software “ Sunrise to Sunset”, where every Friday a team member or employee in the designing department or in the department related to technical specification can share their feedback, which will be displayed on their  portal and on their internal magazine. They also maintain a website for the same. There is a dedicated team for taking complaint, whose task is to collect these conflict & feedback through software and then pass these conflict & feedback to the respective HR teams, who are responsible for resolving these conflicts. These teams are also responsible for, in how much time these conflicts are resolved or not. There is also a help Centre for distributors to register any conflict with the company (Lever care), they can register complain here online and company people resolve it in the same way as discussed above. 

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Impact of modern retail on distribution 

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Modern retail had helped company in terms of more exposure to customer; more display space but as such there has not been a major impact on the distributors. Company has appointed a separate dedicated sales force for the modern retail shop to increase its sales and  better services. Distributor use to gives more margin to the modern retail shop than to the other retail outlets which deals with it directly. There are areas or regions in the country where the population is less or the financial status of  people is not stable, like in the case of Haryana, where no modern retails exist. In Rajasthan also, due to the above mentioned reason, Modern retails outlets are available only at Jaipur and Udaipur, but it is absent in rest part of Rajasthan.

Trade margins and other discounts All types of discounts are given by company to its distributors who finally pass this discount to respective retailers. For Distributors Trade margin for distributor is less  No credits is given to distributors from Company end Schemes/Discount and benefits are provided to distributors. As soon as the product reach the Distributor premises, all cost expenditure from here onward is distributors responsibilities But Margin also depend on the region and also on the population status of that particular region, for example in Delhi, the margin for distributors is less as compared to margin for distributors in some    

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 part of Rajasthan as the per capita income of the population and population is less scattered in Delhi as compared to Rajasthan. Distributor is actually an investor to the company. For Retailers Trade margin for Retailers is much more as compared to Distributors. Credits facilities are provided to retailers from distributors and not from Company. Schemes/Discount and benefits are provided to Retailers too, such as display scheme wherein if the retailers will display 6 or more HUL Pureit products for 3 months than they will get some incentives. And whatever scheme/benefits given to retailers, are mainly company scheme. In some cases distributor may give extra scheme to meet its own target.   

Impact of internet on distribution With the advent of technology and internet company processing have improved a lot, Work and leads are being shared on real time basis. Tracking of the prospect customer and their sales rep has become very easy.  Smoothing of processes 

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HUL had a tie up with “ Snap deal” for selling their products through online web portals. Previously it was also with “Fip kart” but it had been discontinued now. So here internet  played a major role in increasing their penetration in the market and getting distributor big clients. Use of new software best example their Samsung tab given to PWE (pure it water expert) through which they can share the details and it get registered in the central database increasing efficiency and productivity. Even the conflict feedback part improved a lot with the advancement in internet, as all feedback are placed on the company website and portal, from there all feedbacks are stored at a centralized database, where the respective teams can collect the data and processed it further.

Supply chain of the industry With respect to inventory cost, carrying cost and l ogistics cost all are bear by company till product is reached to distributor. Manufacturer- They are owned by the third party, company just gives their design and specification of product. It manufacturer responsibility to procure and make number of quantity demanded by the company. Company may cancel a lot if the products are not as per specification by the company. Depots (CFA)- These are also owned by third party on contractual basis, there work is to keep inventory and transfer of goods on t he orderly basis. Distributors- They receive lots from the depots and responsible to supply and meet the demand for retailers, modern retail and also for the direct sales product. There is no Whole Seller in this company. Retailers- They are the ones who directly deal with the customers company do not have direct contact with them it‟s distributor who is responsible to deal with them. Modern retail shop- Big Stores like Big Bazaar, Croma, Next directly deal with the company and company have separate sales force dedicated to them. Some other modern retail shops directly deal with the di stributor trade margin for modern retail shop is greater than normal retail shop. These are basically big stores in malls. Online portal sales –  If sales order is placed online on Pureit website sales rep will collect order from distributor and deliver it to the address. Else, portal like snap deal purchase product from distributor on greater margin mainly on credit basis of (15-20) days. 

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Level of Cooperative Advertising  At HUL Pureit, the advertising expenses are mainly borne by t he company itself. Neither the distributor nor the retailer bear any expenses related to advertisement.  Sometimes the distributor funds the distribution of pamphlets, stickers, brochures etc. placed at point of sale or on the roads through banners and posters. The company reimburses the distributor for these expenses.  Thus the flow of the advertisement goes from the company to the distributor and from the distributor to the retailer.  These days, HUL has been following a very interesting way of advertising Pureit. The company offers special schemes to the retailers who stack the Pureit products in the front, just outside their stores.  These schemes also flow from the company to the distributors and from the distributors to the retailers.

TATA Swatch Distribution Network Manufacturer s

CFA

Depots

Distributors

Distributors

Crockery division

Retailers

durable division

Distributors both division

Distributors both division

Retailers

Retailers

Retailers

The route from the retailer to manufacturer is shown above. The diagram shows that there can be three types of distributors as follows o Distributors servicing crockery retailers. o Distributors servicing consumer durables stores. o Distributors servicing both types of retailers. The company follow intensive distribution as the retailers are not selected by the company, but are rather selected by the distributor who gives t he product to the retailer under credit t erms. The selection of new retailers is also done by territory executives who collect orders in his/her territory. The average number of retailers under a distributor is around 80, which may not be large when compared with FMCG industry but in white goods it is quite a big number. In case of return sales, the return sales are made to the distributor and the manufacturer has no role to  play in this case. Whenever a defective unit is to be replaced, the following sets of events are enroute from retailer to manufacturer: The communication of the defective unit is made to the Territory Executive of the Retailer‟s Territory. In some cases, the communication may be made to the distributor. In both the scenario, the Territory Executives creates a replacement case and sends the unit  back to the distributor. The distributor immediately delivers the replacement unit to the retailer. Meanwhile, the Territory Executive performs the requisite documentation. After the closure report has been documented, the Carry and Forwarding Agent delivers the number of units replaced by the distributor, at Free of Cost Value. 

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The Carry and Forwarding Agent then processes the return of defective equipment to the respective vendor.

Major Changes in Distribution Policies in past 5 Years     

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Tata Swach has been in the water purifier market for a few years. The company has adopted a static distribution policy over the past few years. However, recently a change has been introduced. The Margins of the distributor have been increased from 3.5 % to 8 %. This is in line with Tata Group‟s vision of long term relationship with its employees, vendors and distribution partners. As a result, it has increased the interest of distributors in the product. Increased margins have improved the credit schemes for retailers, by the distributor. Also, recently, online sales through tataswach.com have been withdrawn from distributor and have been transferred to in-house department.

RURAL Segment: One of the important Below The Line activities that really helped TATA make inroads to the households is through „Society/School contact Programme‟. The idea was to create awareness about water borne diseases among the children. So, under this programme Tata Swatch has its volunteers going to and conducting contests and essay writing competitions (on topics related to water borne diseases). This programme really helped Tata Swatch in getting its footing stronger in the market. Apart from such programmes, the company has been reaching its target consumers through  participation in rural melas, haats, outdoors, activation vans and through road shows. Another important strategy that helped Tata Swatch to reach more consumers is the company‟s focus on the indirect channel to reach consumers. For this, it tied up with NGOs and MFIs to harness the potential of small level entrepreneurs at the village levels. SERVICE OUTPUT DEMAND and Its Application This service output demands are analysed below for HUL‟s Pureit Bulk breaking: - High for TATA Swatch as it is a low cost product, so only volume sales will generate revenue still TATA Swatch is not able to penetrate into the market and one can hardly find TATA Swatch in MBO‟s as well. Spatial convenience: - It is very High for TATA Swatch, but since product presence and visibility is very low, they have long way to go. Waiting or delivery time: -  Since competition is very high and revenue is only generated through volume sales, waiting time or delivery time for Water purifiers is very low but TATA fails to understand this and their existing customers are switching to other brands. Product variety and assortment: -  Since TATA has only one product in water Purifiers and also its presence is very low in the market, so nothing can be commented on this aspect. Customer Service: - Requires very low service as no company can afford a sales representative for a low profit margin product. Information Provision: - This is also Low and is only done through outlets. TATA is sold through two channels of distribution i.e. through internet and Retailers, and due to intense competition the product availability is the major issue. There are factors which are taken into consideration while choosing a distribution channel Cost vs Customers willingness to pay and channel profit, since offline product, TATA Swatch only profitable if it is sold in bulk and for that availability is very much important for this  product. Competitor‟s aggressive strategy does not have any impact on TATA Swatch as it is not available at every MBO or Grocery Store. Ease of entry for new players are there in this segment. This service output demand has little impact in designing the distribution channel and sales force structure for TATA Swatch. 

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Marketing flows considered important by the customers for the category S. No Marketing Flow Cost represented 1

Physical possession

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2

Ownership

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3

Promotion

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4

Negotiation

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5

Financing

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6

Risking

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7

Ordering

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From Manufacturer to CFA and from CFA‟s to distributors, the cost of transportation is incurred by the company and in this case it is bear by Tata Swach But from Distributors to Retailers, the cost of transportation and storage cost at distributor end is bear by distributors. The CFA is only given payment on a yearly basis and hence does not own the product. The distributor pays for the product in advance; also inventory carrying cost is bear by the distributors, when goods are at distributors end. Although retailers are given a credit depending on their relations with distributors with average being 1 month, the retailers bear the cost of carrying of t he product. Advertisement of the products, Sales promotion, publicity and PR are handled by the company, distributors and retailers are exempted from this activity. The territory executive are given the charge of POP branding with stickers which is done on a weekly basis, cost of boards etc is taken by the company itself. Mostly Margin level for all distributors across country is same as a result negotiation on the basis of price is very less from company‟s end but in many case when there is a bulk order company may relax some norms. There is a separate sales team for negotiation for the stores like big bazaar, Next, Croma etc. At distributor level negotiation can be done on the basis of order as distributor use to give high margin to bulk order, the company also provides lucrative scheme to boost sales.  No credit is provided by the company to distributors. All transactions are on advance payment. But in case of retailers, credit facilities are given by the distributors, for which the company is not responsible. It is totally on distributor risk There are targets set by the company for the distributors, which they have to fulfill and for the same company  provide scheme or discount to their distributors. As Retailers are independent, so there is less pressure on them to fulfill these targets and also get advantage of this schemes/discount which is passed on to them by the distributors from the company. Price guarantees, warranties, insurance, repairs and after sales service are all look after by the company with the help of distributors, who takes the damage product from retailer, who in turn take it from the customers and then distributors return that damage good to the company, who will replace it in 15 days time period or repair it as per warranties terms and conditions.  Neither Distributors nor retailers are at risk of bearing this additional cost. Order processing cost through customer care or internet are

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8

Payment

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 bear by the company. Order processing cost through retailers are bear by the distributors. At company end, products are delivered from CFA only after payment is paid in advance, so there is no problem in  payment collection and no bad debt cost incurred. At distributors end, not every transaction took place on advance payment, as they provide credits to the retailers. The average credit period is around 1 month. There is a possibility of bad debt cost with the distributors as there may be a case when retailers will not be able to clear the credit amount.

 Areas of Vertical and Horizontal Conflict  Areas of Vertical conflict Targets: Conflict in target numbers. However defined by Tata Chemicals, they may be unrealistic with respect to a particular area/ product, which lead t o conflict between RMs and distributors. Mostly targets are given to territory executives under distributors which creates  pressure on distributor. In most cases distributors have to carry extra stock just to meet the quarterly targets. (Tata Chemicals have quarterly targets) Target Incentives: This is not a conflict between distributor and company rather this occur  between distributor and the retailers as in Tata Swach schemes comes without previous notification and cannot be extended to past sales even if the difference is of one day, this creates a tension between retailer and distributors, where retailer blames the distributor of not notifying. This can be removed by companies (RM‟s or ASM) directly messaging the retailers rather than distributor or territory executive. Institutional Sales: There is a problem with sales generated by ASM or RM in an area as to no clear policy of the company as to who will handle the order in these cases, so these orders are sometimes passed to distributors liked by RM‟s or ASM‟s, also these orders can be handled by company directly. This always creates a conflict among the distributors and  between „distributor & Company executive‟. It can be solved by making clear cut operating rules by the companies, so as to avoid ambiguous situation. Replacement: Although less common in Tata Swach, this problem still comes out when return claim of some product is not is found correct by the CFA and CFA return the defective  product to distributor which has to deal with territory executive to who made the claim. This is less common and hence is not very important as it is resolved between distributor and territory executive. 

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 Areas of Horizontal Conflict Area Trespassing: It is a conflict not only between distributor, but also among territory executive, as the sales of one is taken away by the other distributor. There are many case of one distributor giving more discount than the distributor of that area, this not only causes loss in sales but also reduces the future sales and profit of the distributor. This also damages the market in the long run as other distributor just to replicate this unjust carry this tactic in other area‟s thereby causing damage to both the distributors. The company till now has not taken any steps to curb this practice (according to distributor) apart from writing a mail, although if territory executive (T.E) complaints than those sales in his area are transferred into his account only for calculating the quarterly sales figure of the T.E. The company should take strict action against the distributor who involves in this kind of practice so that companies name is maintained in the market, also these practices are not good for the company in the long run. Channel trespassing: Many a times a distributor of consumer durable division be cross selling in the crockery division in his territory, this gives rise to conflict between distributors, 

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and the method to sell the product is same as in the above case. The problems arising out of this practice is also the same. These problems are also yet not dealt with any results (according to the distributors). The company should take strict action so as to reduce long term negative impact. Impact of modern retail on distribution Modern retail is growing in the country and company has worked from the beginning to cater to this channel in a better way. The company do not service the modern retail through its distributor network which though extensive might not be able to serve high demands of modern retail, also these modern retail owning to their huge sales, demand extra discounts which a distributor cannot give. Hence all the sales of modern retail segment are conducted through a team in Mumbai catering only to modern retail. Tata is also involved in modern retail through Chroma Store‟s, which is also served by the Mumbai team. The sales percentage of Tata Swach from modern retail though not found through distributor and companies executive, but we can predict that the sales of modern retail will not be more than 5%. The reason for this prediction is o The cost of Tata Swach is less and is a product targeted towards middle and lower segment, which shops more from traditional channel. o The sale through Modern retail in the country is less than 5% in durables which makes our  prediction quite valid. Trade Margins and other discounts The company has recently increased the margins of distributors from 3% to 8%; the company might have taken this step in the backdrop of low ROI (As told by one of the distributor). This have now increased the ROI of distributors to around 2% monthly, which is quite good (This was given by two distributors). The company gives a margin of 20% to the retailers without schemes, but company keeps around 10% with itself, which the company passes on to retailers in the form of schemes. An example of current scheme is given below: o The scheme is for retailers and distributors, which have to be achieved in single billing. o Buy at least 50 units and of every 15 retailers 2 will be randomly selected and award of a mobile phone will be given. o Buy at least 70 units and of every 5 retailers 1 will be randomly selected and award of 1 LED TV will be given. o Buy at least 100 units and of every 5 retailers 1 will be randomly selected and award of 1 Honda Activa will be given. By roughly calculating the discount through the last scheme, out of 500 Tata Swach (the base model of Rs.900), by reducing the margins from the total we get to a figure of around Rs. 315000, if one Honda Activa cost around Rs.50000 to Tata (assuming bulk purchase price), we can see that company is giving an extra margin of around 15%. Impact of Internet on Distribution Tata Swach is also sold through its website which signifies that its sales strategy have bearing on internet, also its strategy signifies that company is not leaving any chance to better capture the market. The exact data about the ratio of sales through internet and tradition retail segment was not found, but as previous sales through internet was handled by respective distributor, the distributor mentioned that the sales through internet was less than 3%. But we cannot clearly say that this is true now also as the move might be taken on the back drop of increasing sales through Internet. Now all the sales through internet are handled by company itself. Tata Swach was the first to company to launch online sales of its product in Water purifier segment, this step might be taken by the company as consumers are becoming more and more techs savvy, also the reach of internet has increased to a huge percentage of consumers. The search of price by consumers in the internet is not only easy but also cost effective; hence the company might have introduced online sales option as people who search for price and product online might buy the  product online as well. Also at first the sales were handled by distributor hence the cost to the company was low and conflict among the channel did not arise, but now as the sales through online is  predicted to rise company might have changed the distribution channel. 44 | P a g e

Tata Swach distribution channel is also not automated, and the company‟s sales agent does not make use of any hand held devices. The only use of internet is to mail the weekly report to higher executives. Supply Chain o The Cartridge or Bulb of the water purifiers in manufactured by the company in its own plant at Haldia, India o The body of the purifier is manufactured by Supreme Plastics, at Noida o The cartridges are assembled onto the purifier at Supreme Plastics, Noida o Supreme Plastics sends the packaged units to Tata Chemical‟s Carry & Forwarding Agent o Carry & forwarding agent delivers the products to each of the distributors o The distributors deliver the units to retailers o The retailer sell the units to final consumer 

5 CFA Cartridge

Retailer

• Spread across the country • NorthGhaziabad

• Tata Chemicals • At Haldia Plant

• Average 80 Retailers under Distributor

Body

Distributor

• Supreme Plastics • At Noida

• Four Distributors in Delhi

Tata Swach supply chain is shown above in the diagram, the cartridge which is the core of the product is made in-house by the company at its plant at Haldia, it outsources the work of body manufacturing to Supreme plastics at Noida, the final assembling is also done at Noida at Supreme Plant, the product is then sent to all CFA‟s which forwards the product to various distributors across the country. The distributors then deliver the product to retailers across the country. Level of Cooperative promotion in Tata Swach The advertisement, PR and on store promotion is all carried by Tata Swach itself and no extra cost is incurred by the channel partners. The on store branding and promotion is done by territory executives who have to stick the promotion material in a specified number of stores in their area once every week. The company also bears the cost of boards this work is outsourced, and no cost or time is given  by the distributors or the retailers in these promotion work. All in all there is no combined promotion work in the company.

Kent Kent has a strong distribution network with over 500 distributors spread over the country with northern states providing most traction. Till 2015, it hopes to increase the number to 1000 distributors.Kent RO Water Purifiers, which enjoys a 40 per cent market share in the RO segment, is aggressively focusing on tier II and III cities on the back of its ATL and BTL activities with a 360 degree media approach. The company has its warehouses in various parts of Delhi.

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Share(%) of various channels 12% 2% Retail Channnel / Distributor

8%

Direct sale 8% 70%

Corporate sale Modern retail/ CSD Online

Source- Company head office Table 1.2: Percentage share of sales of Kent water purifiers in Delhi Marketing flows considered important by the customers for the category

Table 1.1 Marketing Flow Manufacturers: In case of water purifiers all the promotion activities are handled by the manufacturer, all the major promotion activities are handled by the manufacturer. The manufacturer handles all the negotiation part with the distributor, logistics company for its sustainability in the long term and to generate revenues. The manufacturer gives the order to the distributor on advance payment basis and no credit is given so risk part is not quite there and not much financing. Distributor : Distributor has to negotiate with the dealer and give order on credit. According to our interaction with the distributor it is quite evident that there also a risk involved from the side of the distributor as his gets recovered in 1-2 months from the dealer and he has to get products on advance payment Dealer: Dealer in water purifier has quite a lot of freedom, as there isn't much competition in the vicinity and generally he sells various brands according to customers pockets and requirements and as he takes the goods on credit there isn't much risk involved. The dealer in water purifiers has to do negotiation from the distributors and customer in order to earn a considerable amount of profit. Customer: Customer in water purifier is most particular about the physical possession of the good on time and proper demo after installation and ownership of the water purifier from the dealer 

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The customer also has a few options according to his requirements so he also negotiates to get the best deal either from the dealer or from modern retail outlets and finally payment of the  product is an issue.

Trace the route back from retailer to manufacturer to determine levels and intensity of distribution The company has a strong dealer network and sells a lot of water purifiers through these dealers/retailers. The company has distributors in the cities and towns which provide the water  purifiers to the dealers and retailers, which further sell to the consumers. The company also appoints its sales reps to handle the needs of dealer stores. The distributor- retailer flow is prevalent in majority of the cities in India apart from Delhi/NCR which also has a direct sales division. In the Delhi region the company has around 14-15 main distributors. The entire Delhi region is divided into north, south, west and eastern region and there are about 3-4 distributors in each region in Delhi of the 3 types. There are 3 types of Kent distributors Type 1-The distributors of offline water purifiers Type 2-The distributors of online water purifiers for which the company does a lot of  promotion and high capacity advertisements Type 3- The distributors of online water purifiers for which the company does not do a lot of  promotion and no high capacity advertisements For example the distributor in Sarojini Nagar that we visited belonged to the category 3 distributor having products like Kent Super plus and Kent excel, for which the company was doing less  promotions and the distributors had to do search for the retailers, knock at their outlets and promote these products in order to sell to the retailers . The category 2 distributors do not have to worry at all about the promotions as the company is doing a high capacity advertisement for these products.The intensity of the distribution depends on the market demand. For some distributors the average monthly sale could go upto 60 products while the sale could also go down to 20 products. The market demand for water purifiers does not depend on any festival season. There are no distributors for the modern retail stores and the company directly sends its goods to the modern retail stores which are replenished as soon as the goods are demanded by the modern retail stores. Example- The Company sends its goods directly to big bazaar and the average monthly sale at the Big Bazaar is around 12. If the in shop promoters feel that the sale is high then the company sends the new stock within 20 days or when required else the stock comes after a month.  

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The distribution for the canteen sales division is different. There are no distributors and the requirements are managed through the corporate office. A purchase order is released by the army for requirements of water purifiers in various parts of the army canteens, the head office in Noida takes care of this requirement and products are released from the head office to these  places.

Trace any major changes in the distribution policies over the last 5 years and their impact For the first two to three years Kent was only a Delhi-based company. Then it expanded by taking the distributorship and franchisee model to Haryana, western UP, Punjab and then slowly to the whole of northern India. Later, it expanded into western India, then eastern, and after a span of 10 years, expanded in south India. Although there has not been much change in the distribution policy of the company, some significant changes areSome distributors are converted to sell exclusive Kent products and are being converted into Kent shoppes and the company directly caters to needs of these shoppes. The company has started giving more focus on the multi brand outlets for the sale of its water  purifiers and has set an online store for the consumers to order and buy online The company is rapidly expanding into tier 2 and tier 3 cities where the company cannot work without the distributors, therefore to have a strong retail presence in the future in untapped markets, the company has to build more relationships with t heir distributors. 

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Identify areas of vertical and horizontal conflict and possi ble solutions Vertical Conflict Vertical conflict is slightly present in water purifiers as they sell through both retailers and modern retail outlets. In modern retails products are directly sources from the company whereas in case of retailers products are sourced from distributors who source it from manufacturers. So distributors have their margin as well so retailers are not able to have a margin that modern retail.So in order to sell at competitive pricing at which big bazaar sells retailers have to sufficiently cut their share of margin and not able to sell at prices offered by Big bazaar. Due to some instances of vertical conflict between the company and the retailers, the company also sells its water purifiers directly to the consumers. Example- Few months back, a dealer in Delhi was selling some local water purifiers to the consumers using the brand name of Kent. The company got to know about this fraud case. This is one of the reasons why the company is selling the water purifiers through direct sales also in Delhi as the products sent directly to the consumers from the company are always genuine and the consumers trust the Company. The distributor‟s complaint that the company was very rigid in product replacement and the retailers and the consumers complained about this. Horizontal Conflict Horizontal Conflict is also present in case of Kent but not very prominent , it is mostly present in big markets where the number of retailers of water purifiers are in close proximity like in Karol Bagh, Sarojini Nagar , Lajpat Nagar central market where there is pricing war ,with dealers cutting their margins to give the best price. But the conflict is not very high as almost every retailer sells at almost the same price range. The prices offered by the different retailers are different for the water purifiers. The highest discount is given by the distributors. The retailers tend to compete among themselves as there are different sales channels like modern retail, dealers, online sales which sell at different  prices. The online price is cheaper than the direct sales from the company. Solution to this problem can be that company promotes selling their products based on the products USP rather than on the pricing war. Company should encourage distributors to encourage dealers not to indulge in price rather focus on selling the product based on its value. The distributor should also take care that he does not have large number of dealers very close to each other as it is bound to rage a conflict. In case of a retailer or modern retail outlet giving excessive discount and cutting its margin hugely just to show higher figures should not be encouraged by the company. 

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Impact of modern retail on distribution The company is also selling their water purifiers through the modern retail stores such as Croma, Big Bazaar, Next Stores, Vijay Sales, etc. The company sends its ISP‟s there for the demonstrations to the customers.The procurement outlets set up by modern retailers allows the company to deal with fewer intermediaries and gives a better opportunity for the company to gain better prices for their products. The company believes that both small and large retailers would continue to co-exist in India. Distributors and small retailers account for the bulk of retail sales of water purifiers today and will remain a significant force in the future since growing consumption will itself warrant the growth of  both organized and traditional retail. Traditional retailers will also innovate, upgrade their stores and enhance value-added services to retain and strengthen relationships with their Trade margins and other discounts Trade margin given to the distributor- 7 -8% Trade margin given to the retailer- 10-15% The company gives the goods to the distributors in advance (material against payment) while the distributors sell the water purifiers to the retailers on credit. The credit period may go up to 30-60 days for some retailers. Example-We visited a big bazaar outlet in Delhi and found out that the highest selling product of Kent i.e. Kent Grand plus had an MRP around Rs 16,700-17,000 and the company sold the product to 48 | P a g e

the retail store at a price of Rs 14‟600. The price at which the retailers now sell to the consumers  becomes the margin for the retailer. Impact of internet on distribution A new medium--the Internet and World Wide Web--is changing distribution channels like no other force since the Industrial Revolution. It is modifying many of the assumptions on which channel structure is based, and in some cases it is transforming and even obliterating channels themselves. The internet is also helping the company to advertise its water purifiers on various websites, therefore the distributors and the retailers don‟t have to worry much about advertising Kent‟s products as most of  the burden is taken by the company.Kent also has its online store where the consumers can directly order and buy the water purifier of their choice. The customers can register and have a Kent eShoppe  account to login .The company gives the consumers easy payment options, free shipping and installation facilities and cash on delivery options through its online st ore, Therefore due to the online store, it gets convenient for the consumers to get their product ordered online. Supply Chain of the Industry

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The water purifiers are manufactured at Roorkie and are then transported to the central warehouse in Greater Noida. The water purifiers are then sent to various parts of India to the regional warehouses. For Delhi/NCR the 3 warehouses are in Noida, Okhla and Gurgaon. The water purifiers are then sent to the distributors, then retailers and to the consumers. There are no wholesalers in Kent. For the other channels like CSD, Modern retail, corporate sales, direct sales the water purifiers are sent directly from the company though different sales teams. Level of cooperative advertising Kent does a lot of advertisements of its water purifiers through posters, banners, T.V ads etc. The distributors and the retailers of Kent purifiers do not have to worry about the promotions and advertisements as all the cost of advertisements through banners at the dealer outlets are borne by the company. The company people come and do the promotions.

WHIRLPOOL Sales organization and territory design The sale of Whirlpool water purifiers is done mainly through 2 channels: Retail channel sales This sales division also caters to the demand of the household through retailers/ dealers. The company has a decent dealer network and sells a lot of water purifiers through these retailers. In the present scenario many customers visit the retail shops to buy water purifiers. The company has distributors in the cities and towns which provide the water purifiers to the dealers and retailers, which further sell to the consumers. The company appoints its sales reps to handle the needs of retail stores.  The company sells its product through shops like croma, big bazaar etc.  The retail store on an average has around 8-9 sales reps who sell are goods like refrigerator, air conditioner and also water purifier. Corporate sales division  This division caters to the demands of the institutions and companies which require the Whirlpool water purifiers. There is a separate sales force for the institutional selling which sells the water purifiers to the schools, colleges, offices, hospitals, etc. The sale force for this division in Delhi for example directly goes to the corporate office in Gurgaon where they enquire about whirlpool water purifier and gives them order about how many units they want for their institution. The order will be handled by area sales manager who intimate the sales force about the latest order and send them to the respective institution.

Share % of Corpor various channels ate Sale 10% Moder n Retail 20%

Retail Chann el

Table 1.1: Percentage share of sales of Whirlpool water purifiers in Delhi Recruitment and Selection of sales people The company recruits people who have the willingness and passion to work as the sales reps. The minimum requirement for selection is 12th class and when you want to move on to higher position graduation and post graduation are important. The company recruits by giving advertisements on the various job sites like Naukri.com, through newspapers etc. The interview for the junior post is taken

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 by senior sales executive and for the senior post the interview will be taken by Area Sales Manager or  by Branch Manager. Compensation structure of the sales force The sales representatives on being permanently recruited into t he company are given: Fixed Salary: 9200 Variable Salary (Incentives and commissions): 2000 Variable component of the salary: Commission on normal days on sale of 1 purifier= 250 Commission on Saturday and Sunday of 1 purifier= 400 If a sales representative is able to do more than 30 sales in a month, then after that his incentives get doubled. For ex- If he sells the 31 st product on a weekend then his commission will increase from 400 to 800. Distribution Whirlpool has an extensive list of retailers for distribution of whirlpool water purifiers in Delhi. Water  purifier segment don‟t have any distributors. Dealers/retailers get the product directly from the company and then retailers sell it to the end customers. Therefore they utilize a producer-retailercustomer distribution channel and a producer-customer distribution channel (For bulk orders). In both instances, the company transport the products from the warehouses located in Faridabad, Pondicherry and Pune to the retail stores. The company has a strong dealer network and sells water purifiers through these dealers/retailers. The company supplies water purifiers directly to retailers/dealers in the cities and dealers further sell it to the end consumers. In the Delhi region the company has around 14-15 main distributors but they don‟t distribute water purifiers because of limited demand by the customers. They distribute all other whirlpool products like refrigerator, washing machine, air conditioner and microwave oven. The dealers get the water purifier directly from the company. The entire Delhi region i s divided into north, south, west and eastern region and there are about 3-4 distributors in each region. Manufacturing Unit (Faridabad)

Main Warehouse (Faridabad)

Dealer/Retail er

End Customer

Trade margins and other discounts Trade margin given to the retailer- 10 to15% Apart from this the cost of promotions, advertisements, banners and posters are all borne by the company. The retailers do not have to pay any cost towards the promotions. The company also gives

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more margins to the retailers who are able to sell a certain minimum amount of water purifiers to the consumers. Example- I visited a retail outlet called Balaji Electronics in West Delhi and found out that the highest selling product of whirlpool had an MRP around Rs 15000 and the company sold the product to the retail store at a price of Rs 13400. The price at which the retailers now sell to the consumers  becomes the margin for the retailer.  Areas of vertical and horizontal conflict and possible solutions Vertical Conflict- When there is conflict in the channel at different levels in the channel. Vertical conflict cannot be seen in whirlpool water purifiers as all the local retail stores as well as the multi brand outlets procure the water purifier directly from the company and there are no intermediaries. Horizontal Conflict- The conflict between the channel members at the same level, i.e. two or more retailers. These conflicts can offer some positive benefits to the consumers. Competition or a price war between two dealers or retailers can be in f avor of the consumers. Horizontal conflicts does exist when it comes to selling of water purifiers specially with the advent of modern retail wherein there exist a Balaji Electronics, Better Deals & Croma in the same shopping mall. So all three stores want the best offer from the company so that they can show that discount to the consumers to attract them. Reasons behind horizontal conflicts : Price-off by one dealer / retailer can attract more customers of other retailers. • Aggressive advertising and pricing by one dealer can affect business of other dealers. • Unethical practices or malpractices of one dealer or retailer can affect other and spoil the  brand image. 

Possible Solution To solve the problem of conflict between various modern retail outlets and other local retailers company can: • Exchange of persons between channel levels  –   This helps in better understanding. It can reduce the misunderstanding and conflicts can be reduced substantially through this communication. Each will grow to appreciate the others point of view and carry more understanding when returning to their position. • Offer same promotional schemes to modern retail stores as well as to local retailers.

Impact of modern retail on distribution The company is also selling their water purifiers through the modern retail stores such as Croma, Big Bazaar, Vijay Sales, etc. There are no distributors for the modern retailers and the company directly sends its products to these modern retail stores. The procurement outlets set up by modern retailers allows the company to deal with fewer intermediaries and gives a better opportunity for the company to gain better prices for their products. Unorganized retailers in the vicinity of these modern retailers experience a decline in their sale of Whirlpool water purifiers as the number of people buying the Whirlpool purifiers from the modern retail stores is increasing in Delhi. 

Impact of internet on distribution Internet is a new tool to reach consumers. Internet has surely affected distribution in a great manner. The salesman after selling the water purifier enters the sales data in his/her PDA which is synchronized with the company warehouse database. This process happens in real time and without internet this won‟t be possible. Whirlpool now they have their websites where customers can go and compare different types of water purifiers having different price points. The potential customers can fill the form online and then customer care representative will contact you either through phone or through e-mail to make sure your queries and doubts are solved. Through the internet the consumers are able to search for the information on various Whirlpool water purifiers and they don‟t have to depend on the dealers to explain them the functions and the new technologies used in the Water purifiers. The internet is also helping the company to 52 | P a g e