 PROBLEM IDENTIFICATION

Which sales compensation plan should the company adopt to improve the performance of their sales
representatives and which plan would motivate them to feel better about their responsibility as a sales
person?
 ANALYSIS OF SITUATION AND PROBLEM
 CURRENT SCENARIO
EFL was started in 1982 as a joint venture between the Forbes(India) Group and Electrolux of Sweden.The
company sells Euroclean vacuum cleaner ,water and air purifiers among which AquaGaurd water purifier
had ahuge contribution to company’s revenue. Their direct sales approach was practiced even in India
since their launch in 1982.

The company was facing difficulties in reaching sales targets by the end of 2003 and high attrition rates.
CEO of Eureka Forbes Mr. Suresh L. Goklaney had noticed some gaps with the current system of
compensation to sales representatives which indirectly was affecting sales hence he soon after returning
from Harvard wanted to implement another compensation to motivate young lads to boost the sale sand
also their motivation to reach targets. The new compensation system called “Bettering the Best”, it called
for rewarding sales reps for process adherence and sales both, in contrast to the earlier system based on
only final number of sales.

 SITUATION ANALYSIS

The old compensation system included salary, rent allowance, leave travel concession, holiday bonus
and medical reimbursement. A successful sales rep earns two-thirds of his monthly earnings through
his commissions. This system was more focused on final sales count and had put lot of pressure on
sales person. If the person did not learn how to sell that lead to less commission and less salary finally
to attrition which was a huge issue at that point in time. No proper seller and buyer relationship was
built in this system since more was focused on only the sales number.

 PROS

 Performance of sales person id directly linked to his number of units sold with in the
stipulated time and if performed better they would get entry to elite sale rep clubs to boost
their status and also motivate other peers to achieve the same.
 Silver Circle, Club 100 were some of the clubs to motivate the sales people.
 CONS
  Pressure was mounting up on the sales representatives to get their commission which in deed is
their salary , it lead to lose of the process of selling and concentrated more on units sold.
 No loyal customer retaining relationship was established.

Case 2: The New compensation system- “Bettering the Best ”

 “Bettering the Best ” was designed to give reward points to sales reps at each point of selling
process like, calling customer, Demo of product, Selling product to customer.
 The points were then converted to commission which was his salary
 The idea behind the new system was to reduce the sales pressure on the sales people and to change
their focus to improve the process of selling.
 This would also improve the chances of sale as the overall customer handling improves, thus,
improving sales productivity and reducing the growing attrition rate amongst the Eurochamps.

 PROS:
 Knowledge about the process of selling and how each stage of selling is important
 Low pressure and hence less attrition rate
 Less attrition rate leads to less investment on new recruits since lot of time has to be spent on
training them.
 Customer relationship will be developed and loyal customer base and more referrals for the
products
 CONS:
 Focus of sales reps would shift to earning more number of points rather than selling more
units
 Leads to zero sales with substantial points which would result in good commission
 Hectic work for higher sales executives because of time consuming computerized system
 No proper recognition for the outperformers

Recommendation:

There are some loop holes which have to be rectified before implementing the new compensation system.

1. Financial incentives should be changed like significant points to converted sales rather than stages
of selling which would improve the sales scope of the representative
2. Feed back from the customers very regularly and counselling to sales reps
 3. Make the process more handy and easy for the higher sales personnel
4. Incentivizing all the stake holders in the system rather than only Euro Champions

By implementing the new compensation system with the above suggestions may work out in the long run
and also may have a significant change in the process of direct selling approach.