Durapro: Driving sales through distribution channel

On 5th June 2012, Ramdoss was sitting alone in his office and pondering over his professional
future. He had come back from a very strenuous tour to the market to regularize the billing he
had made to the retailers on 31st May 2012, without their orders. On his way to home from the
railway station, he had dropped in his office to check his mails. However, he changed his plan
after he opened the only mail from his boss, which stated that his sales and collection figures had
not been satisfactory for the month of April and May. The boss wanted an explanation for the
performance and action plan for recovery. The letter was also categorical in stating that he had
three more months to prove himself in his new role. He was worried about his own career and its
probable impact on his family, for which he was the sole bread earner.

Ramdoss had joined as a Sales Manager in Durapro Limited on 25th December 2011, responsible
for the sales in state of Kerala. As discussed in his interview, he was hired to increase sales of
Durapro products from Indian Rupees (INR) 15 million in 2011 to INR 25 million in 2012. He
started well in January and February but had to struggle in March and failed miserably in April
and May 2012. Initially he was very sure of achieving the annual targets, but now he was not
even certain about the next two months or about retaining his job.

While accepting the offer from Durapro, Ramdoss had deliberated if it would be appropriate for
him to accept an offer from a much smaller, Indian appliance making company. So far in his 10
years of career, he had worked as sales executive for couple of large multinational companies
(MNC) only, each of them had similar products but had much larger product portfolio. He had
taken up the challenge because in his new job, he would move to supervisory role. In Durapro,
he would have sales executives reporting to him, which would not have been possible with the
MNC employer at least in the next 3 years. He was also confident of achieving Durapro’s sales
objectives for 2012 on his own as he had worked with the same channel for the last five years
and enjoyed good relations with them. Though there was only a marginal increase financially, he
expected the change of role would allow him the exposure to taking business decisions, rather
than just implementing other’s decisions.

Before getting the letter, Ramdoss has not happy with his sales performance. He had pondered
about possible reasons for his lack of performance. He had reasoned that he had no experience in
handling subordinates. At times he had censured his sales executives, Hari and Rajesh, but that
was normal in sales function. He was however sure that he had good personal relations with both
of them and the families used to meet each other frequently. Similarly, he had always enjoyed
good relations with the channel, and nothing had happened in the last four months that would
have changed the status. He had achieved good results in the first three months of joining and his
distributor ‘M/S Home Needs’ was also quite happy, in fact they had a party to celebrate the
quarterly performance on 1st April 2013. He was unable to figure out any of the possible reasons
to be conclusive but was sure that something was wrong.

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Now, because of the urgency induced by the letter, he had to get to an actionable solution within
the next week. He decided to slowly recollect each aspect of his business, so that he could figure
out the lacunae and possibly the remedy.

Background of Durapro and its Kerala operations

Durapro was an Indian manufacturer of domestic kitchen appliances like hand blenders, mixer
grinders etc. It was set up in 2005, initially the company had an export oriented modern
manufacturing facility, which made products for international brands as contract manufacturing.
In 2008, they decided to market their products in the Indian domestic market, for which they
developed a separate set of products. The company achieved annual turnover of INR 750 million
in 2011, out of which, INR 250 million was sold in the Indian market. The company was
headquartered in Mumbai and had a small marketing department for exports and a bigger team
for domestic sales. The India sales team had a general manger in head office and sales managers
in every state. The sales managers supervised the sole distributor for the state and were
responsible for the sales in the entire state in which they operated. The distributors were
important for Durapro as they were exclusive to the state. The distributor provided the requisite
warehousing, accounting, sales and service infrastructure, and manpower. The distributors sold
Durapro products to the retailers directly and did not use any sub – distributors. Distributors
offered an average credit of 15 days to retailers, who in turn sold it to end consumers only on
cash.

The company has a Maximum Retail Price (MRP) and a Dealer Price (DP). All % calculations
were benchmarked on DP for ease of operation and communication. Thus, MRP was fixed at
110% of the D.P. The products were billed to the distributor at a discount of 25% on the DP and
the sale was entirely against advance payments. There was no advertising support from Durapro.
For 2012, to achieve the steep increase in sales, an additional 5% was provisioned for Kerala
market. This could be provided to the distributor as sales promotion expenses against necessary
supporting documents ratified by the sales manager. The responsibility of the targets and sales
operation like dealer-wise planning, tour planning for the executives and the promotional
activities remained with the sales manager, who operated as per the guidelines provided by the
Durapro headquarter.

M/S Home Needs was the sole distributor for Durapro Products in the state of Kerala from 2008.
Rajesh and Hari were the sales executives of M/S Home Needs devoted to Durapro business.
They were working for Durapro business for the last two years, before that they were in the Fan
sales business of M/S Home Needs. They reported functionally to the sales manager of Durapro,
but were loyal to Milind, one of the owners of M/S Home Needs. Some relevant details of M/S
Home Needs are given in Annexure1.

Based on market study conducted in June 2011, the sales team at Durapro head office had
decided that there was potential to achieve a sale of INR 25 in Kerala in 2012. Since the previous

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sales manager had only achieved INR 13.5 million in 2010 and planned to achieve only INR 15
million in 2011, they decided to remove the sales manager and appoint a new sales manager who
could achieve the growth plans.

The Market for kitchen appliances in Kerala

Kerala was located along the extreme south west coastline of the Indian peninsula, flanked by the
Arabian Sea on the west and Western Ghats mountain range on the east. It stretched 580 kms
along north-south coastline with a varying width of 35 to 120 kms. Kerala's economy was
predominantly agrarian in nature and it was one of the popular tourist destinations in India. It had
14 districts further divided 63 Taluks and 1453 Villages. Kerala’s literacy rate of 93.91% was
comparable to the most advanced regions of the world. Its population was 33.8 million in 2012
and had more women than men. A sizable male population of Kerala worked in the Middle East
countries like United Arab Emirates, Kuwait etc. and remitted considerable foreign currency to
their families. Thus Kerala was a prosperous market.

The kitchen appliance market had been steadily growing at around 15% annually from 2008 to
2011 and the trend was expected to continue (Exhibit 2 gives month-wise market size details for
Kerala). Around 60% of the consumers were price conscious and around 70% of them depended
on the retailer’s suggestion in case of appliance selection. Part of the retailers influence was
because the service support was provided by them. The rest 50% consumers were brand
conscious and did not mind paying extra for the owning a premium brand. These consumers
normally purchased from the retailers with modern shops, had good display and stocked MNC
brands. 80% of these consumers were not very amenable to the retailer’s persuasion while
making their purchase decision.

Almost all consumers also consulted their friends and relatives before visiting any appliance
shop. In case they had received adverse comments about the performance of any brand
purchased from them, they would almost certainly reject the brand as well as the shop. Thus the
shops mostly stocked a limited set of brands and there was a stable status quo which existed in
the market. Most shops had been enjoying a reasonably regular set of customers and had adapted
their selling styles to suit their customers. Experience of Durapro management in other states of
India indicated that it was possible to get good sales of Durapro products from shops who sell
high end products and had elite clientele, provided the retailer took interest.

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Competitive distribution strategies

All the kitchen appliance marketers followed a selective distribution in Kerala. Retailers in
Kerala were mostly relationship driven in their dealings with their suppliers. The sales executives
would many a time be invited to the homes of the retailer for lunch or dinner. This was
facilitated by the fact that the sales forces were normally stable and worked for a particular
company for a long time. The commercial aspects of the business were important as was
expected to be the case with any businessman, but personal relationships were also significant
for business success.

The retailers maintained good financial controls and processes. They sold in cash and themselves
also adhered to the payment norms of their suppliers. They also ensured that they maintained
their inventory level to less 30 days sales. The promotional schemes of the suppliers for their
consumers were well utilized, and the benefits passed on to the consumers. This was necessary to
maintain good relation with the consumers as well as the suppliers. Thus the channel sales team
had to convince the retailers to stock and motivate them to sell; there was not much problem of
stock damage, returns or credit control.

There was a healthy competition among the retailers, but there was a reasonable level of price
maintenance. Most products sold at MRP or at a discount of 1-2% on MRP. Almost all the
retailers had their own service set up to address small technical problems of their customers.
Only in case of major technical problems, the cases were referred to the manufacturers. Thus
customers got very good service more or less from all retailers. Major appliance retailers had
their own loyalty schemes aimed at rewarding the repeat purchasers, which were backed by
many MNC appliance manufacturers.

Overall strategy of Durapro was to keep the MRP very attractive for the consumers. The MRP of
Durapro hand blenders were INR 1000 per piece while that similar Indian products like Softel
was INR 1200/- and multinational products like Philips and Braun was INR 1500. The products
of all the brands had similar aesthetics and the performance was comparable. The MRP of
Durapro Mixer Grinder was INR 2,500 while comparable Softel Foodpro & Sumeet Mixer was
priced at INR 3,100 while Philips was INR 3,500. Thus, the value proposition of Drapro to the
end consumers was that the prices were around 20% less than that of competition. Though the
customer base of Durapro was not very extensive, but users had satisfactory experience with
their products and many of them had bought another product of Durapro in their next purchase
cycle.

All competitors of Durapro kept MRP pegged at 110% of DP. They sold their products at a
discount of 10% on DP while the Indian competitors offered 15% on DP. Durapro billing was at
20% discount on DP while the payment and service terms were comparable, thus Durapro
offered higher margins to retailers. To make the deal attractive to big MNC retailers, Ramdoss
had selectively offered upto 5% additional annual discounts on achievement of the annual

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targets. The MNC’s advertized their products on television on a regular basis and enjoyed good
brand recall and image. The Indian competitors did not advertize on media but focused on the
local promotion of events and gift schemes during specific seasons.

Durapro had been mainly present in the retail outlets which accounted for the price sensitive
consumers. So far their initiatives to open up the rest of the retail channel had not proved
successful. One of the reasons was that Durapro was lower priced and did not have the brand
image which appealed to the consumers coming to these retail outlets.

Performance of Ramdoss

Ramdoss had experience of direct sales responsibility; hence he was confident of achieving the
turnover of INR 25 million for 2012 on his own. Managing a sales force was his dream and he
liked the freedom that he was enjoyed in Durapro. There was no boss breathing down the neck in
the office, there was no daily reporting, no call norms and above all no formats to fill. There
were a few planning and performance measurement formats, but they were to be filled once in a
month, which were prepared by the Home Needs staff. He only checked the formats, signed and
sent it from his mailbox. He had calculated the incentive he was likely to get from Durapro,
which would have surpassed the overall package of the MNC. Hence Ramdoss was a very happy
and optimistic man when he joined.

Upon joining, on the first day, he met the members of his team together in a formal setting as
well as individually, to understand them professionally and personally. In the rest of the week, he
visited all the retailers of Durapro along with Hari, Rajesh and Milind. He was happy to note that
there was very good financial control, which he had not expected. There were no overdue
outstanding or any dispute. He was even happier to note that Hari and Rajesh were eager to learn
and held him in high regards, which he had expected as there was respect for authority engrained
in the culture of Kerala.

In the beginning of the second week, Ramdoss did his target setting exercises (refer Exhibit 3 for
the Durapro Sales records in Kerala). He had planned to open a select set of his old retailers who
had not been dealing with Durapro products so far in the first two months. He also reorganized
the territories of the sales executives based on the equitable distribution of workload and sets up
town-wise, dealer-wise breakup of the targets. Ramdoss took care to spend adequate time to
explain to Hari and Rajesh their targets and planned retailer level strategies to achieve them.
After initial skepticism, when Ramdoss assured that he himself would work alongside them and
help the team achieve their targets, Hari and Rajesh seemed to take up the challenge and they
were ready to go.

By the 10th of January, he had developed the norms of the retailer coverage for his team. He had
classified the retailers to be small, medium and large. He had planned that small retailers would

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be visited twice, medium thrice and large four times every month by the sales executives. He
would visit the large retailers once and medium retailers once in two months and small retailers
once a quarter. However, for opening new retail shops, he would tour extensively with his sales
executives in the first two months.

Ramdoss visited the existing retailers of Durapro and also approached his old retailers. He had to
use 2.5 % of the 5% promotional budget available to him selectively for striking target linked
annual incentive for select retailers. He discussed the very attractive return on investment for
Durapro products as compared to competition (for which he assumed the ability to convert a
customer to Durapro products). Mostly he used it for opening the new counters and getting
existing retailers to commit to stretched targets. Ramdoss got the telephonic sanction of his boss
located at the Mumbai head quarter of Durapro immediately after striking a deal. After coming
back to his office, he documented all the special discounts and sent to his boss to get the written
sanction. Since Ramdoss had initially discussed his broad strategy with Milind, he only informed
Milind about the developments on a weekly basis.

The actions of Ramdoss were a great learning for Rajesh and Hari; they also went to their
markets and started making deals with the counters. They were excited at their achievement, and
felt that achieving sales target was quite easy, now that they knew the tricks. But when they
came back to Ramdoss, he clearly told them that those deals could not be honored as they were
not with his permission. He also made it clear that he had discussed each of the special deals
with his boss before making the commitment. Since, Hari and Rajesh had no authority to give
such commitments, and they had not understood the possible fallouts of the same in the channel,
he was not in a position to sanction them post facto. He also told them to revert to their retailers
and communicate the same immediately, so that there was no misunderstanding and dispute in
future.Rajesh & Hari were disappointed initially, and felt that they had a loss of face in their
channel. But they recovered quite fast as the new retailers Ramdoss had appointed, helped them
achieve them record volumes and they were in line with their planned targets for January 2012.

Ramdoss was a very good boss. Since he was a frontline executive; he knew how to keep his
team in good humor. He had good terms with all the staff members and the environment was
quite comfortable and relaxed, even though they were achieving much higher sales and workload
had increased. There was a celebration in the month-end and Milind was also very happy at the
performance of the team.

Ramdoss was able to deliver the targeted sales and channel expansion objectives in the first two
months and was now sure of himself as a boss. His team was happy and he had by now trained
his team to keep very good records of all the sanctions and the commitments, a big learning from
his MNC days. Based on his initial achievements, Ramdoss was very cool about the sales aspects
of the business. In March, Rajesh & Hari were not able to get the orders as market conditions
were sluggish. In fact 1.8 million billing of the total 2 million billing in March was done on the
last 3 days only. Ramdoss had to call called up the retailers and was able to manage over the last

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three days what his team could not do for the rest of the month. The display of great selling
capability of Ramdoss brought great admiration from Rajesh & Hari. They also realized that
Ramdoss enjoyed interacting with the retailers directly and enjoyed the adulation of theirs. So
Hari & Rajesh were also very cool, they knew that they were in safe hands and they were
achieving good sales without the struggle they had to make earlier.

By April 2012, the market situation had changed. The initial sales boost due to pipeline filling
had tapered off. There was increased competition in the kitchen appliances business. Other
Indian manufacturers started wooing aggressively the same network which Ramdoss had opened
up, and in the process changed the equilibrium in the market. There were good quantity of
Durapro stocks in the trade and the customer pull was limited. Intra channel competition was
increasing and retailers were undercutting the price of Durapro products in the market. Ramdoss
attributed the problem of reduced profitability of the retailers as a temporary phase, which would
get corrected over time.

Hari and Rajesh were not getting the same response from his network, which they got in the 1st
quarter of 2012. Most retailers were insistent on discussing with Ramdoss for the sales and
collection aspects as they felt that Ramdoss would be able to give them better deals. Hari and
Rajesh were getting some collection, but were not getting any orders. When they checked up the
stocks, they found that adequate quantities of their products were already in stock. When they
reminded the retailers about their monthly targets, they were told by retailers that there was no
sale in the market and they would talk to Ramdoss. Till the third week of April, they had no sales
to show, but were not perturbed as they expected Ramdoss to manage the sales as he did in
March. Ramdoss also knew that the team was having an easy time but did not mind it that much.
They had clicked as a team and by now there were good relations among the families also, there
was no need to be tough and spoil everything.

In the last week of April, Ramdoss sensed that the situation has changed significantly. He called
Rajesh and Hari, asked them to abandon their planned tours and report to office for a meeting.
He tried to gather as much information about the market, sales to consumers, competitor schemes
and based on that planed intensified sales effort. Additional budget inputs were not available, but
he thought that extensive coverage would help in putting pressure on the retailers. Ramdoss felt
that he was more or less behaving like his previous boss (which he did not like), but he also felt
that he had no choice but to be harsh. In April end, Rajesh & Hari came back from tour virtually
empty handed and the total billing on 28th of April was only 0.3 million.

Ramdoss was appalled at the lack of effectiveness of his sales team and more importantly the
complete lack of ownership & accountability. He however kept his temper in check as he
realized that it would not help the situation for the month end. First he has to manage the closing
for April. So he started the routine once again, opened his digital diary & started calling up the
retailers one by one. Most retailers started avoiding his persuasions and in the end the total
billing for April closed at INR 1.2 million against a target of INR 2.5 million. Some of the sales

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included billing without order to old retailers of Ramdoss, where he was sure he would be able to
persuade them once he visited them. Ramdoss planned out his tour for the next three days, by
which he planned to regularize the dump billings.

The month of May was even worse. He and his team had extensively toured the retailers,
sometime jointly. There was a complete reversal of the retailer enthusiasm for Durapro. The new
retailers whom Ramdoss had persuaded to start business with Durapro had not been able to get
the expected sales. The retailers were also quite worried as their customers were not showing
inclination for Durapro, even if they tried their best to persuade and offered discounts to the
extent of even 10% on MRP. The existing retailers of Durapro were quite antagonized because
Ramdoss had increased their competition. In desperation, some of them had resorted to price
cutting to increase sales, but that also did not help.

Ramdoss had used up the 2.5% of the total 5% promotional budget in fixing up the annual deals
with select retailers, so he did not have much up his sleeve to salvage the situation. He realized
that Hari and Raju were loyal but not really competent sales executives. Sometimes he felt that
they were bothered with keeping Milind happy and not really about their sales performance. He
knew that had he to manage the sales on his own, he could use the balance 2.5% promotional
budgets in the market to achieve the targeted sales, but he was not sure if Hari and Rajesh had
the skills, and for that matter, if they were interested to work hard either.

Ramdoss knew that he gained a lot of market share in first quarter of 2012, however he was not
even reaching the last year’s figures in April and May. He was tense as not achieving last year’s
figures was not pardonable at all in any sales set up. He realized the need to give serious
thoughts on his management style.

The experience of working in a MNC and managing the customers was not really the same as
working for Durapro and its distributor Home Needs. When he moved in from the MNC, he was
clear that the operating condition would be different in Durapro, but he expected that his long
sales experiences would him adapt to the changed environment. But the last five months made
him think critically; he doubted that he was able to really understand the dynamics of the sales
management. Why was his sales force not effective? He thought about the assumptions which he
might be subconsciously making about the employees, the distributors, retailers and the end
consumers.

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Exhibit1: Background of M/S Home Needs

M/S Home Needs was set up in 1960 as a retail outlet in Cochin by Mr. M.V. Nataraj. It sold domestic
appliances and furniture items. They were typical traders and did not have any manufacturing business.
The shop prospered due to high quality products, reasonable prices and very good after sales service
provided to the consumers.

Mr. Nataraj had three sons. When the sons of Mr. Nataraj grew up, the family decided to expand their
business operations in 2001 to distribution business. They also opened two more retail shops. The original
shop was managed by Nataraj, the distribution operation was managed by the eldest son, Milind and the
two new retail outlets (in the same business lines) were manage by the other two sons, Govind and Yatin.

The Distribution set up continued the core value proposition of M/S Home Needs. They dealt with
reputed brands which were essentially looking for financially sound, steady and reputed distributors.
Though Milind was not very well qualified, he had learnt the distribution business by being actively
involved in the operations. By sheer hard work and good dealings, he could do well for himself and
establish the distribution business and expand his influence in every small town of Kerala. He
commanded respect in the channel as well as with the principals for his fair dealings. The total turnover
the distribution business for 2011 was INR 430 million. Milind needed the support of the companies to do
the marketing and was able to delegate the responsibility to his staff. Milind had clout with his principals,
in fact Milind had seen Ramdoss as a potential candidate and suggested the name to Durapro for the
position.

Apart from Durapro, they had the distributorship of Rishab Plastics (manufacturer of thermoware kitchen
utensils) with a turnover of INR 180 million and Cinni Fans (which were very popular in rural Kerala)
accounting for the rest. The total number of employees of M/S Home Need’s distribution business was 25
which included all the sales, accounts, logistic functions.

The fathers of Rajesh and Hari had been working in the retail shop of Mr. Nataraj from 1980 onwards.
When the distribution business was set up, the two boys were inducted as they were considered reliable,
trustworthy, young (then 22 and 24 years old respectively) and willing to work. They were trained by the
company persons, Nataraj, Milind and of course the market experiences. On their current performance,
they could be considered to be average sales persons at best, but they were willing to follow instructions
and learn.

Rajesh and Hari were clear in their mind that their sales performance was only one part of their
performance appraisal as sales incentives were to the tune of 30% of their salary. However, the real
decision to employ and deploy them was in the hands of Milind and not Ramdoss. They understood that
the prosperity of Durapro business would lead to their individual growth and enhance their stature in the
M/S Home Needs, hence they worked hard. Both Rajesh and Hari were earlier with the Fan business of
Home Needs and were considered average performers. Their salary checks were signed by Milind. They
moved into the Durapro business in January 2009. Inter business transfer of Home Needs staff was not
very uncommon, they normally happened when there was special expertise required from other
businesses or when there was a sudden loss of manpower.

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Exhibit 2: Kitchen Appliances- Kerala Market Size

Year
Month 2010 2011 2012
January 4.5 5.0 5.5
February 6.0 7.0 8.0
March 7.0 8.0 9.0
April 8.0 9.0 10.0
May 8.0 9.0 10.5
June 8.0 9.0
July 11.0 13.0
August 15.0 18.0
September 4.0 4.5
October 4.0 5.0
November 6.0 7.0
December 12.0 14.0

Exhibit 3: Durapro Sales record – Kerala

2010 2011 2012

Sales Sales Sales
achieved Closing Number achieved Closing Number Sales achieved Closing Number
in Outstanding of in Outstanding of plan in in Outstanding of
million in million retailers million in million retailers million million in million retailers
Month INR INR billed INR INR billed INR INR INR billed
January 0.8 1.1 32 1.0 1.2 32 1.5 1.5 1.2 42
February 1.0 0.8 32 0.9 1.2 32 2.0 2.0 1.2 48
March 1.2 0.9 32 1.1 1.1 32 2.0 2.0 1.9 50
April 1.1 1.0 32 1.4 1.0 32 2.5 1.2 2.5 32
May 1.2 0.9 33 1.2 0.9 33 2.5 1.0 1.8 15
June 1.0 0.8 34 1.0 0.8 34 2.0
July 1.5 1.4 34 1.7 1.8 34 2.0
August 2.0 1.9 34 1.9 1.8 34 3.0
September 0.6 1.0 36 0.8 1.1 36 3.0
October 0.8 1.0 36 1.0 0.9 36 1.0
November 0.9 0.9 36 1.0 0.9 36 1.2
December 1.4 1.2 36 1.5 1.4 36 2.3

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