Eureka Forbes Limited (EFL) was among the first companies in India to use the direct sales approach. How have the channels evolved?
When we started out we were a 100 per cent direct sales company. And most importantly, we are a direct sales company at heart. Our entire set up - our back bone, our IT - is geared up for making direct sales work. Yet we are a different kind of business from the direct selling business, because conventionally when one speaks of direct sales you think of Amway or Tupperware that are multi-level (marketing) companies. We are probably the only company in the world that has an employment direct sales model. We have 10,000 people on our payroll of which 8,000 are in frontline sales.
Secondly, the evolution from direct sales also has been a very different journey for us. Starting out as a pure direct selling model, we wanted to expand into smaller markets – for which, direct sales as a channel does not work out economically. So we started a franchising model in those markets and created franchised direct selling agents. Then we looked at the retail opportunity. EFL now has a full-fledged retail business and has also grown on the institutional (sales) front.
Direct sales requires a lot of passion, relationship building. That remains our core and this philosophy extends whether we do retail, franchising or institutional. In terms of business, direct sales still contributes significantly to our turnover. But yes, the other channels are growing.
How did the extensions take place?
We have a customer base in excess of 10 million and we have ongoing relationships with them. We do a lot of work on the product development side so that we can go back to the customer with a better and updated product.
We are a company which basically gets dictated to by the customer; we started with a purifier at home. So the customer says, “I am drinking your water at home but at office I have to drink the other water. Can you help with a water purifier in the office?” So, we created a larger line of purifiers. When asked for cold water we created an option. Then they asked us to purify water at a larger level. We got into large scale water treatments that provide water to power plants. Similarly with the vertical of vacuum cleaners. The customer said, “I clean my house with your vacuum cleaner, can you not send someone to clean my home?” So we started with a facilities management company. We have listened to our customers and taken the next step ahead.
What prompted the move to be present on store shelves? What are the various retail channels?
Direct sales works best in a ‘Push category’ where a consumer thinks he doesn’t need the product but actually does. So we are catering to a hidden or a latent desire. As we grew the brand and the water purifier market, we realised that we were moving from a ‘push’ to a ‘pull’ category. In a ‘pull’ category, the customer sometimes does not know how to get in touch with you and therefore he goes to a store. So, it would be silly of us to ignore this channel. We looked at retail to fulfil the needs of the consumers. It has not started now but 15 to 20 years ago. In other categories - like security, air purification and vacuum cleaners - we are still a predominantly direct sales business, as these remain push categories even today.
Retail channels are multi-brand outlets, speciality stores, mom and pop stores. We are present across the entire retail spectrum. We don’t have standalone stores but we have ‘Health Zones’. It is a new concept we have started inside stores, where we can give consulting advice on the best water purifier for your home.
Within the big play of water purifiers, there is intense competition today. What are the price points Eureka Forbes straddles?
We have a product right from a storage purifier right up to the most expensive purifier that has a cooler inside it and is manufactured in UK and assembled in India. Our cheapest product is for Rs 1,800 and our most expensive product costs Rs 27,999.
However, our business is very different from a conventional FMCG or even durables company as we are a solution-based system. Water purification as a product or a category is dominated by the need of consumers which is based on the level of the input water and the level of impurities. The needs vary from place to place. For example, the impurities of water from Nalla Sopara will be different from water impurities at South Mumbai. So the same purifier will not work at both the places unlike a durable like TV, which will work irrespective of the location.
A lot of consumers don’t understand that and go for the latest technology. Instead, call our specialists. They will test your water and tell you what to buy.
How big a focus area is rural India for Eureka Forbes? How much does it contribute to sales and how is the company addressing this market?
This is a zillion dollar question. We have been looking at it and one of our dreams is to duplicate in rural areas what we have done in urban areas.
We look at rural India in different ways. We look at it as a huge employment opportunity as there are people coming from the villages and we give them livelihood.
Further, when you look at the real rural India, they cannot afford a water purifier. How many real people in rural India can afford a Rs 1,800 product which requires regular refills? So when we did our rural marketing, we thought of how we should reach out to this consumer base and the sachet was an inspiration. So we do not look at rural marketing for selling a product - we look at it for providing drinking water at 15 paisa per litre.
The village will have a water plant and an Aquaguard water shop run by a local. The NGO and self help group involved help the local entrepreneur set up shop to dispense water at 15 paisa a litre. We set up, maintain and run the plant.
So, if you want to look at rural marketing in India, it’s not really a profit model, it’s more a CSR initiative. Rural is a long term game; it’s not about today or tomorrow.
How have the spends on marketing changed for Eureka Forbes over the years? How has the measurement of RoI on the spends evolved?
The marketing spend as a percentage of turnover has been a constant through the years. Being a direct sales-driven organisation, our advertising to sales promotion ratio keeps fluctuating. So at times we have a higher sales promotion expense.
We are a very result-oriented company, so we have some fantastic tools. RoI is fastidiously measured at EFL.
For every print ad released, I can show you how many responses we’ve got. We analyse ‘why, when, what form, which place’ and how many of them have converted into sales. Till date, we have an incentive structure with the publication for the number of leads received. When a person calls on our number, within 40 seconds he will receive a call from the nearest branch manager. We were the first in the country to implement ad RoI.
Leads are our business and we calculate cost per lead across media such as digital, print, TV.
Aquaguard has maintained the brand positioning of ‘Paani ka doctor’ for the last two years. Could you take us through the shifts from potable water to the Eureka Forbes ‘Friend for life’ to ‘Paani ka doctor’?
We look at Aquaguard as ‘Tried. Tested. Trusted.’ Tried by a variety of segments of consumer types and proven and tested by 110 water laboratories across the world. Trusted by 10 million consumers.
The concept of the communication has evolved as the market needs have changed (from push to a pull category now). There is a need to build a competitive advantage in your communication.
‘Paani ka doctor’ was born by asking what our biggest competitive advantage was. The fact is that we invest in water, understand it and know it better than anybody else does or will. We have 18 water laboratories across the country mapping water every day. So we have all this information, and the fact that our guy, who is friendly, visits your home. But is he trustworthy enough? We thought - how can we make him a specialist? Who is the person you trust most and is the specialist you go to? A doctor. That’s how the ‘doctor’ was born.
Then over time the doctor himself has evolved. The doctor gives you safe water on one level and pure water on another. But what’s the high ground on this? The highest ground is ‘healthy’.
Water can be pure and safe but does it preserve the nutrients and minerals present? Our products are geared towards that. So, the natural evolution from friendly to specialist to healthiest: It is the healthiest water on earth brought to you by ‘paani ka doctor.’ It’s a positioning that has evolved.
What is the media mix? How important is digital?
We use TV, print and digital in the ratio of 65:25:10. And we use a little bit of radio and outdoor. The digital medium is very important for us. We work with a fantastic digital agency called Digitas. We have been rated in the top 50 corporate websites in the country. We have over five lakh fans on Facebook. Digital is a highly response oriented medium that is measureable and track-able. From SEO, to Twitter and Facebook, we are present on all channels.
Is social media more critical for a company that engages in direct sales?
We are a relationship company, so we need to have all kinds of avenues to reach out to consumers. Social plays a pivotal role in most of our digital activity. I have certain expectations from social media. I don’t expect it to bring me sales but it’s a medium for reaching out and building relationships. It’s a medium for my customers to vent out their frustration if they have any, as well as a medium they can use if they want to say something good about my products. It’s a non-intrusive relationship building exercise. It’s an opportunity for us to get them to like us in different ways.
Customer service is one of the key challenges faced in this segment. How do you handle resulting negative visibility?
Customer service is a challenge for all models of business. A TV breaks down once in every three years while a water purifier needs servicing twice a year. It needs consistent service. Customer service in the direct sales model is not a challenge; customer service in the water purifier category is a challenge.
Service has different dimensions to it – first you must know that the customer has a problem, and then the issue is of delivery, timing and expectations and so on. We are working on it. If I get an escalated complaint, it is replied to in half an hour from my e-mail ID wherever I am in the world. I reply to each and every customer who writes to me. The complaints on Facebook are handled via Facebook itself with immediate replies. If there are angry customers, I need to know about them and appreciate that they tell me rather than tell five other potentials not to buy Aquaguard.
Would it be fair to say that Eureka Forbes is perceived primarily as a water purifier company? What can/has been done to change this?
Aquaguard is a household name, has spontaneous top of mind recall, and numbers which would make Coke and Pepsi envious. Aquaguard is a super brand and we quietly work on the brand. A lot of our research says that an Aquaguard is bigger than Eureka Forbes.
Why would Hindustan (Uni)Lever make its name a bigger brand than Pepsodent? It doesn’t make sense. Each brand has its own DNA, strength and it stands for something in the mind of the consumer. If you try to change that, the brand will lose its recall.
I am quite happy with what we have built; we can strengthen it further.