PERF RMANCE 04 - The Performance Portal - Ernst & Young

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“ A focus on distribution equity will yield greater returns to organizations planning to succeed in rural markets in India.” Figure 8. Mode of funding Physical stock value as on date Market outstanding as on date Physical stock norm (days of sale) Monthly sales target Adjusted RCT Physical stock value (average value “monthly sales target” stocking norm/30) Market o/s value (average value “monthly sales target” adjusted RCT/30) Current funding at dealership (physical stock + market o/s value) Required funding at dealership (physical stock + market o/s value) Funding gap (required - current) Bank RCT 35% No Industry size>500? No 1 2 3 Candidate for channel funding Candidate for territory bifurcation Probable candidate for distribution funding
Competing for market share in rural India Deployment of appropriate funding methods and effective monitoring of the funds deployed led to a significant improvement in the dealers’ profitability and enhanced their ability to service the market more effectively. 3. Sales force effectiveness Another critical aspect was the effectiveness of the sales force (including both the client’s and the dealers’ sales forces in the local markets). Based on the analysis, we found contact by a sales person during the sales cycle was one of the most critical components impacting successful sales performance (see Figure 9). Analysis of customer buying behavior revealed that customer conversion dramatically drops when the salesman has not met the customer during the sales process. For example, conversion ratio was 36% when a company salesman met the customer, irrespective of whether the customer visited the dealership or not. Conversion ratios went up to 48% when the customer visited the dealership and was visited by the salesman. However, when the salesman did not contact the customer during the sales process, the conversion was only 5%, irrespective of the customer having visited the dealership. As a consequence, running initiatives to increase the number of sales personnel (of both company and dealer) in the market and also increasing the frequency of visits made to a customer during the sales process dramatically improved sales performance. Overall impact By focusing on the key elements of the client’s distribution equity and introducing some very specific changes, the effect was a significant overall improvement within a very short period of time (see Figure 10). While only part-way through implementation, the client witnessed a 50% increase in its market share and is currently looking at rolling out a similar program across its entire network within India. Figure 10. Sales and market share performance 8% 180 90 11.21% 226 83 100 12.35% 253 Figure 9. Analysis of customer buying behavior December January February Customer conversion driver Customer conversion ratios Implementation launch — mid December 2010 FY 09 FY 10 Salesman contact Dealership visit 36% Summary Salesman contact Salesman contact Dealership visit Dealership visit 48% 5% While organizations spend significant amounts of time and effort in developing their brand equity, in rural India, given the nature of the market, it is critical for organizations to focus equally, if not more so, on their distribution equity. We believe this will yield greater returns to organizations planning to succeed in rural markets in India. 67
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