Putting The Price War to Rest
- 11 April, 2008 13:37
Establishing a brand name is a task that few companies do well. And, according to those that have, if there's one thing that's harder it's sustaining a brand.
That is because it takes more than just wisdom to understand what's needed to stay on top of the brand game. And more often than not, it isn't about building another fantastic product, but knowing the pulse of the customer.
With competition at its peak and demand on the rise, companies are trying to push each other out of the way to reach where it matters -- promising to deliver time and again. Promising to be different, promising the world to the consumer.
But some companies promise to deliver just a good night's sleep.
And that's what Sheela Foam -- the company that owns the Sleepwell brand of mattresses -- is known for. Founded in 1972, it has over 10 manufacturing units, 50 exclusive distributors and over 1,700 dealers across India.
But over the past few years, heavy discounting among channel partners attempting to sell volumes had become a serious problem. This price war wasn't doing very much good to consumer confidence in the product. A standard price is among the most basic requirements associated with a brand.
And worse, all the discounting among the channel partners was hitting authorized dealers who were now unable to retain their margins because customers, being customers, went to the lowest seller.
Thus, selling the brand was becoming difficult for authorized dealers.
"Selling mattresses depends on referrals from customers and the dealer's word," says Rakesh Chahar, CEO, Sheela Foam. Since referrals from customers are not very high, the company had to depend on its dealers. "To make a dealer recommend Sleepwell, it is important that he retains a reasonable margin in selling the product," he points out.
The company needed to enforce the MRP of its product. This is what led Sheela Foam to explore options in IT, and thus the project to control MOP (market operating price) was born. And the man responsible for its implementation was Pertisth Mankotia, head-IT, Sheela Foam.
Keeping the Bed-Bugs Away
"The most important challenge was to enable our dealers to retain their margins," says Mankotia. But, in addition, the IT team also had to track sales up to the customer level and build a customer database.
This was the only way it could revive customer confidence in the brand. One of the things that stood in the way of the IT team was the fact that they had to manage with a home-grown ERP system, and this meant that they had to customize it themselves without much help from the vendor.
Mankotia says, "There is no off-the-shelf product that caters to our requirement. Right from the order placement up to the stage when it is sold to the end customer, all business transactions are recorded in the system. We have been using this system for almost seven years."With the homegrown ERP -- which they call Greatplus -- they have not only automated their entire production process right from procurement to production, but have also successfully integrated it with their external channel partners.
A Short Siesta
Mankotia's team also decided to use a simple mechanism for data management: SMS. "This is the most simple and innovative way for controlling MOP and for tracking and maintaining stock at the location of the distributors and the dealers without spending too much," he says.
Mankotia goes on to explain that the system tracks product movement all the way from the factory to the customer. "It maintains data on the stock at our factories, at the distributors' warehouse and the dealers' warehouse".
Tagging is done with the aid of a unique product serial number, which is bar coded. With each dispatch, an SMS is sent to the distributor about the material that is dispatched to him. "The stock of finished goods at our factory is reduced and stock with the distributor is updated. When the distributor sells a product to a dealer, then the distributor's stock is reduced and dealer's stock increases. All this is recorded by our ERP system," he says.
So what's new? The innovation of using SMS comes into play when the dealer makes a sale to an end customer. When the dealer sells a mattress to a customer, he uses his own mobile phone to SMS the product serial number along with the customer's mobile number to a number belonging to Sheela Foam. "This SMS is fetched by our database, where the system checks the entire transaction. Within two minutes of the SMS being received, the system automatically informs the dealer and the customer, through SMS, about the 'Successful Guarantee Validation' and the MRP of the product," says Mankotia.
Thanks to the rapid proliferation of mobiles in remote and rural areas, the system can be implemented in any place where a mobile phone can work.
According to Mankotia, the biggest advantage of using SMS as a means to transfer data is that the dealers are not forced to install computers -- it is more than sufficient if the distributors get their hands on a phone. All that the dealers have to do is use SMS to complete transactions from their side.
Since the system has a bird's eye view of the entire transaction of the mattress -- moving all the way from the factory to the distributor to the dealer -- it is able to authenticate the genuineness of the dealer. The dealer gets five points for each transaction made, and this can be redeemed by him after a period of time.
Sheela Foam spent about $54,000 on Greatplus, and it went live in January 2007. But the rollout was not as smooth as expected. Distributors and dealers resisted the new system because they felt that Sheela Foam would have full control over their stocks. They also feared that if the company tried to rigorously monitor the MOP, then the dealers would not be able to sell the product properly because the customer price would go up.
In order to address these fears, Mankotia says that Sheela Foam conducted several workshops, group meetings and one-to-one discussions with various distributors and dealers to explain to them the long-term benefits of the entire system. In order to show the seriousness of the initiative, the CEO and the head of sales and marketing personally attended all meetings and workshops in order to strengthen confidence among distributors and dealers.
Thankfully, their efforts paid off and the project became a success. Before the project, registering for a guarantee could take many months and the company paid approximately 40 cents per guarantee registration. "Now, the guarantee is registered in just two minutes and we are spending only 40 paisa (1 cent) on the SMS," says Mankotia. This difference in cost has been passed on to the dealers, and naturally they are happy -- especially since the number of guarantees has gone up from around 500 per month before implementation to around 10,000 per month.
For a Good Night
The dealers are happy and Sheela Foam is pleased. But the IT team is more than glad. Mankotia says, "Discounting is the biggest problem in the consumer durable industry in India. No one has gone to this extent to control MOP. We have controlled sales through unauthorized dealers, stopped infiltration, controlled selling to non-dealers, controlled inter-dealer competition by giving heavy discounts, and also built a strong customer database for the future."
Mankotia is also pleased to point out that "guarantee registration through SMS is an unique and innovative method that no one as per our knowledge has ever done in the country." Mankotia takes pride in the fact that the company has got a competitive edge in the market, as they are able to track stocks and can replenish them within a shorter timeframe.
But ultimately, all IT projects need to reflect on the bottom-line. Mankotia says that the sales of Sleepwell mattresses have shown a growth of approximately 40 per cent during the financial year. While the full credit for this cannot be taken by the IT team, "The project has made a significant contribution towards this growth," he says.
Anupam Srivastava, the head of sales, is thrilled by the impact that the SMS system has had on the customer. "We are able to win the confidence of customers in our product because, immediately after the purchase of a Sleepwell product, the guarantee is registered through SMS," he says.
A Bed Time Story
The system has been in operation for over a year now, and Mankotia says that Sheela Foam has not made any major changes in the application. "But our major concern is connectivity uptime. Initially, distributors were operating through the Internet, and many times connectivity was a constraint. However, the problem has been resolved. We have now brought them into our MPLS network," points out Mankotia.
In 2008, Mankotia has some ambitious plans for his project. Right now, Sheela Foam has extended Greatplus partially to its distributors. "As a step forward, we are in the process of launching our Greatplus Distributor's Lounge to almost all our distributors. This will record all their business transactions and provide all our distributors a business advantage that is similar to what is enjoyed by us today," he says.
Using this system, Sheela Foam hopes to reach out to all its dealers and allow them to place orders online with distributors. "These will get translated into distributor orders and will appear as outstanding orders in our books," says Mankotia, who goes on to add that, "dealers will be able to know their online order position and they will be able to track materials movement and get more market insight."
Another advantage of the improvements being made, says Mankotia, is that, with the information on materials movement, Sheela Foam will also be in a position to efficiently monitor the delivery of goods from the distributors to the dealers.
"In short, with the Greatplus Distributor's Lounge, we are creating a totally synchronized environment, right from the order placement by our dealers all the way up to the sale of the product to the end customer," says Mankotia. The Greatplus Distributor's Lounge will become operational from April, 2008.
Look who's getting a good night's sleep at Sheela Foam.