Suresh L. Goklaney, executive vice chairman of consumer appliances company Eureka Forbes Ltd. (EFL), was on vacation in The Hamptons in New York when his son-in-law began discussing the onset of the “digital era.” It was the summer of 2010, and, at the time, only the travel and ticketing industry had warmed up to e-commerce in India. “I found the dramatic increase in online commerce in the U.S. absolutely amazing, even though the economy was on a downtrend,” recalls Goklaney.

He returned to Mumbai the next day and chanced upon a 2009 Ernst & Young study that piqued his interest in the digital space even further: According to the report, members of India’s top socio-economic class spent an average of 87 minutes each day on the Internet (“and growing dramatically”). Compared to this, 96 minutes were spent watching television. Goklaney immediately turned to Marzin Shroff, CEO of direct sales and senior vice-president of marketing, and asked: “What are we doing about this?”

That question, more of a directive, set Eureka Forbes’s digital initiative in motion, compelling Shroff’s team to consider two strategic initiatives. “[First,] how do we stay relevant to the consumer of tomorrow and, second, how do we expand our presence in person-to-person selling?” Shroff says. “There was definite need to imbibe new technology.” Until then, all the consumer durables company had was a basic website. Eureka Forbes focused solely on its direct sales model with its iconic Eurochamp, “the friendly man from Eureka Forbes,” going door-to-door selling the firm’s primary products — water purifiers and vacuum cleaners, which respectively account for 75% and 22% of the company’s sales.

Eureka Forbes, a Shapoorji Pallonji Group company (the younger son has recently been appointed heir to Tata Group chairman Rata Tata), was started in 1982 as a joint venture between Electrolux of Sweden and the Forbes Group of India. Goklaney, who has been with the company since 1987, spearheaded the then floundering firm’s growth story from a single office in Mumbai with 20 sales representatives to a US$250 million organization with a presence in 590 cities and towns across India. Its 7,500-strong sales force, the largest direct-selling sales force in Asia, knocks on over 60 million doors a year.

But EFL’s traditional model needed a digital impetus. “We needed to generate more demo requests for our Eurochamps, reach out to the younger generation as they are spending an increasing amount of time on the Internet and ride the e-commerce wave coming into the country,” says Siddhartha Singh, senior manager of marketing.

According to Sridhar Samu, assistant professor of marketing at the Hyderabad-based Indian School of Business (ISB), the Internet is a perfect complement to EFL’s direct-selling model. “The Internet makes it easier to provide tailored information to time-sensitive consumers…. The basic problem of finding leads still exists, whether it is direct selling to consumers with or without the Internet. But the process improves dramatically once the lead has been generated.”

Indeed, the Internet can open up an entirely new touch point for EFL’s sales team. According to a report by the Internet and Mobile Association of India and the IMRB (Indian Market Research Bureau), the number of Internet users in India crossed the 100 million mark in September 2011 and was expected to grow to 121 million by last December (as compared to 245 million users in the U.S.) The same report estimates that since more than 600 million Indians use mobile phones, about 50% of the population is online, making India the largest national base of Internet users in the world.

But as Kartik Hosanagar, professor of operations and information management at Wharton, said in an interview with Indian business daily Mint, “It’s important to understand what these 100 million users are doing on the Internet…. The numbers in India do not compare well with that of China and the U.S. either…. Also, from a commerce standpoint, how many users will be willing to engage in e-commerce? That’s a very negligible figure, since the payment infrastructure and distribution infrastructure are lacking.”

E-commerce in India has indeed been struggling. According to a recent white paper by First Data Corporation and ICICI Merchant Services, the Indian e-commerce market was expected to reach only US$10 billion by December 2011, with the online travel industry accounting for 80% of that amount. Those figures are small compared to the U.S. e-commerce market of US$195 billion in 2011, as reported by digital marketing research firm eMarketer.

One reason for the poor showing in India is that customer service after a purchase has been made has never been a strong point in the country. A lot of outlets don’t have a returns policy, for example. Firms such as online bookseller and brand promotion and gaming site have succeeded because of their attention to this issue. Flipkart has an elaborate system in which customers can track  orders. Earlier e-retailers would just take the customer’s money and leave them wondering — sometimes for months — when a purchase would be delivered. More fragile items often arrive in a damaged condition. India doesn’t have a significant consumer rights movement and there are no easy remedies.

Embracing a Hybrid Model

EFL was convinced that it couldn’t ignore the Internet. But the corporate strategy had to be a hybrid. “I see the Internet as a tremendous way forward, to be able to cut costs and give the end customer the right product at the right price with good servicing,” says Goklaney. “In places that we are already present, the Internet can complement our sales force as a lead generation device. In places that we are not present, the Internet will become our sales force.”

The first step EFL took towards digitizing its model was to make the company’s website easier to navigate and to develop focused, brand-oriented microsites for various product lines. “With a maximum of one or two clicks you can find the information you are looking for,” Singh notes. “We also have a feature where an online Eurochamp helps the consumer choose the right product.”

Over the years, EFL has also “mapped” the quality of water across the country. The website now has an application that can recommend the right technology once a user inputs his or her pin code. “This application helps to determine the best product for the customer,” Shroff states. “It encourages e-commerce because when you are sure of what you want to buy, you will be more open to doing the transaction right away.” EFL is also among the few consumer goods companies that offers a Hindi version of its website.

But the key component of EFL’s digital transition has been its Call Connect System. When a consumer fills out and submits a “lead form” online, an automated process identifies his or her location based on the pin code supplied. The system then identifies the nearest sales team, makes an outbound call to a salesperson and one to the customer. The system then connects the two calls — all with an expected hold time of less than 30 seconds. “There is often a lag between a customer filling out a lead form and the team getting back to him. This system cuts down the lag time drastically. It also works on SMS and telephone,” Shroff says.

Other than customer lead generation, EFL has also tried to digitize the back-end, or after-sales, service, which is among the most important determinants of sales in high-involvement product categories. The firm has established a five-step service request application. If the customer is not satisfied with the response he or she gets, the system keeps moving the request up the ranks of the firm’s service staff. At each level, the entire history of the customer’s problem is updated until the issue is finally resolved.

According to ISB’s Samu,“the trick is for direct sales companies to make the consumer want to search for you instead of the other way [around]. The company is trying to make its brand ubiquitous online through search engine optimization programs. Other than lead generation, EFL also focuses on building brand equity. It has an online reputation management cell that responds to consumer complaints on sites such as”

When EFL first started taking its digital initiative seriously, the company had 22,000 “likes” on its Facebook page. Today, the firm is at over 150,000 and also has two additional pages — Euroair and Eurovigil — for air purifiers and security solutions. “We’ve gone from just putting up press releases and information about the company to more engaging content such as health tips and contests,” Singh notes. To bring in the New Year, EFL had a “Blast From The Past” Contest, for which consumers were asked to share pictures of cherished moments from the year gone by; the best entrants won gifts. The Facebook page is also linked to the company’s service request application. But Shroff admits that the actual number of leads generated from Facebook is low. “Our intention with social media is to build affinity,” Shroff adds. “Today’s digital consumer is the last guy you want to push things to. So let him like you.”

With a customer base of close to 9 million homes, EFL deals with a lot of annoyed customers each day. “If your water purifier is not working, you want it working in the next half hour,” Shroff notes. “With every passing half hour that it is not serviced, the customer gets increasingly annoyed. We have a lot of irate customers visiting our Facebook pages. If we show them that we are also a nice company, they might calm down a bit. So this is a relationship building program, a long-term lead generation process.”

Building a Deeper Connection

Samu suggests that that this increased affinity with customers will be key to EFL transforming its sales model. As the level of consumer interaction increases, EFL must build deeper relationships with them. “This can eventually develop as the main selling model, as it will include home visits for demo purposes, replacing the current direct selling methods,” he says.

But how useful have EFL’s digital initiatives been in actual conversion to sales? “As of now, online sales — actually using a credit card online to make the purchase — are less than 1% of sales,” Singh notes. “What’s working is a ‘Cash on Delivery’ model.” EFL’s online sales have grown from US$10,000 to US$50,000 a month. “That’s not bad considering it’s only a year-and-a-half old initiative,” Singh adds.

EFL currently gets only four to five leads from Facebook every month. But it manages 35,000 leads a month through organic traffic and an additional 40,000 leads a month from its brand display campaigns. The conversion of leads from hits on EFL’s own website are high — 40% to 45% of total leads. While Shroff is reluctant to disclose the actual cost of each lead, he does admit that, “It’s brilliantly cost effective. The cost of each lead is the lowest as compared to advertising or door knocks.”

Shroff and Singh are upbeat about the digital initiative but Goklaney is candid about the course corrections he would have liked to make in hindsight. “First, we should have started earlier,” he says. “Second, as a company we have not yet learned to be e-commerce friendly. I want to be able to engage my current customers and to get their inputs on how we can make our products better. We’ve tried, but we haven’t done it successfully.”

But it’s not just the Indian consumer that Goklaney wishes to engage. While their offline direct selling model exists in other countries, he expects the Internet to be a primary driver of sales in the international market. “I should be able to supply my products to a customer in Switzerland or any country in the world from India. I am unable to do that today.”

EFL’s share of the water purifier market has dropped to 60% from a high of 75% in 2004. “We’ve had 68 quarters of continuous profits. When you have a market that you have dominated for 29 years, and then competitors enter, your sales continue to grow, but your share drops. It’s a process of market expansion. We still sell as many water purifiers as the rest of the industry put together and more,” Shroff notes.

More competition is coming; this time, in the direct-selling space. The Indian arm of direct-selling major Amway is considering an entry. Others are looking at the Internet as an easy entry point. That’s where they will stumble, Shroff says. ”In 10 years, we will have moved up the value chain and created new products that Indians don’t think they need. You can never replace human interaction with the Internet. Ultimately, we are in the P2P, person-to-person business.”