Rishi Electronics is an established domestic manufacturer of air conditioners and other related products. Over the years, the company has worked with major retail chains such as Croma, Big Bazar and Vijay Sales to develop efficient air conditioners for the consumer and commercial markets.In turn, some of the large retailers sold the conditioners under their own brand names as well. Rishi's brand is also sold to multi brand outlets. retail. Rishi's image as experts in AC manufacturing continues to be highly positive among both the companies and the customers it serves.

During this time, the Marketing vice president and sales manager of Rishi took an especially active interest in the demand for the company's commercial line of large ACs.As a result of the rapid growth of this market post 2007, Rishi considered manufacturing a small, lightweight AC. After conducting several marketing research studies, Rishi developed a prototype of the product for further consumer testing and possible commercialization.

Rishi conducted additional research in the consumer market and found that consumers especially liked its portability, its ability to be fixed to a wall in the garage or workshop, and its attractive design. Rishi then decided to enter the in-home consumer market with its new lightweight AC. In developing the in-home small AC market, Rishi faced the traditional problems of bringing a new product to market, but it also needed to expand its sales force. Historically, the firm produced ACs for retail market but it also sold to major accounts mentioned earlier.

The company had six full-time salespeople and a sales manager. To gain national distribution as quickly as possible, the firm contracted with a large number of sales agents who collectively covered all the States. They called on smaller accounts and/or accounts that Rishi could not cover with its own small sales force. The agents were compensated through commissions which were computed on either a per unit basis or a percentage of their invoice totals. Initially, both Rishi and the agents benefited. As the product became more accepted in distribution channels, the agents began to 'cherry - pick' their larger accounts and ignored the smaller accounts in their territories.

Recognizing this, Rishi decided to enlarge the size of its own internal sales force and hired sixteen new salespeople. Compensation was salary plus benefits, and the new salespeople's role was to call on accounts the agents were bypassing. At the time of the decision to hire the 'junior salespeople' the original six internal salespeople were promoted to national account managers, handling only the largest customers like Croma, Vijay sales, Big Bazar, CSD canteens. Their compensation would be salary and benefits in addition to a yearend bonus on volume and profitability.

After a few years of having three different groups of sales people (junior, national account, and agents), Rishi faced a serious problem with its junior salespeople. The junior sales-peoplecomplained that the agents continued to cherry pick the large accounts in their territories, thus earning large commissions, while they had to make three times the sales calls for a lower salary. In addition, junior salespeople felt the old guard had an unfair advantage with their national accounts. Not only were they making considerably more with a salary plus bonus opportunity, but they had fewer sales duties. A summary of the annual compensation for each category of salesperson is shown in table 1.

Despite the unusual makeup of Rishi's sales force, sales increased rapidly. The small AC market grew faster than management had anticipated. With the growth, however, came a great deal of competition. Although Rishi's sales force strategy had weaknesses, management felt they were doing an adequate job in the small AC market. Turnover remained high (50 percent or more in some years) among the new salespeople, but there was never any problem hiring additional salespeople. By 2014, Rishi's sales force strategy had grown to thirty-two salespeople (six senior national accounts reps and twenty-six new junior salespeople).

Table 1 Compensation and Turnover for Rishi's Sales Force Type of Sales Person Commission Average Yearly Year-End Bonus Benefits Turnover Salary (percent) National account None Rs 9,00,000- Rs1,55,000- Rs 1,00,000- managers (6) 12,00,000 200,000 1,20,000 Agents Rs 5,00,000- None None None 0 7,00,000 Junior salespeople None Rs 4,50,000- None Rs1,00,000- 50+ (26) 6,00,000 $1,20,000