The rep alignment dilemma … whom to align with to generate sales? End-users? National chains? Independent supportive distributors? Any distributor who will support the manufacturer? The manufacturer? But, the bottom line becomes, what will generate sales to meet manufacturer expectations?
It’s complicated, and channel consolidation and channel diversification will make this more complicated.
The Market Share Conversation
Recently I received a call from a rep asking for some advice. They had satisfactorily represented a manufacturer for over 25 years with never a hint of dissatisfaction. In fact, they had gone through at least three different sales management regime changes. Either the manufacturer was satisfied or complacent.
This rep happens to be in a state that is relatively rural and, in its metropolitan areas, is pretty consolidated from a distribution viewpoint. A couple of independents dominate and then there are the chains. There are a few small independents but … did I say that they are small?
And the manufacturer is not the #1 in their category and does not have much share, even nationally, within a number of national chains.
The manufacturer recently conducted a state by state market share analysis and projects that, in this state, they have about a 10% share versus their estimate of the overall market.
10% is low, therefore the email/call of “your 30-day countdown has started.”
So, let’s put aside the fact that there wasn’t a meeting and a plan developed to try to improve share. The reality is the share has been about the same for years.
But it brings up some issues that are growing within the industry due to consolidation as well as channel fragmentation / alternative channels that question some industry sacred cows.
When Share Isn’t Available, Where to Can a Rep Grow?
The questions then become:
- In an age of distributor consolidation, if the manufacturer essentially has limited share at a national chain, is this due solely to an agent or is it a joint issue? Some national chains are very “structured”. If a manufacturer isn’t preferred, trying to get significant business at a local level is a challenge. That’s the distributor’s choice. What is the role an agent plays in supporting a manufacturer in such a chain? What is the manufacturer’s role?
- While calculating share is important as a metric, should the discussion be about TAM (total available market)? In reality, some aspects of the market may not be feasible to obtain, or the manufacturer may not want aspects of the market due to pricing levels or they may not have the appropriate/preferred product offering (or brand).
- In a market with few electrical distributor conversion opportunities, if the rep pursues end-users, where can they place the business?
- Most buyers already have their preferred distributors and want to place their orders with them. Which begs the question of, what is more important … manufacturer brand or preferred distributor? The reality … the customer will decide.
- Nowadays there are multiple channels for electrical material. Products can be purchased via Grainger, MSC, McMaster Carr, Fastenal, plumbing distributors, industrial supply distributors, automation houses, power transmission distributors and more let alone Amazon Business, Home Depot, online only distributors and distributors outside the market. And yes, there are manufacturers who will take the order direct (sometimes bypassing their reps). While hopefully the manufacturer compensates the rep based upon POS at the zip code level, most manufacturers do not compensate reps for sales to non-electrical distributors. Perhaps the rep could grow the business, at the end-user level, if they could direct the business to a non-electrical distributor … when they are blocked in placing the business through a local electrical distributor (no supporting distributor for the line). This then begs questions of:
- Should reps be compensated for sales to non-industrial distributors?
- Should reps, with manufacturer consent, be able to open non-industrial distributors as accounts?
- Should reps support a manufacturer’s sales to Grainger, Fastenal, et al (whomever the manufacturer has authorized)?
- Or, is the industrial rep committed to supporting industrial distributors, even if the distributor is not committed to supporting all of their lines?
- What is the manufacturer’s responsibility/role in getting “stocked/preferred” within a national chain or a local leading distributor or is the responsibility the rep’s within their territory?
Evolving Roles in an Evolving Market
Lot’s of interesting questions as the market evolves. The role of a rep may change by type of distributor, or perhaps the culture of the distributor. For very disciplined distributors where corporate makes decisions of which lines to support, perhaps the role of the rep is to support the manufacturer initiative with the manufacturer responsible for communicating (selling) their value proposition to corporate management? In other distributors, where local decision-making is more prevalent, perhaps the role of the rep is engagement throughout the distributor’s business … corporate to branch and salespeople?
Or is the role of the rep to focus solely at the “customer/end-user” level to generate demand within the territory for their manufacturer?
As the business changes, it becomes more nuanced. Will we get more similar to the electronic industry where most distributors represent all and the role of the rep is really specification-driven and providing local support?
A challenging dilemma for reps. Align with independent distributors and “control” destiny locally?
Focus solely on end-users and let them decide whom to buy from? Hope the manufacturer provides clear channel guidance?
Seek agreements to sell multiple channels? Should manufacturers compensate based upon the territory or by the channel that sells the product?
Does the role of the rep change based upon the culture/type of distributor that they call on … support solely at local level or “top to bottom” engagement?
Thoughts?
Awesome article Dave! In this day of the “Create Demand at the End User” mantra, who is the rep creating demand for? All channels. And which channel are they compensated for?
If the manufacturer’s value proposition is not recognized or appreciated by the channel what are their options? The channel has never had more “noise” due to the crowded space and the sheer number of manufacturers.
If your company is small, and made in America, the national chains and conglomerates literally block your access to the channel, what next?
The game is rigged…
Kevin – thank you for your input.
By “channel”, I presume you are referring to “distributors?”
As a manufacturer, and recognizing that some lighting companies sell through up to 14 different channels, would you support reps selling to non-electrical distributors and compensate them accordingly or based upon geographic territory or should reps / agents be industry (or channel) specific?
David,
Another thought provoking article.
We have manufactures claiming “Market Share” but cannot state figure on competition, do not add non electrical distribution nor bring up POS that should also be included in our numbers at the very least. Ask a question, you do not get a response from most.
Evaluating a rep or anyone needs more measurement than a number. It needs effort and relationship with the rep and customers. It means knowing the situations, what is needed and joint effort.
A friend and principal in a very large multi territory rep agency once told me that manufacturers used to depend and start everything with a sale. He then went on to explain that IT and accounting now run most manufacturers and the sale may be a necessary event.
We used to analyze with key factory people from Presidents, VP’s and salespeople as an important process in determining operations, objectives and results with regional managers included as much a part of our team. Now it is less likely reps or distributors get to meet one-on-one with manufacturers except a few minutes at the various national meetings. This was expressed to me as a complaint by the President of a very large electrical distributor who said he saw perhaps one or two a year at his headquarters.
NEMRA and the NEMRA Manufacturers Group put together a guide that we would be able to truly evaluate each other in the selling process, but it is now something we hear “management wants us to finish.”
I know everyone is very busy with major concerns, but as companies grow larger don’t we need more personal touch? A complaint about the millennials is they want to do things via email or the internet and not in person. Aren’t we now doing exactly what we do not want our associates doing?
Maybe we just need to “get personal” if we want our businesses to depend on relationships. Products are often made similar to each other and competitors; what makes the difference is service and service is as personal as it gets.