Changed Relationships

Twenty-five years ago, I was the Chairman for the Thomas & Betts Rep Advisory Board. This was back in the days when, rep input was solicited, and perhaps valued more.  We were charged with assisting in the development of a distributor program to reward more loyal distributors, while reflecting the dramatic improvements T&B had made to their centralized warehouse and shipping capabilities.  The program was also designed to allow for continued communication and evaluation of performance by all parties. This program, Signature Service, became one of the original distributor programs and was followed by many other manufacturers.

I believe it is important to recognize it was NOT INTENDED to be a rebate program. Even 25 years ago there were plenty of rebates available for distribution.  Recognizing distributors needed multiple sources for many products, the recommended strategy rewarded distributor’s for committing a significant percentage of the available business to various Thomas & Betts but certainly not all of the product groups available from them.

Thomas & Betts’ commitment to qualifying distributors included priority shipments, guaranteed accuracy, written marketing plans to be reviewed quarterly, visits to those distributors during the review, guaranteed delivery on A and B items on the original shipments and yes, additional rebates based on achieving the written goals and achievements   Should any of the above not be achieved, the factory would not compensate the distributor for failure to perform.

What has changed?

Manufacturer, distributor, and representative mergers and acquisitions have severely reduced the number of each, making it mandatory, as one of our industry icons told me, to protect oneself. “Protecting oneself” inevitably leads to disadvantaging ithers meaning that distributors and manufacturers hedge their bets and have multiple, frequently competing, relationships. The result is each company focuses on its objectives and that mutual objectives are given lip-service.

A changed industry

I interviewed many of the most respected distributors and manufacturers in our industry for this article, and a few very important issues became immediately clear given the acquisitions and changing atmosphere of the industry.

• Each party needs to be successful and will, obviously, do what is in their best interests.  Therefore, communication among parties to include goals and very specific target areas are necessary to understand. Each geography may well be very different as to which manufacturer or distributor might be best suited to fulfill the need.  If a manufacturer needed to be successful in the industrial, commercial, residential or utility markets for their success, is one distributor capable? Authorization and support decisions should be localized, in writing, and supported by all three parties (manufacturer, rep, and distributor) as they know the local needs and can make commitments.
• Given manufacturers’ expansion by product and in many cases different market segments, is a distributor supposed to eliminate suppliers they have been successful with through mutual effort prior to that manufacturer’s entrance into the product package? Decisions should be respected. Business shouldn’t be expected.
• Most I spoke with preferred partnering rather than loyalty. Partnering is communication and honesty by looking out for each other’s best interests.  It also means losing orders or parts of business should a decision be based on what might be good for the one making the decision.
• The lack of communication remains the single most important issue in today’s business, especially as compared to the past. A manufacturer told me  Signature Service changed the model. He said distributors seldom complained about the length of time it took to deliver product if it was consistent and reasonable.  Errors were also expected but not appreciated. The outcome was that, suddenly, manufacturers spent large dollars to improve their services including moving to regional or centralized warehousing and completely new processes / systems. Rather than competing on price and rebates, they had to compete on service.
• Another person related that manufacturers today are often presided over by operational people rather than salespeople.  They opined that this has helped to create an unsettled and shorter-lived workforce.  Years ago, salespeople spent lifetimes working for a company.  Now, with larger manufacturers and distributors, people look to move up.  They suggested it is not unusual for a regional manager to be in their position for less than two or three years   I asked three distributors how long it takes for them to gain trust in someone soliciting their business and each shared that it was three years, as a minimum.

I worked for a very large foreign manufacturer whose intent was to sell out their capacity to a specific international distributor. They did not care who it was as long as their production in the States was reached. They fired all of their U.S. reps and closed their U.S. manufacturing facilities when they could not find what they wanted in a partner. They wanted / expected to replicate the model that they had in Europe

At this year’s NEMRA Annual meeting, a different international distributor, when asked how reps could support them, shared that they were looking for reps to generate specifications and that their function was to serve as the distribution part of the channel, providing credit and material ordering / warehousing.

Choosing partners is more difficult than ever given so many changes.  Perhaps it is now highly unlikely that partnerships between companies can be “forever”. Maybe the only long-term supplier relationship that a distributor will have is with their switchgear and/or automation supplier?  We are all evolving into larger, more efficient, and more technical companies.  Knowing each other’s needs and objectives is a must for being successful in today’s environment as methods for selling continue to change.

Your thoughts?

Help me with my next article! I am interviewing many representatives for my next article as truly more of the responsibilities for relationships, managing, and specialization is being focused on them. I’d like to talk to NEMRA reps and lighting agents to understand how you see the manufacturer / rep and rep / distributor relationships changing. All input is confidential. Email me and we’ll set up a time.