Is the relationship between reps and distributors becoming more essential to our industry?

I was interviewing an executive of a national electrical distributor recently, and he related to me his company now found partnering with a manufacturer’s representative more significant to their successes than with most of their manufacturers. This distributor shared that his business is approximately 35% industrial and 65% commercial contractor.

If reps are gaining, does that mean someone is losing?

He observed that in the past 5-7 years, relationships with manufacturers have deteriorated to levels he never imagined. It surprised me especially since I had known this person for a long time.

When I asked him why, he simply said many did not listen to issues, nor would most meet with them, or their divisions, to do significant planning. He felt manufacturers were solely focused on achieving short-term revenue goals. He further stated that should his salespeople promote specific products at customers, few would support them or treat them any differently than all their other distributors when an opportunity arose from their efforts. In other words, manufacturers are loyal to a sale, regardless of whom they received it from. Relationships are further confused given the short tenure that many manufacturer regional people currently have in their company (or their position), whereas reps seem to retain their people far longer. This builds personal trust, enabling sales to follow.

He further shared that he felt that reps knew their territories and company / individuals’ personalities, he respected work done on his company’s behalf, and found ways to make sure his company’s sales efforts in bringing opportunities were rewarded.

He mentioned that some reps calling on their locations are packaging their manufacturers and positioning themselves to perform as manufacturers by coordinating pricing, finding ways to “protect” the distributor, and giving them preference, sharing information and essentially “being a partner.” He also related that his company tries doing business as much as possible with as few reps as possible. By inference, this also reduces the number of manufacturers that they work with.

Lessons from the Past: Some Business Practices Still Hold True!

I recall traveling with a distributor salesperson for a few days in support of a manufacturer. We were calling on the salesperson’s cell tower contractors. After writing a few very nice orders. I asked him why he chose to support us, as we were his company’s secondary supplier for the product we were promoting. He reflected that he had once traveled with the other company’s salesperson, and when he had a bid opportunity that was developed from one of his contractors the manufacturer refused to give him anything better than the other two distributors bidding on the work. He said he knew we would protect him if he initiated opportunities and supported us.

When I was the NEMRA Chairman, Hank Bergeson, the president at the time, and I visited with a very large manufacturer contemplating adding reps to his sales group. The manufacturer sales executive stated that his direct salespeople and existing national distributors were failing to sell new products that were instrumental to his company’s success. The plan was to pay their representatives for incremental business thru local distribution only. They would receive no commissions from existing accounts including the nationals. I presented the VP of Sales a scenario where the rep and a local distributor were able to get new products specified at a larger institution or plant and as often occurs, a quote or blanket was sent to various distributors of this manufacturer. Would the national distributor receive the same benefits, and would the rep be compensated? His response was that everyone would receive the same pricing, and if the national received the order, the rep would NOT receive any commission. Speaking for NEMRA reps, I stated that I seriously doubted that many quality reps would be interested. They were not, although today they do have good representation and I am told the contracts for reps have changed from the one initially considered.

The moral of the stories?

• If you are a distributor, if a rep supports your efforts, you can capture more of their efforts if you reward them for their efforts and protect them. They will do the same to you. And, if they don’t, have a discussion. At the end of the day, as much as the business has changed, people still work with, and do business with, people.
• If you are a manufacturer and want quality reps who will create demand for your products, you need to compensate them for their efforts, regardless of the business goes. If you need someone only to service distributors, that is a yesterday’s rep model, and you may be able to compensate them differently.

Are functions changing?

The VP of an international distributor, while speaking at NEMRA two years ago, referred to his company as being a distributor whose function was to inventory products needed by his customers and getting those products to them when and where they were needed. He saw the efforts of reps and manufacturers to get products specified at his customers, bringing business to them. (and I’m sure a number of their salespeople disagree, at least some of the time!)

Have times changed?

• I called on a regional distributor and the President of that distributor bitterly complained about reps who called on “his customers.” Were they every “his customers?” Did they buy from other distributors? Yes. Were they open to meet with anyone who offered them ideas? Yes. If they were “his,” did they know that? No. The customer is loyal first to themselves. They need information to help them win jobs / perform profitably. They’ll support those who support them. When I think back, did he get the best rep support he could have?
• A large contractor owner told me he no longer speaks to many manufacturer salespeople / regional managers as they merely reflect the wishes of their bosses, who don’t seem to care about his issues. He calls reps and “although they may not get me answers I want, they always get back to me, seemingly fight for me and care.” The rep is an independent business operation that is only paid on what is ordered and shipped, they care, he said.
• A distributor told me one of his larger volume manufacturers just significantly lowered their rebate program that was based on the number of products and categories he purchased. I told him the same manufacturer had lowered their commission rates to their representatives over two years ago. They supposedly suggested the decrease last year was due to increases in costs, difficulty getting product, and competition pricing. The distributor admitted that he was now looking to replace some of the product he was purchasing from this manufacturer, but he questioned what a rep would do under these conditions. I told him a few of their reps had left to take competitive manufacturers, but that most had stayed. The distributor shook his head and related he saw the company had record profits two years ago with a significant decrease in profits last year. He laughed and asked if they had increased the reps’ commissions as their pricing had stabilized and, in some instances, had been reduced significantly. He knew the answer and asked if the decreased commissions might have affected their profit reduction.

Are there any solutions or resolutions to be found?

I do not question the need for profitability. I recognize it as the primary responsibility for any company. What I question is the effectiveness of decreasing commissions on the people who are most affected by the added responsibility and decreased compensation. Would an employee accept it? Does it benefit the manufacturer to force their sales force to add additional manufacturers to represent to meet payrolls and costs?

Are more reps understanding their cost of doing business? When a manufacturer reduces their commissions to representatives, will they get less time or effort to sell and specify the line? Maybe we should not blame the reps for the number of manufacturers on their line card as they are subject to the whims of management (and most are on 30-day contracts!)

NEMRA began with the intent to be the “third leg of the stool” to drive the electrical industry. A friend told me he despised that analogy because, certainly, equality is not yet present. He commented bosses don’t care about their reps, nor their customers, because salespeople, people who are in front of customers, are no longer bosses. Manufacturer bosses answer to Wall Street and not “the street.”

I prefer to believe that the chair may be wobbly, but with representatives becoming far more a part of the chain and carrying far more leverage than when NEMRA began, we may not be the reason for the unevenness.

If you have been feeling the same, or you’re not achieving your goals, Channel Marketing Group may be able to help. Some rep-focused areas include:

For Distributors

• We can survey / interview your reps to gain confidential feedback?

For Reps

• We can survey / interview your distributors to gain insights from them. We have a proprietary Distributor Satisfaction Survey as well as an Inside Sales Assessment process that gains distributor insights.
• If you are not familiar with the NEMRA Rep of the Future, since we wrote it we can help you analyze yourself and develop a roadmap.
• We’ve also worked with reps on succession planning, strategic planning, marketing strategies, and more.

For Manufacturers

• Ask us about our Rep 360 process. Or perhaps you could benefit from a Rep Advisory Council?
• Maybe you need a review of your rep management process? Your regional managers? Or you need help in finding a rep?
• If you are not evaluating yourself, and your reps, based upon the NEMRA Rep of the Future, perhaps there is an opportunity to upscale your sales processes … while also educating your team on what leading reps are expecting from factories.

Planning for 2027 is coming soon. These insights can help you position for 2027 … and yes, we only have so much bandwidth and will consider exclusive product category and geographic area exclusivity.

Reach out to myself or David