How Independent A/V Reps are Making a Comeback
More companies are embracing or returning to the independent manufacturer’s representative sales model, as it persists with renewed vigor and attractive ROI potential.
When you distill the job description down to its essence, an independent manufacturer’s representative is primarily a server. They serve the manufacturer with whom they have a contract while simultaneously serving the client to whom they wish to sell the aforementioned manufacturer’s product or service. A rep is really the middleman, if you will.
Full disclosure, I was a rep for a long time. I first tried it for a year or so in the mid-1970s before I became a buyer for a major department store. I began again in the early 1980s, finally hanging out my own shingle (with partners) as a rep principal about 10 years later. That continued, with a couple of fits, starts and partners, until I retired a few years back.
So, you may correctly assume that I like reps. In truth, most of my best friends are or have been reps. That’s why I was very concerned back in 2011 when CE Pro published a series of articles on the demise of independent reps. There have always been truly frenetic vendors who change the way they go to market seemingly more frequently than they change their undergarments. But in 2011 some stalwart manufacturers that had used the independent rep model since Eisenhower was president changed to a factory- direct sales team. It was troublesome.
“A lot of sales managers feared for their jobs during the recession,” says Ray Wright, a former longtime rep who has served as executive director of IPRO (Independent Professional Representative Organization) for most of the group’s 20-plus years. “The bean counters were looking to cut costs wherever they could and the rep force was offered up as the easiest place to start.”
Tide Begins to Turn Back
But the move to get rid of reps didn’t make a whole lot of sense. They are a fixed cost in a sales budget calculation. If they don’t sell much they don’t get paid much. (They also get fired.) There is no salary, no draw, no medical or workman’s comp insurance premiums, no 401(k), no expense reports to examine and/or dispute and no company car. The direct sales force devotees will counter that they have a more focused and precision sales force that know the product and policies cold. The direct team is loyal without conflicts.
“That was one of the many excuses factories used when they got rid of an entire rep force,” says Marla Suttenberg, president of The Sapphire Group, a multi-territory commercial and residential rep firm that spans a good chunk of the Northeast.
She adds, tongue-in-cheekly, “And independent reps hate to write reports that factory reps don’t seem to mind.”
The independent reps further claim to have a more intimate understanding of their market and clients.
“Now that business is better and jobs are no longer threatened,” says Wright, “the manufacturers know that independent reps give them better and quicker access to the accounts.”
Mark Cichowski, currently CEO of Clarity AV International in Orange County, Calif., concurs, adding, “Most manufacturers have come to realize that a good independent rep offers a better return on investment than a factory rep working a territory by himself for a week a few times a year.”
Yet that intimacy explains only part of why there appears to be an industry swing back to independents after years of the pendulum seemingly stuck in the other direction. Instead of headlines involving companies cutting rep forces, lately we’ve been seeing the opposite as manufacturers such as Kaleidescape, Sony and others board the rep train to pad their sales strength.
Networking Events, Education Enhance Reps’ Role
“There’s a new kind of rep firm that has emerged from the ashes of the recession,” insists Mike Sajecki, principal at C&E Marketing in Florida.
And his peers from coast-to-coast agree. First, this new kind of rep has truly invested in their business. And it’s more than just technical expertise, which is now as required as a pencil. For example, each salesperson at Sajecki’s C&E Marketing is a member of both the American Institute of Architects (AIA) and the American Society of Interior Designers (ASID), memberships that afford them superb access for presenting new products, not to mention the networking possibilities.
Suttenberg calls the architects and designers part of a group she has dubbed “the influencers.” For her that group also includes the specific A/V consultants and end users, both largely part of the process on the commercial side of the industry but beginning to appear on the residential side, especially in uber-affluent metro New York. These influencers are called on with the same frequency and enthusiasm as the integrators themselves.
Before Cichowski sold his local rep firm to concentrate on projects of a larger scope, he and his people were regulars on integrators’ jobsites, familiar with both the projects and the field people responsible for their installation and follow through. “By necessity the recession created a better integrator — not down-sized but right-sized. Those were the clients with whom we had the most success.”
It is important to note other intertwined qualities of this new rep phenomenon. Most of them are simply reps, not rep/distributors or even stocking reps save for an occasional emergency sale. But that aside, many of them still feel the time, effort and expense of a local show is worth its weight in gold. That used to be almost exclusively the domain of the distributor.
Cichowski’s current company, for example, spends part of its time helping to organize local territory shows that involve multiple (and usually competing) rep firms. Starting with his own territory, Cichowski has brought the concept to Arizona, Michigan, Colorado and Florida. More than 100 custom install brands have exhibited at his Technology and Business Summit Events. This is certainly new thinking outside of the box.
Suttenberg has successfully produced her own events with the help of her vendors (led by Crestron) in New York and Boston for a few years now. She is thinking of expanding to Philadelphia and upstate New York.
“Call me selfish but I want my accounts and the influencers in my venue, eating my food, drinking my cocktails, learning about my lines without any thought of the competition,” she says.
Brand Loyalty Shrinks Line Cards
Another quality in this post-recession rep movement is that they are more careful about what they choose to represent. The line card that unfolds like a road map is largely a thing of the past. Indeed, IPRO’s Wright concedes that his greatest challenge at present is finding IPRO members to represent start-up firms, even those that appear to have a lot of promise.
“Reps today are protective of not only their time and energy but also of the equity they have with their existing manufacturers,” he says.
Says Suttenberg: “Before I decide to take on representation of a new line, I look for synergy with my current roster of vendors. If there’s no apparent fit, I won’t take it on.”
Cichowski adds, “Manufacturers in this new era really seem to want a partnership with their reps, so the reps commit to that type of vendor.”
The debate will likely never end. There are vendors that appear to do just fine with a factory-direct team and will likely never change in spite of what is clearly a new era for the independent. But reps should keep their ears to the ground and answer their smartphones. You never know what opportunity might be on the other end of the call.
5 Things You Didn’t Know About Reps
I had three successive partners over my rep firm’s 25-year history. Each of the last two, still close friends, had made the jump from retail to vendor sales management without the more- oftenthan- not step of first working for a rep. Within 60 days of starting as a rep principal, each lamented after a bad day something like, “This is a lot harder than I ever imagined it would be.”
There lingers an unfortunate and inaccurate supposition that reps, especially principals, make coffee runs and glad-hand their way to a prosperity that affords them much time on their yachts and/or golf courses. Being a rep, although relatively easy to launch, takes a tremendous combination of heart, guts, street smarts and luck to succeed and prosper.
1. How does a rep get lines? Outside of the very rare occasion when an old college fraternity brother or the like becomes a national sales manager (it does happen), the interview process is the norm. Rep firms interview far more often for lines than individuals ever interview for jobs and I can assure you the former in much more intense on every level.
First up is an introductory letter which is part cover letter, part 30-second elevator pitch. This letter is accompanied by the rep firm’s company profile, an up-to-date resume that includes philosophy, methods of operation, bios of all personnel, current line card, page of awards and achievements and a list of key accounts who will serve as references in addition to the sales manager types mentioned on the line card page. The average profile runs a dozen or so pages and needs constant updating.
If the rep firm passes the first stage, the vendor will often ask for a detailed marketing report outlining how the firm will increase business. This document features, in addition to tons of other stuff, throwing the former rep under the wheels as well as subtly doing the same to whomever the rep thinks or knows they are up against for the line.
Then there’s the actual interview. It’s usually all hands on deck with the principal(s) doing the bulk of the talking and answering. But the sales staff and the office staff has to be prepared should a specific question come their way. Some rep firms have been known to bring ringers to the interview to make their firm look larger than it actually is, a process known as “dead men on the resume.”
2. How long a time is the rep contract good for? With very few exceptions, 30 short days. One of the aces that the manufacturer has in its hand is the Unrestricted Termination Clause, which was in every rep contract I ever signed. It reads something like this: “Either Party may terminate this agreement for any or no reason by giving the Other Party at least 30 days’ prior notice.” Reps, as you would imagine, virtually never terminate these agreements. Manufacturers do all the terminating.
3. How and what is a rep paid? Along with that termination clause every rep contract has addenda that outline the rep firm’s territory and compensation. Territory can be loosely defined by the manufacturer, which, for instance, might loop Fairfield County in Connecticut as part of the Metro New York area rather than New England where it actually resides.
Commissions are anything but fixed. There can be different rates for different series or types of product or different channels of trade or even different color price sheets. Now where as each of the variations mentioned above are specified on an addendum page in the contract, anything else that is negotiated between the manufacturer and rep for a specific one-time deal or a pre-determined reduction in commission for a promotion or close-out (end-of-life) is not. And that can vary wildly.
4. Are all reps also distributors? In a manner of speaking, yes. There are three levels. At the top of the food chain are reps who have established completely separate businesses for their distribution company complete with warehouses, additional personnel and corporations. These folk not only distribute the brands they represent but also many other brands.
The second level is the “stocking rep,” which keeps key and best-selling items from contracted vendors in stock to sell to direct dealers in a pinch and sometimes smaller accounts with the manufacturer’s permission. As a quick aside, it is usually a violation of the rep contract to sell to an account on credit hold with the vendor. The third level is a rep who chooses to simply represent a manufacturer and leave the distribution to someone else.
5. What is the most unpleasant aspect of being a rep? I’d have to put collecting money from past due dealers at the top of the list. This is, again, required as part of the contract. It is at best awkward, at worst relationship ending. And despite the fact that “priority payments” just before a bankruptcy filing are illegal, credit managers may still ask a rep to get money or even merchandise out of a client’s place of business and take the chance of never getting caught.
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Chuck Schneider is a freelance writer with a long history in consumer electronics. He started and restarted his award-winning manufacturer’s representative firm - Value Added Marketing - and was also a vice president and general merchandise manager for a multi-regional CE chain, as well as a buyer for Lechmere's (a division of Target). Today, he is a freelance writer. Have a suggestion or a topic you want to read more about? Email Chuck at firstname.lastname@example.org
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