Having been an independent manufacturers' representative since the fall of 1979, I have seen the job description of reps evolve dramatically. Reps are the middleman or messengers in a three-way partnership (Dealer, Representative and Manufacturer) and as the industry evolves, it is only natural that these relationships become strained if individual roles do not evolve as well. As always, it's easy to shoot the messenger. Unfortunately, there seems to be a lot of that going on in our industry, as both technology and marketing strategies undergo rapid change.

After recently polling a dozen or so reps whom I believe to be tops in our industry, I have concluded that most are staying in business only because they are excellent businessmen, and certainly not because rep commissions are high. Out of the three types of companies that make up the traditional distribution network (Dealer, Representative and Manufacturer), the rep works on a dramatically shorter net profit than the other two. We have had our commissions drop a point, to a point and a half, over the last 3-5 years. On top of that, new tax laws have taken a huge bite out of what we net.

Under the new tax code, the percentage of our income that's taxable has grown dramatically, in some cases as much as 50 percent. Because of the nature of the rep business (having to travel and entertain), we are now netting less and paying more tax on the same amount of sales.

The cost of services expected by our dealers and manufacturers also has skyrocketed. The days of a car, a couple of phone lines, a pad of blank purchase orders and an inside person taking orders and paying bills while you're on the road are long gone. When I started my first rep job, I had to establish model inventories for my contractors and dealers. I would travel around and do an inventory, compare it to the model, generate a purchase order for what had been sold, hand out new price lists and literature, talk about programs and new products and schedule my return. Now, because we are in the computer and Internet age, we are expected to have computers for placing and tracking orders, creating web sites, using E-mail and generating in-depth reporting capabilities. Not only does this take a hefty investment in equipment, (by the way, that hefty investment requires a hefty upgrade charge every 36 months), it also takes more personnel to feed the data into the computers and fax machines.

Oh yes, samples. We can't forget rep samples. A few years ago, when reps were done with their samples, most manufacturers would rotate them into inventory used for promotions. What a concept! I looked at the sample inventories of my firm, as well as others around the country. We are now required to pay for many samples, so it is no surprise to learn that our inventories are as big as a fair-sized dealer. This significantly affects the rep firm's bottom line.

REPS CAN BE GOOD INTEGRATORS Some in the industry feel that reps are just salesmen. However, most of the reps I know are pretty good systems integrators. You see, several times a year, at our own expense, we pull our sales team out of the field to go learn about our manufacturers' newest technologies and the products they embrace. New products are being released every day, and most manufacturers expect their reps to commit significant resources to training the dealers, contractors and consultants on these products. At least once a quarter, we host a major training seminar to share this knowledge with dealers and their customers. Dealers look to the reps for this kind of support. It may be a conservative estimate when I say that our sales people" spend at least half of their time training dealers, consultants and contractors how to use and integrate new products into their systems.

The fact that equipment is getting more expensive shouldn't be blamed on manufacturers and reps. It's actually a sign of a healthy market. Take just a minute to think about the typical system of just five years ago and its features, performance and pricing. I bet you could still do the job for the same price, and find it would perform better and have just as many features if not more. The difference is that consumer electronics have gotten very sophisticated and jam-packed with with cool features. Manufacturers and reps are also performing better customer training. Therefore, your customers have higher expectations and greater demands which are, in effect, driving up the sale price. The good news is that you have the technologies and skills to meet their expectations and a market healthy enough to support it.

The tremendous volume of information available to customers is one of the ways our industry has changed over the years. We have always been information managers, but advancements in technology have caused the best information managers to float to the top and become the best reps. Remember all of those computers and the personnel needed to feed them data? Well, if these inside people are really doing their jobs well, our dealers and manufacturers hardly know they are there. It's their job to make sure that orders are placed correctly, shipments are shipped in time and to the right location. They supply sales persons with the latest reports, so that we know what our dealers and manufacturers are doing. In short, they make us all look good.

On any given day I can sit in my office and see our office team head off a multitude of problems that would have turned quickly into major disasters, and they do this with very little notice or thanks. I have witnessed similar situations quickly go awry when dealers and manufacturers are left to their own devices. No offense, but this is our business. This is just one of the many services we offer.

We have watched a few dealers grow to become some of the biggest in our industry and then decide they don't need reps anymore. They circumvented their reps only to have things get completely out of control. Regularly, orders were lost or placed with the wrong sku's, they consistently had shipments go to the wrong location and the latest promotions weren't being used. These dealers came to miss having reps demonstrate the latest equipment and leaving literature and pricing.

Because reps have become integral in disseminating information and training, keeping up with new technologies and integrating those products into their systems has become almost an impossible job. Left with nowhere else to turn, many manufacturers have asked their reps to sort it all out. So it's no surprise when many of these dealers went back and rekindled those old partnerships with their reps. Manufacturers have set up their systems based on rep involvement. It also shouldn't be a surprise that circumventing part of the system often makes things a little shaky.

Here's another tidbit that seems to slip by some of our dealers and manufacturers. Good reps call on both dealers that are growing and doing very well and those that aren't. I don't think that there is a rep out there who doesn't represent some really great manufacturers that have it together, and some that just don't seem to be able to figure it out. Many manufacturers have discovered the advantages of the reps' perspective and utilize rep council groups. Just about any other industry would love to have this kind of adviser as a business partner. In fact they do; they are called consultants and they are paid huge fees for their expertise.

The dealers and contractors that do well all have one thing in common: when a rep walks into their office they ask a lot of questions. The ones that don't are wasting a tremendous resource. The same could be said for the manufacturer. The ones that seem to always be able to meet the demands of the market are the best listeners and, like our good dealers, ask lots of questions at the rep council or meet with us one on one.

The reality is that there are a lot of very clever and shrewd people, both on the manufacturer's side as well as the dealer's side. If reps wcre such a questionable entity, then most manufacturers wouldn't use us. In the pro contracting and A/V market there are a few manufacturers who do successfully employ their own reps or what is termed line specific reps. In most cases they are marketing an extremely narrow niche and high priced product line.

In past years we have seen some manufacturers, whose product lines are more typical in that they have broader market appeal, try to use line specific reps. They found, generally, that all territories have very broad markets and that the line specific rep was lacking the market influence and involvement that independent reps enjoy. This approach resulted in missed sales and sluggish or negative growth.

Independent rep firms contract with 10 to 12 major manufacturers (core lines) and have as many support or complementary lines as they do core lines. This creates momentum fueled by the synergy of the rep working these lines together. In such a highly technical and competitive industry many territories are simply too large either geographically or in customer density for one rep to handle. The economic feasibility of putting several line specific reps in a territory makes the independent firm far more attractive.

Reps are always balancing between having just the right number of lines (affording all the services expected by our market), verses too many lines and losing focus. About every two years we seem to have to do some pruning. As manufacturers broaden their product lines, they become conflicts with others. During the late '80's through the early '90's, we witnessed many mergers, often having great impact on a rep's line card. On the other hand, some manufacturers stop growing and can't seem to keep up with the market; while others have a management change and the rep is one of the fatalities.

A Note On Mergers
Many would argue that mergers have helped our industry's growth, both in technology and sales. Companies merge for a meriad of reasons to strengthen their product lines or to obtain technology and manufacturing facilities. Even though this trend has seemed to have slowed, many manufacturers view this as a good way to grow their business. There is no question that this tactic is here to stay.

Let me say it one more time: If reps were so expensive, dealers and manufacturers would have figured out how to get along without us long ago. The truth is, so long as there are free-thinking business people making the buying decisions and there are manufacturers who want to compete and have an edge up on the competition there will always be the need for reps.

What does all this mean? Today's rep firm makes less for the same amount of sales, our cost of doing business has dramatically grown, and to top it all off, we work on 30-day contracts. In spite of all this, we seem to make it work; in many cases very well. Most people couldn't conceive of trying to build a future on this kind of a seenario. Yet reps are just like anybody else; we have mortgages to pay and kids to send to college.

So the next time a rep walks into your office or calls, take a moment to appreciate the tremendous resources he represents. All you have to understand is that he is potentially your best asset and business partner within the industry. Establishing a stronger partnership with him will be time well spent Given the opportunity you just might be surprised at what he can make happen for you in this three-way relationship.

Bruce Marlin is president of Irving, TX-based Marketing Concepts, founded in 1984 Bruce Marlin can be reached via e-mail at Bruce@Mar-Con.com.

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Date Written: July 1998

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