“At one point our organization grew to over 1,300 employees. Most of the head count was in a sister company, called Ready Set Service, we started specifically to perform in-store service for Home Depot. This involved a lot more HR management and no real sales and marketing, so I was happy to sell off my interest in this piece of the company and get back to selling,” explains Michael Rowe, who is retired from Rowe Marketing Group and currently President of Mikrotech Business Development in Evanston Illinois.
Thirteen hundred employees in a rep firm? In the circles where I’d travelled in the past, a rep firm of 20 employees was very substantial. So I definitely wanted to learn more.
When his firm was at its peak employment its three business units were:
- Industrial Catalogs like:
- Home Depot
- Home Improvement retailers, including
-Hardware Co-ops like ACE Hardware, TruServ, and Do-It Best
To support the needs of manufacturers, distributors and retailers, Rowe’s company provided many diverse services like:
- In-store merchandising
- Field training
- Trade show booth design and management
- Creating specification and catalog sheets, planograms, and order forms
- Writing catalog and advertising copy
- Shooting product images
- Writing how-to articles
- Market research
- Packaging design
- IT software development
When a new Home Depot opened, for example, Rowe’s company set up the shelving, built displays, stocked the shelves, and took ownership of those shelves going forward to be sure the products were attractively displayed, adequately stocked, reflected current signage and were state-of-the art in their merchandising practices. So well, in fact, that when Home Depot created their own in-store merchandising organization, they hired Ready Set Service to manage entire category aisles in electrical, bath and vanities, plumbing, and lighting.
After selling off his interest in the service and retail pieces of the company to employees, Michael focused on the industrial catalog segment. In 2008 he turned over the reins to a former Grainger executive, Bob Thrush, who had joined Rowe Marketing four years prior. Michael continued with Bob at the new company, Rowe-Thrush, Inc., for another few years and retired after 30 years in the business in 2011.
What reps do best, says Michael, is “Grow profitable sales and extend market share.” And do it faster and more cost-effectively than direct salespeople, he adds.
“The direct salesperson is the easiest to beat for a sale,” says Michael. “A buyer at a major retailer or national distributor typically has two years in that chair for that product category. And a company’s direct regional account manager has about the same. Being in that position for the buyer and being in that role for the account manager is not a lifelong career for either of them.”
When a rep sits across the desk from a major buyer, the rep can bring decades of broad experience with that particular retailer to the conversation, an institutional memory that a manufacturer’s direct account manager doing a two or three year rotation in that role can never match. “Reps live at the customers, know their direction and get ahead of it,” says Michael.
Another disadvantage in using direct salespeople is that they often toe the company line and put compliance with company directives ahead of serving the customer, Michael explains. “In traditional trade channels, the manufacturers often use a single marketing strategy for all distributors. They paint themselves into a box. They say, ‘This is how we go to market and the sales manager follows those marching orders, because their sales process is typically manufacturing driven. A good rep understands how to modify and customize the given program to balance the needs of both the customer and the manufacturer creating a win-win opportunity.”
Another strategy innovative reps use is what Michael calls the “Get the gig first, then get the band” strategy.
“Say we are calling on a catalog account and we find out that they will be looking to add particular kinds of items to their catalog. With our experience, we can qualify a line for them just as the buyer would. So we would go out and find a manufacturer who would be the best fit, call their VP of sales, and offer to capture for them business at this account, which they would probably never access themselves. They say ‘yes’ 95% of the time.”
A similar strategy can be used at traditional vertical distributors. Understanding the distributors’ customer base provides opportunities to sell many types of items that appeal to the customer who is already standing in the counter area. “We asked ourselves, ‘What else would a contractor buy?’ The answer to that question might be as diverse as hats, pick-up truck accessories, hunting knives, or electronic accessories.” Again this is an example of understanding the end user for each customer and providing resources to grow their business. This is what makes a rep important.
Despite all his company’s successes, Michael too has experienced the “we sold too much, made it look too easy and lost the line” syndrome.
“We had a line we sold to all our major accounts to the tune of well over $40 million in annual sales which equated to over $1 million in commissions. A new CEO looked at that check and said, ‘Hey, I can put in my own direct people and do a better job fro less, so he fired us. He had no idea of all the work we did for them and all the relationships we built over decades of working for them. One account alone was about $14 million, which they quickly ‘grew’ with their new sales team to $8 million a few years later. By the time they eventually came back to me for help they were on the road to losing all that business too,” Michael explained.
“We had not burned any bridges and agreed to take back the line. It took some doing to turn the situation around, but I did eventually repair the relationship and get them back to where they were before they fired us and then some. After that, they thought we walk on water.”
Michael’s company constantly evaluates and updates their value proposition. “If we can’t honestly articulate why our company should be an essential part of the supply chain, then we have no future. And the services we provide to maintain that value have changed dramatically over time and will continue to change. That makes it challenging, but is also part of the fun.”
Rowe achieved what every rep company strives for. A principal who thinks they walk on water. Do your customers and principals think you walk on water? Use these lessons from Michael and MANA’s other educational resources to move your company in that direction.
My own personal small foray into selling to catalog houses when I was a rep supports Michael’s conclusion that regional sales managers’ sales processes are “manufacturer driven.”
When I owned a rep firm I managed the relationship between a large catalog house and one of my principals, and in one product category we had about a 1/8th of a page that generated about $250,000 in sales for that principal.
That small bit of catalog real estate was very successful for the catalog house, and the catalog house’s product manager came to me looking for complimentary products from my principal that would increase us to a quarter or a third of a page. So I wrote up my recommendations and produced a dummy catalog page that included the new products to present to the catalog house’s product manager.
But before I could deliver my recommendations, a new VP at my principal decided paying rep commissions on a catalog account was an unnecessary expense, because the principal “owned” that account, after all. So the catalog house was now a “house account” and I was forbidden from calling there on behalf of that principal.
That principal was still my largest line, paid my rep firm high-six-figure commissions each year, and gave me six months of severance on commissions for that catalog house, so I was a good soldier and turned over all of the material I’d created to the VP’s newly assigned “Catalog Manager.”
Not only did the Catalog Manager fail to follow through on the opportunity to double that catalog section’s sales, within 18 months the “manufacturer driven” attitude Michael cited eventually lost them that entire section.
How did they lose it? The catalog house had a policy. As long as a vendor’s prices for a product did not increase, the catalog house would not shop that product category with other prospective vendors.
The principal had a policy of issuing annual price increases, but I knew that the principal’s margins were phenomenal and that if the catalog house ever shopped that commodity, the principal would have to give a significant price decrease to maintain the business.
So when the principal had a price increase, I pushed back and got the price increase cancelled for the catalog house, and we kept the business at excellent margins for nearly a decade.
The new Catalog Manager’s skills, however, did not include pushing back against an ill-conceived price increase. He blithely forwarded the manufacturer’s annual price increase letter to the catalog house and stuck by the company’s policy of achieving annual price increases.
When the catalog house shopped that product in the marketplace the prices they got were close to half the prices of the incumbent I used to manage, so they dropped the incumbent without even allowing them the chance to counter offer.
The new VP is now gone. The Catalog Manager is gone. And the business is permanently gone. As is so often the case, a C suite manager who had never even met once with the customer meddled in a commercial situation he knew nothing about and managed to lose the business. Game over.