David Gordon on the Rep of the Future (a NEMRA study)

[00:00:03] Well, welcome to the Flowing Sales podcast everybody. We are excited to have David Gordon with us in the studio here I'll let you give a brief bio After that, we're gonna get into a really interesting topic rep of the future which you've had a lot of involvement

[00:00:19] Yeah, let's you uh, okay. My name is David Gordon principal of channel marketing group We are a strategic planning and marketing consultancy firm here based in Raleigh If you want to learn more it's channel mkt.com We focus in strategy marketing channel marketing and market research for manufacturers

[00:00:41] distributors and reps in the construction industrial trades That's the only people sense and we've run a couple of blogs in the industry electrical trends calm And HVAC our trends calm let's talk about rep of the future, you know where to come from

[00:00:56] I had it all had it all these discussions store Nemra which is you know, the National Electrical Manufacturer Rep Association For probably the last 15 years or so he has done a rep of the future study every five years And we got involved

[00:01:13] 2019 in doing research for them on the current rep of the future report which was released Just before kovat actually February 2020 and we spoke and surveyed about 700 people In the electrical channel distributors manufacturers of rep and asking them

[00:01:32] When they start looking at the market and where they see their needs being forward they meaning Distributors in the manfare. What do they need from reps? His never wanted to provide a tool roadmap for its members to grow their business and it became a tool for

[00:01:53] To evaluate their rep firms and but talking to the distributors it gives a sense of where it goes So we did all that research. We shared the results with the membership with the manufacturers It's been an interesting journey over the last five years

[00:02:09] Seeing members adopted because as you know with everything else is the early adopters There are people who already along that path without realizing they were on that path The forward thinkers

[00:02:22] You had others who've seen it and have adopted and then there are some who have been pulled along by their manufacturers his manufacturers have said I we maybe mentally always evaluated our reps and no one ever wants to say that they really use the Jack Welch

[00:02:40] method of employee management of ABCs, but Manufacturers do ABC. So this gave them a more formal Scorecard of how do you how to look at their reps? So they've adopted that and pulled it in and then there are some

[00:02:55] Agencies they haven't really changed in the last 30 years and that can work for them for that ownership based upon their goals so that's kind of what the History of had it has been and NEMRA has invested in this on behalf of their members

[00:03:10] For the last 15 years every five years It has also been used up in Canada because Semra which is a Canadian electrical manufacturer rep is a Heavily tied to NEMRA. So those members have gotten benefit from it, too There are some people in EDRA were also NEMRA members

[00:03:30] So they have seen the benefit of it So that has helped and we're getting ready to do the next version of that right now So every five years you do a refresh Things have changed a lot in the last five years

[00:03:41] Yeah, because it's not only on the rep side that change Think of all the changes that have happened on the manufacturer side and then on the distributor side let alone You know we can say what we want from the government policy and whatnot

[00:03:57] But COVID created lots of change and even if we take it out of COVID the market just changes Significantly when you start looking at five-year Segments who would have thought of AI five years ago? Who would have thought of how much investments going into data centers?

[00:04:15] Who would have thought electrification forget about green and things like that, but just the whole electrification What's going on with the grid who would have thought that has really been brought to the forefront now five years ago Industrial reshoring how much is that changing the economy?

[00:04:32] So all these dynamics you have to start thinking about How does that roll up to the distributor? How does that affect the manufacturer and from a rep viewpoint? The reps customer is the manufacturer because that's where the check is coming from right?

[00:04:45] So if you're understanding all these things as a rep Then you can start thinking where do you want to go because you start understanding the customer's expectations And that's the key to success is understanding customer expectations And then how do you manage it?

[00:04:59] So you've done a lot of work on the customer side We did the last one we did the research in 19 and released it in 2020 What was most surprising that you found? It's tough to say what was the most surprising five years after the fact

[00:05:14] Okay, because one of the things that was talked a lot prior and was seeping more into the conversation was topics about succession planning Which we've done a lot of research on and we've done a lot of research on that

[00:05:27] One of the things that was seeping more into the conversation was topics about succession planning Which we've seen really explode into the marketplace in the last two three years with acquisitions mergers within the rep community

[00:05:41] And it's interesting if we look at the succession planning and consolidation between with the rep side of the business as well as the distributor The biggest driver of that is people are getting old

[00:05:54] The ownership gets old and if they don't have a kid in their business they either need to do an esop sell it to management or have an exit So that's what's driving a lot of that you're seeing more of that so we knew planning would become important

[00:06:08] But what probably become more mainstream instead of let's say as an aha is few manufacturers had talked at that time about reaching the end customer They were more comfortable for the most part with reps calling on the distributor

[00:06:25] More of them started expressing that they wanted the rep spending more time at their customers at the distributors customers Whether that be a contractor whether that be a industrial end user whether that be at an influencer An engineer an architect specifications I'd be focusing on brand preference

[00:06:49] Versus focusing on servicing the distributor so that dynamic has really accelerated That further and this probably if you want to think about major change that then tied into another topic of demand generation Because calling on that audience a portion of that's demand generation but it's marketing

[00:07:12] Manufacturers wanted to see reps investing more in marketing to be a force multiplier And one of the things i've seen within agencies over the last two three years there are many more marketing people

[00:07:25] That have been employed within the rep community by factors of two and three if not more Of people who are responsible for marketing not the principle doing it in a part-time basis That's been I mean I know one they're not necessarily a large agent

[00:07:43] They've got three four people in marketing and they can actually track that back to revenue that they've generated Because it becomes that force multiplier to get the messaging out and for many who've said

[00:07:57] An independent sales agent the term is a misnomer because most agents regardless of the industry Are not selling anything selling defined as clothing giving the final price and collecting the cash Closing the sale they're really going out to creating brand preference, which is really a marketing function

[00:08:18] It's a demand generation function and the reason they're called sales is because years ago No one was willing to figure out a way to compensate that so they had to be compensated based upon sales in that territory

[00:08:32] Sales into account within a defined area that that manufacturer gave could be national could be local But it was tied to the selling of the product Versus the activities that drove interest because there's plenty of reps who don't get compensated

[00:08:48] They've created the demand but that product might be purchased outside the channel that they're responsible for Or it could be purchased By that company, but the purchasing manager Happens to be in a whole nother state

[00:09:02] So you but that demand generation of the marketing were some things that really came out of the last one And really probably to put a frame for you There were five pillars that really came out of the rep of the future that drove more detailed information and guidance

[00:09:17] We gave people and the pillars were product expertise Manufacturers expect the rep to know the product should fair enough fix that but with the changing of people That means you have to put a lot more into training demand generation

[00:09:31] Planning because there's not only planning for the agency but planning with that factory to drive growth And planning for the agency itself of where it wants to go. There's a succession planning. There's actual business planning There's annual sales plans. There's annual marketing plans. What's your technology investment strategy?

[00:09:53] Not for this year, but looking out What are you going to need getting people to think more forward of their business and more Collaboratively with their customers and with the factory The fourth as I mentioned was marketing

[00:10:08] And it's not just how do we go and buy what i'll call trash and trinkets the pens and golf balls and stuff like that It's more than how do we have a counter day or go and have an event or t and e and take someone to golf

[00:10:23] It's how do we mine data and actually do marketing in vertical marketing? And you represent 28 manufacturers But you also know there's synergies amongst some of those manufacturers And how do you focus on specific applications that tie in multiple manufacturers?

[00:10:42] Thinking like that versus forgive me for saying it this way go fetch For a particular product particular factory Technology kind of that's old school And the fifth pillar was technology which plays into flow But it also plays into crm systems marketing automation systems

[00:11:05] warehouse management systems expense management systems marketplace data and data intelligence Within different industries there are software tools for getting project information and bid information It's thinking holistically about the technology stack that the organization needs and it's not running microsoft 95

[00:11:27] And it's not running all of the commissions based upon excel or the back of the napkin It's how do we get into the modern age? So those became the five pillars from the last platform. What is the next iteration?

[00:11:39] We're currently doing a project for never call manufacturer of the future So we're trying to capture information from manufacturers of where they see their business challenges over the next three to five years

[00:11:52] We're taking that information. We're now going to roll it into the next rep of the future Which we're going to be doing that research this summer early fall and the Next document will be rolled out at nemera 2025 in uh february

[00:12:08] Do you have any uh feelers on you think some of this is going to change from from last time or Like what's happening in the market now? Because the rep of the future you did is now about five years old

[00:12:19] What do you think we're going to see you're going to see from early feedback that we've gotten from a manufacturer of the future You're going to see a double and tripling down on the demand generation side in the marketing side

[00:12:33] And that is driven because of consolidation of the distributors and with the latest in the electrical industry between Ad and iMark merging now, there's fewer independents and uh fewer Abilities for reps to affect change Individually, so it's going to come down to how do you get information?

[00:12:52] Down to the end customer the influencer to affect Behavioral change to get the product spec to even create demand because a lot of times Responded to us respect that servicing an opportunity Versus creating an opportunity can be two different things

[00:13:09] Some factories don't have the ability to create because they don't have products that could be Necessarily productivity enhancements. They need monies to be allocated and you therefore you're servicing Sometimes you can create demand in white space, but they want them focusing more and more on that

[00:13:25] The part that will be the challenge Is manufacturers have to think about how their compensation models have to evolve Because most manufacturer compensation models were built 30 40 50 years ago Strictly based upon percent of sale, but manufacturers over the years have moved more and more

[00:13:46] functional responsibilities to the agents whether it's back-end services side or sales Responsibilities or marketing they want more agency expenses go up talent goes up desired skill sets go up The tools agents need to have a vehicle that if they go in after specifications

[00:14:06] But that sales not happening in that territory, how are they going to get compensated if they're going to invest in technology They're going to invest in ai you either need to be an agency of a size that can afford to do it

[00:14:18] We're going to need some help if you're going to add people to focus on selected Vertical markets or certain product types or bringing in engineering resources. How are you going to monetize that? So those are things that are going to come into the next rep of the future

[00:14:33] Yeah, we've seen it um in some of the like for cisco For instance if you're a cisco provider or a partner for them and you get to a certain size a lot of times they'll they'll get creative and do things where they'll help fund a

[00:14:49] resource on staff for the for the partner or any rep in this case to Just focus on their product or be an expert on a group of products We're starting to see some of our manufacturers the utility space start kicking around those ideas as well

[00:15:05] Just because we got to own that in customer and that's to me and that's important for our business And we're doing things from an from an nts perspective We're cutting territories down so we can get in there and get and really grind out those

[00:15:19] end-user contacts and opportunities and And demand, you know drive that demand. So To me We're gonna have to come up with some creative ways to get those resources closer to that end-user

[00:15:33] Versus having them all at the factory. We got to be able to get them out in the field besides just doing a field trip with a Factory engineer we got to be able to do that on a weekly basis

[00:15:43] So it's going to go rely on us to do it So we got to come up with ways that we all win when you think about a rep today The reality is a rep's a fractional salesperson for the factory as an agent

[00:15:55] But you only have x people who can only spend x amount of hours in any given week For a particular factory let alone within what we're going to get to is how do some of your people or new people?

[00:16:08] Be fractionalized for selected groups of manufacturers. So you take your cisco example, they're not going to Spend for argument's sake a fully loaded person 150 000 dollars just randomly picking a number within a Element of your geographic market because one person realistically covering all eight states makes no sense

[00:16:31] You know, it's like throwing a pebble Into the pool, but then the question becomes how do you have three or four of those people? Depending upon the role could be even billable hours to an end customer depending upon the service

[00:16:43] But how do you get three or four of those? Manufacturers to help share that resource and you also pick up a piece of it because another Definition of profit is reduction of loss. You're not saying you don't you're not willing to help fund that

[00:17:00] But for you to go and invest 150 000 dollars On the hope that the person can generate strictly for that factory Knowing the sales cycle is a significant investment And if a factory and someone like a cisco with their size and their revenue base if they're not willing to invest

[00:17:19] How important is the initiative to them because when it's all on the back end they want all the reward In none of the risk. So why should all the risk be on the rep you're willing to share the risk That's right

[00:17:31] But it's a different thought process for a lot of these factories because with so many of them being owned by being publicly held companies Now it comes down to the quarter and what type of turnover happens in some of these companies at?

[00:17:43] Regional management and higher level let alone how often do they change their initiative dessert? That's the revolving door you get a new regime in All right. Here's a new plane. You get a new regime. All right. Here's a new plane. No, you're sorry

[00:17:57] So why should you take all that risk? It needs to be a risk sharing we've known some manufacturers who when they have those type of things They may come up with some retainer models. They'll come up with some compensation sharing models Some who are risk-averse

[00:18:13] Will come up with incremental commission models for those opportunities or they'll do a steps to sale Compensation model so there's other ways that it can be done but to think that just because they want you to do it you should write that check and

[00:18:31] Say, thank you very much for giving me that incremental expense I hope to get the return for you. It's a lot for them to ask. Is there anything the reps? Can do to kind of help facilitate those conversations is a lot of the other manufacturers I guess realizing

[00:18:47] That they need to do this or just something the rep should go to the manufacturer and say hey We're already marketing. We ought to do this Let's come up with a new revenue model. What do you recommend? It's a loaded question

[00:18:58] And the reason I say it's a loaded question is I know reps who've attempted to have that conversation One-on-one with a factory and unless it's an enlightened factory The factory says no because factories believe in divide and conquer and divide and conquer means

[00:19:15] You can't come with three or four or five of them or represent an advisory council Because one guy says it and what's the factory say? Let's take that offline But reps need it to a degree and i'm not saying every rep

[00:19:28] This is the right strategy for but ones who are like-minded with the same factory It wouldn't hurt them to speak with a similar voice They can each have different Tactical strategies for their marketplace, but at a higher level there's the

[00:19:45] Opportunity and you also obviously have to think of the right factories most reps They'll push the envelope to a degree But they say well so-and-so is right in the check

[00:19:57] So I don't want to push it too much because I don't want to be afraid i'm afraid of losing the line There's a fine balance comes down to how well, you know the players How you can socialize? the information through multiple levels

[00:20:11] Within the factory because most regional managers will not be too creative And don't want to take a risk to bring that information up because they don't want to take it to the vp Or the president they used the idea generation flow in downhill. You're smiling

[00:20:28] He's kind of like I resemble that but i'm not gonna talk about any of my manufacturers Yeah, we know a 30-day contract without your line Then there's a way to have it and it kind of goes back to what we were talking about earlier today is relationship

[00:20:39] You got to have that relationship With those manufacturers where you can have these conversations and it doesn't mean like hey when you bring an idea they have to do It or you're walking out. I think it's just more of

[00:20:50] Let's have a discussion on how we can grow our business together, right? And you have to get outside the the old way and just it's it's got to be this way There's there's so many Opportunities out there in the in the market has changed

[00:21:03] So we got to be able to adapt with that market which might mean Having these conversations that can get us all out of our normal business practices, but you got to have that relationship to have that discussion where you don't fear for repercussions

[00:21:18] Relationship is important and remembering. It's still a people business It's all going to happen on email and text and it doesn't all happen on teams Teams can continue relationships, but you do have to have some face-to-face the most progressive

[00:21:33] Manufacturers have a rep advisory councils that they actually listen to versus just one Never an excuse to get to give one together play golf with a checkbox to say we had a rep advisory council The most progressive

[00:21:50] Manufacturers also recognize that the organization that does not need to be run by legal finance it and operations Now what I mean by that is there's so many of them that It's got to be a one-size-fits-all strategy every market every opportunity can be a little bit different

[00:22:09] How do you come up with a cafeteria playbook? That works for that different market still if it can fit within a parameter, but you can't always put a circle into a square How do you come up with the right solution?

[00:22:23] Because at the end of the day every factory is interested in one thing actually two things They're interested in increased sales and increased profit. And what's every rep interested in increased commissions from that factory

[00:22:36] You're not thinking about improved profitability from that factory because that there's so much other things that go into that But you need to get more money and you got to be able to monetize it does have to be a profitable line to work with

[00:22:50] If that gets into ease of doing business on the back end So those are some of the dynamics That get played into it. It's a lot of a lot of complexity, right?

[00:23:00] What's stuff coming then we'll do like one more topic and then we'll we'll close it out. You mentioned marketing and uh, like you said that's something that maybe A lot of rep firms maybe aren't doing yet

[00:23:12] Something they haven't gotten into what have you seen as successful ways to do that from rep firms that are hiring Marketers like because the rep model is interesting from a marketing standpoint, right? How have you seen that done well? Well

[00:23:24] challenging question to answer because so many different industries What inevitably the first question really comes down to is value proposition and answering that question So what is the value proposition of the rep? What is the value proposition of the lines that the rep? represents

[00:23:43] What is the value proposition of those products the answers to those three questions in a tiered approach start driving in a lot of Strategy and tactics that fit into it branding fits into it. So when you think branding, yeah, it can be

[00:23:59] Advertising it can be social media. It can be E-marketing it can be website It can be being at the right events when you get into some more of the tactical you get more into application marketing

[00:24:14] We'll talk about all right, uh, and this is where it changes by industry I'll pick on and enlighten. Let's say you're talking about energy efficiency All right Maybe we want to talk about energy efficiency in certain states and you're talking about utilities and takeoffs and rebates

[00:24:31] And being into You're focusing on the warehouse space and certain products that fit into that so that's where you start getting into the rabbit hole of Energy efficiency starting here and then what is the value proposition to take it all the way down to product?

[00:24:48] But people buy solutions people don't buy products. So it's thinking about those type of things It's segmenting of the customer base How do you communicate to different? Layers of your customer base based upon their size based upon their role. It's doing gap analysis with the data

[00:25:08] So there's a lot of different elements you can start Migrating down but started understanding the value proposition and for the agency Why should someone want to work with this agency? And for a lot of agencies? That's a tough question to be introspective because the first

[00:25:26] Default is our people and we service our customers well And our longevity and we care about customers So the guy down the street who's been in business as long as you he's got lousy service

[00:25:39] Doesn't care about the customers has part of my friends shitty people who've all been there for 20 years Also, it's no depth to prove it. We live in a world today where people want to the same prove it make it real

[00:25:54] Tell me what projects you've worked on in the area. What types of solutions did you bring? What value did you add and that's why I use the term value proposition

[00:26:05] Because that's what people are coming to you for when you have that then you evolve that into a relationship then you get into Lifecycle marketing that's the thing about and so and then this is coming out

[00:26:17] Number of 20 25, right? Yeah, that'll come out then the manufacturer the future report probably come out sometime next Month, you know, where do people find that? Oh because those are number they're going to be number driven The full report will be open to number of members

[00:26:32] Manufacturers and reps and they can get that at nimra.org Uh, or at least with reaching out to their there will be highlights of that I'll share via electrical trends just because we want to sell never socialize that to its membership

[00:26:46] So people can subscribe at electrical trends.com And that's a free subscription probably genericize some of it So if anyone's involved in the hvac segment They can go to hvac our trends.com or give me a call fair to that boy

[00:27:02] How can people contact you if they want to work with you? They can go to channel mkt.com Which is our the website They can reach me at d gordon at channel mkt.com. That was great. Thank you for the opportunity Enjoyed it