Business

‘Good, But Challenging…’

Exploring the market outlook for independent reps.

When I’m in the field and encounter a friend or colleague from our industry, I’m frequently asked, “How’s business?” Knowing that this question comes up often, and wanting to give a concise but accurate response, I have answered the same way for the last few years. I’ve been saying, “Good, but challenging….”

About 10 years ago, one of our industry’s major pundits addressed a group of reps from around the country at a major manufacturer’s annual sales meeting. Ironically, just the month prior, he had published an article that opined the independent rep model would not survive as our industry continued to evolve to a service- and recurring-revenue-based profit model reminiscent of the IT channel. Thinking he was an odd choice to help motivate a group of reps, the attendees from around the country were quite anxious to engage. Eventually, the pundit backpedaled, admitting that perhaps some good independent rep firms might survive—even flourish. I am happy to report that has, in fact, been the case.

Now, that’s not to say independent reps have had it easy. As with every category in our industry—indeed, as with our industry as a whole—reps have been tremendously challenged. Major industry trends play decisive roles in reps’ strategies, as well as their success (or failure). Let’s look at a few of those trends.

  • Mega-Brands: Some large companies, or families of companies, aim to capture the entire solution sale. Their goal is to have enterprise customers standardize on their brand for as many solution components as possible. There’s already a list of traditional AV mega-brands in this category, but, for several years now, little companies from the IT world (ever heard of Cisco and Microsoft?) have been trying to extend the “I’m a Cisco/Microsoft house” approach to include many of their commercial audiovisual solutions. Although I can’t speak for all reps, I can say Cisco and Microsoft have not contacted me to be their sales agent. So, as more of the components (and platforms) of our business migrate in this direction, there will be less market for traditional AV product category specialists.
  • A “Good Enough” Mentality: Most good reps have business models that revolve around partnering with high-quality, best-in-category product lines. Seemingly, however, more and more customers are content with sound and video quality that is just “good enough.” An argument can be made that one does not require a top-tier acoustical speaker for simple sound reinforcement in a classroom or corporate cafeteria. However, at the same time, we often see other factors—wrongheaded ones—being injected into design processes and decision-making, rather than having decisions be made based on a true needs analysis in relation to the user experience.
  • Software/Cloud/Virtualized Solutions Proliferation: Traditional (hardware) solutions are being challenged by software and virtualized solutions in many categories today. Acquisition (cameras and mics) and reproduction (displays and speakers) remain strong component categories at either end, but the middle is becoming murky. The challenge for best-in-product-category reps is that many of the non-traditional solutions in the murky middle do not utilize reps (whereas their predecessor hardware companies did), or they incorporate solutions that used to be addressed by traditional standalone components.

In light of these changes and challenges, what is the role for an independent rep company? Can independent reps survive?

The short answer is “yes.” Good rep firms can not only survive, but, in fact, thrive—but only if we change and adapt our value proposition to the market’s direction and needs. It’s no different, really, from many other areas of our industry. This is proven by the many still-successful rep firms around the country. They’ve realized that, by changing, they can stay relevant. They’ve adapted their value proposition to what the market needs, and, as a result, continued to succeed.

Here are some commonalities I’ve noticed among the “thrivers”:

  • Many of the best reps have a large, great DSP or control brand as part of their foundation. Although it’s more easily said than done, having a mega-brand as a cornerstone partner is extremely helpful at a time when the mega-brand race continues to heat up.
  • Although the “good enough” hurdle is tricky, high-quality, properly supported solutions often still win in the end. Many reps have leapt that hurdle by utilizing relationships, influence, salesmanship and perseverance, conveying and demonstrating the true value of best-in-class solutions.
  • Lastly, as the market clamors for “soft,” virtualized solutions, go ahead and join in! Yes, it’s true that there are still many more “hard” solutions in our market. It’s also true that the newer “soft” solutions often don’t utilize reps—but some do! As more and more “soft” and virtual solutions join the market, we think the local expertise and influence, the low cost barrier to entry and the variable cost of sales growth that independent reps provide will be as appealing to those manufacturers as it has been to hardware manufacturers for many decades now. And that appeal will continue into the future.

In the end, relationships and influence, coupled with high-quality/highly supported solutions, still trump other, more subjective factors. That means independent reps will always have an important and impactful role to play.

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