Recently my colleague, Gene Biben, penned an article for ElectricalTrends, discussing a disturbing trends, perhaps it’s an outgrowth from COVID, that affects many manufacturers.
As background, Gene spent over 40 years as a manufacturer rep. The agency was passed from father to son. He has since retired, with his son-in-law taking over, but he stays involved in the business and the industry.
Many of you know that the HVACR industry operates very similar to the electrical industry, especially the construction side of the electrical industry.
So, the question becomes, to reps and distributors, “can you relate to this ‘evolution’ within manufacturers?” From our experience it is much more prevalent in publicly held companies. The only reason PE backed companies don’t suffer this too much is that they are on a fast-grow mission so the PE firm can “flip” the business in 3-7 years, but when they
get ready for the flip, finance rears its head … cost control to improve margins and profitability.
Gene’s premise … the voice of the customer (embodied by sales, so the voice of distribution, the voice of contractors / end-users), in many companies, no longer has a seat at the executive / C-level table. Take a read and let us know your thoughts?
Is Your Customer King?
“While interviewing a larger manufacturer, the regional manager stated in frustration that in his company’s executive meetings, there was no one in sales that was invited to participate, rather the meetings were now populated by IT and operational positions only.
Anyone that has ever traveled from O’Hare Airport in Chicago knows what delays can occur. I was departing from there after an advisory board meeting and had the inevitable a 3-hour delay. It gave me an opportunity for a discussion with another representative who stated, in dismay that when he and I started in this industry, the favorite statement was that “nothing started until there was an order.” He now lamented that with IT and operational people running many companies, it was “more like sales and customers were necessary evils that messed up their systems.”
Certainly, this does not occur with every manufacturer, however, there seem to be enough complaints that might justify the opinion.
Take, as an example, the past few years when the supply chain has had so much difficulty supplying products and manufacturers could not deliver to distributors to support their customers. Although it was certainly the most widespread supply shortage I can remember, there certainly have been others, although usually supplier-specific. One of the differences in this product deficit was, in my opinion, how many products were supplied and, perhaps more importantly, to whom.
In the past, manufacturers took into account the loyalty of a distributor when determining who would receive a product. And loyalty was not just total dollars. It was longevity and consistency. Many would state if a distributor was not loyal, they would not take orders from them. Manufacturers would call their salesforce (regional managers and reps) and ask us to make determinations on who should be prioritized
The reps I contacted for this article were nearly unanimous in stating they were not contacted this time around. Decisions came from corporate with little to no flexibility. Others stated they had manufacturers that strictly followed a “first come first served” policy with no limitation as to who the distributor was or what business they had done previously with the manufacturer. And others were told that the channel was not their priority – retail (DIY) was due to the penalties that would be charged to a manufacturer for not shipping complete or to required stock levels.
I spoke to the VP of Sales for a large Midwestern distributor who was very disappointed with various manufacturers. This distributor said they had been 100% loyal with a number of manufacturers for many years, but could not get the most important items they needed to satisfy their customers. He stated they currently have added competitors to their inventory so that in the future, they might improve their customer service and fill rates.
Although many manufacturers did not follow this path and did protect their distribution channel, my concern is whether those that did have in place a loyalty program may not have communicated this policy to their customers.
When I confronted one of the manufacturers the Midwest distributor had complained about, I was told there was in place a policy by the manufacturer to favor loyal distributors such as the exact one I had spoken about. When I asked if they had communicated that to their distributor channel, the comment was “apparently not well enough.” He said the order came from Operations and although sales did determine who was prioritized, the sales force was deeply involved with the process, but not in the final selection.
Is it my imagination or do operational and IT people generally not stay with companies as often as salespeople in management? Sales management looks at their salesforce as quintessential to their success and their company’s. A book written by the owner of Rosenbluth Travel, a large travel agency stated, “if you take care of your people; they will take care of your customers.”
The complaint consistently heard in many cases today seems to be “who really cares about anyone or anything?” It was a common sentiment when asking people why they are / were leaving positions to retire or find work elsewhere. Yet, it is a relatively new phenomenon that did not exist a few years ago. To me that means it can certainly be eradicated and fixed.
Hopefully, as the shortages continue to improve, sales might again be a targeted goal in those companies that may have downplayed its importance and perhaps in those companies the customer again might be considered “KING” and their needs might be considered through communication, maybe even bringing back those advisory boards that were so prevalent. (But I guess that depends if Operations and IT are willing to listen to the voice of the customer.)
For companies to succeed, sales, and hence “the customer”, needs to reclaim its seat at the executive table.”
Thoughts
So, what do you think about Gene’s observations. Why do many feel that manufacturers, especially publicly held ones, seem to not want “voice of the customer”?
One national distributor I recently spoke with commented that HR and Finance, sometimes Operations, run everything. Another felt IT was also too involved as a decision-maker rather than being a business enabler (and I know distributors know what IT means at a manufacturer … “Inhibiting Transactions”)
Others have commented how publicly held companies are too focused on DEI and ESG initiatives, to the detriment of focusing on the customer because it isn’t either 1) politically correct or 2) shareholders, and equity analysts, are only concerned about EPS (earnings / share) and then how “green” or DEI a company is … or their ESG score.
If you’re a manufacturer and wonder about your perception, give us a call and we can discuss how to capture the voice of the channel so that you can affect cultural change and “reengage” with customers and be easier to do business with.
In a market that is expected to be flat / low growth next year, gaining customer insights could help you make adjustments that enable you to win share.
