Bosch Security To Terminate 7 US Manufacturer Rep Firms

John...perhaps Bosch wants to replicate the Pelco experience? Panasonic tried this years ago, and went back to reps.

Brian Wiser comes from the non-security AVAD A/V division of Ingram Micro, and some distribution channels look at reps as competitors.

I would think it's all about volume in a territory. The insider accountants would be the only ones to know, but if $500,000 is going out the door as commissions in a territory covered by 2 physical people working for a rep firm, I'd think it'd be cheaper to have those two people on your payrole.

I'm not a manufacturer and sales isn't my thing. That's just a simple guess. It has to be about the numbers.

Have they identified which firms are being terminated?

Age old debate...reps vs. direct. Reps cost about 4-5% of gross field sales. Direct people cost 15% to 22% of gross field sales. Lots of MBA-type documentation of these numbers. But the other main value of reps is that selling synergistic lines drags them kicking & screaming into every market segment of their territories, during which strong relationships/partnerships develop. With a direct sales force, you will always have an empty territory, as field sales people get wooed away by bigger pay offers.

In a fast-changing product environment like ours, reps can very quickly get a manufacturer's new products and programs started, especially if those products touch the non-traditional elements such as IT, datacom, AV, etc. Direct folks have to start from scratch finding potential channels, and many just hang around the distributors, serving just the fulfillment side rather than the initiation side of the sales process.

If direct is really better than reps, there wouldn't be so many reps firms around.

All academic.

Previously Bosch allowed the Regional VP to select either a Rep Firm coverage with Business Development above them or direct sales teams. Most territories with direct employees sold far more than those with Rep Firms. "Most". Rep firms came into play with the acquisition of Philips.

Prior to that DS and Radionics had direct sales teams with a strength in integrator sales and a marginal success in distribution, primarily the DS motion detectors.

Post acquisition the bulk of business came from video and those relationships were retained until they proved unsuccessful or in one case....retired and closed.

Things change. I know a couple of Rep Firms for Bosch they would be crazy to release. I can't wait to see the list.

As for a 5mm territory, I did that amount and more over 10 years ago with a small part of California and Hawaii. My final quota as I recall was just around 8mm.

As for "no direct selling", I would argue that. Getting WITH the dealer and end user was a major part of my day. I closed 1mm in one month, mostly with 3 end users and 2 dealers where I was in constant contact.

Manufacturers often expect their sales channels to bail them out of poor/dropping sales situations due to years of slow product developement, failure to keep up with trends, and low cost competitors. A new management team is brought in, and their solution often is to fire the sales channel and try someting new, however ill-advised that might be. Rarely are the product marketing specialists and product developement people replaced. After a few years, upper management finds that the new sales team fails to perform to their expectations, having to deal with the same issues that caused sales to drop off in the first place. Then the cycle starts all over again, with new management and a new sales team.

Another paradigm change that favored reps was the increasing demand/requirement from their manufacturers to help drive business through the fulfillment channels by influencing end users. In the past few years, most succesful rep firms started adding marketing services to their sales efforts, to influence the verticals in their territories, and to produce detailed reports on both their efforts and the results. These verticals varied by territory, and no single national policy would adequately meet these requirememts. Reps in the Southwest might focus on the oil industry, in the Northeast, education and biotech, in the Northwest, it might be high tech. etc. As a result, a direct salesperson, under these conditions, has less time on the road, and more time doing reports.

Reps went from once-a-month report requiremnts to continuous updates to portals, requiring having multiple personnel in their firms in order to simultaneously sell and report.

As regards the cost comparisons previously mentioned...reps versus direct sales channels, the figures came from "Outsourcing the Sales Function". by Erin Anderson (The Wharton School) and Bob Trinkle (ERA), published by Thomson.