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Manufacturers, agency reps and distributors in the electrical products industry are all too familiar with the laborious process of line conversions. While they can drive greater revenue and growth opportunities for all parties, they can also be tricky, tedious, politically-sensitive and laden with other land mines if not conducted thoughtfully and strategically. A range of IMARK manufacturers, agency reps and distributors with hard-won experience in the “art” of the line conversion recently shared tips to help ensure the success of this complex process for all involved.
EXECUTION IS EVERYTHING
Industry veterans are quick to agree on the benefits of a well-executed line conversion. “When conversions are conducted properly, both the distributor and the manufacturer/agency rep should see greater sales, higher profit and new customers,” said Matthew Barrett, regional sales manager, Central United States, IDEAL Industries in Sycamore, Illinois.
“Depending on the line/category, a conversion can bring brand new excitement, awareness and focus to an otherwise forgotten or stale existing product category for a distributor,” added Kevin Weber, president of manufacturers’ rep agency Electrical Materials Inc. (EMI) in Sterling Heights, Michigan. “A conversion also sets a new baseline that allows for a knowledge refresh for more mature employees and in-depth training and focus for newer and younger sales associates and counter people. For manufacturers and agency reps,” he noted, “a line conversion can provide entrée to a new contractor/end-user base that may not have been familiar with the capabilities and successes of the manufacturer or rep before.”
Simply put, said Ron Eberhart, executive vice president at The Hite Co. in Altoona, Pennsylvania, “when executed properly, a line conversion generates excitement and a focus that leads to new growth opportunities.”
Getting there isn’t always easy, however, and many issues can potentially derail the process along the way. According to Dan Richardson, Northeast region sales manager at NSi Industries in Huntersville, North Carolina, “the process is logistically daunting. It’s labor-intensive, demands a meticulous amount of attention to detail, requires learning a whole new nomenclature and involves an extensive amount of training throughout all levels of an IMARK member’s organization when the conversion is implemented.”
Joe Gately, sales vice president with manufacturers’ rep A.A. MacPherson Co. in Canton, Massachusetts, said that line conversions can often confront distributors with a number of pain points. Among those, “distributors often have a fear of losing customers, upsetting their people with change and disrupting existing relationships. They may also worry that the upheaval could result in the trading of dollars rather than the creation of the sustainable growth planned.”
From Weber’s (EMI) experience, learning new part numbers and changing the “muscle memory” of the sales staff represent other challenges. “There are also inventory change-over issues— e.g., costs associated with computer change-over and actual inventory,” he said.
Tom Barker, co-owner of Mid-Coast Electric Supply in San Antonio, Texas, agreed that the labor and resources involved in a line conversion can’t be underestimated. “Conversion of part numbers and associated data is the most painful part of the process,” he said. “Often, hundreds of stock items and thousands of non-stock or catalog items need to be converted, which takes a lot of effort. Then, following the actual part number changes, pricing, special pricing agreements and unit of measure issues often further complicate the task.”
The Hite Co.’s Eberhart agreed, noting that difficulties can also arise among the distributor’s customer base. “In some cases, the line you’re converting away from is in use with many of your customers,” he said. “You may need to keep back-up of the old product to support those who need one or two replacements [and] to maintain consistency, especially in categories like lighting, colored wiring devices and tools that work with specific accessories.”
TOP 10 TIPS FOR A LINE CONVERSION
The experts offered some of their best advice for facilitating a smooth and successful process:
• Keep Things Clear: A.A. MacPherson’s Gately recommends developing a clear plan with a detailed roadmap that spells out all key milestones. “From the kick-off meeting and internal roll-out to sales blitzes, joint calls and every step in between, map it out, communicate to all and execute the plan,” he said.
• Review the Reason: At the heart of any successful conversion, “a distributor must be able to clearly define the reason why to both their team and their customers,” said The Hite Co.’s Eberhart. “There must be a value to both.”
• Involve the Organization: “The distributor’s owners/senior managers have to be engaged and the organization must be totally involved and support the decision and process across all levels to ensure success,” said NSi’s Richardson. “All have to feel that they’re part of the decision.”
• Secure Company-Wide Commitment: All parties must commit and collaborate for a seamless and successful line conversion. According to Mid-Coast Electric’s Barker, “the distributor must make a conversion commitment throughout the entire organization. If only sales buys into a conversion and operations doesn’t, for example, then the back-end work to get the inventory fully in place will never get done. Likewise, if operations commits to a conversion without buy-in from sales, you’re at risk for dead stock if sales doesn’t effectively promote the new inventory.”
• Engage the Sales Reps: IDEAL’s Barrett said distributors must feel confident that their manufacturer salesperson and converting rep will support them through the process and help train their team to sell the product. “Far too many times I’ve been contacted to correct another manufacturer conversion failure because the converting rep didn’t provide sales support,” Barrett said. “While I’m happy for the opportunity, it costs distributors their time and profit and tarnishes their confidence in conversions.” Barrett advises distributors to commit to the conversion and hold sales representatives equally accountable for its success.
• Communication is Key: The secret to a successful conversion? “Communicate and over-communicate,” said EMI’s Weber. “Make sure all manufacturer executive staff members are on board and aware of all commitments now and going forward. Additionally, all local sales people/agents need to be involved and aware of the commitments created with a successful large conversion. For instance, be sure to understand where funding is coming from for commitments such as inventory buybacks, marketing funds, rebate dollars and other incentives.”
• Promote Properly: In addition to effectively communicating details of the conversion, IDEAL’s Barrett said that it needs to be promoted and positioned properly. “A successful conversion will require a benefit statement to customers,” he explained. “Conversions require internal promotion to all affected salespeople, including purchasing agents, inside sales, outside sales and counter staff beforehand relative to what’s changing and why. Provide them with a consistent message to share with customers about the change; customers will need to know how prior products will or won’t be supported and how they’re benefiting from the change going forward.”
• Review the Risks: According to The Hite Co.’s Eberhart, part of a successful line conversion involves a sound risk assessment process. “You need to consider and plan for the what-ifs,” he said. “For example, what if the customer doesn’t accept or the new supplier doesn’t meet agreedupon expectations.”
• Consider Contingencies: Barker agreed that risk management and a well thought-through process win the day. At Mid-Coast Electric, “we won’t do a conversion unless we have a committed plan for buyback of the remaining converted stock, because if the old vendor’s stock remains in place, it often turns into dead stock and/or ends up competing with the new stock for inventory turns,” Barker said. “We also feel that the vendor must understand how expensive a conversion is for us, so a critical element of any conversion plan is additional funds (such as enhanced rebate dollars) to help offset all of our time spent making the conversion.”
• Act Quickly: The Hite Co.’s Eberhart believes that once a plan is approved and a distributor starts the conversion process, it should move fast. “Data maintenance, old inventory out, new inventory in, marketing and training on new material, targeted sales calls, performance tracking—all of these things must happen within a short time frame,” he said. “The longer a conversion gets drawn out, the more challenging it is for everyone.”
Overall, concluded NSi’s Richardson, successful line conversions come down to being a committed, clear, communicative and detail-oriented champion. “Be an integral part of the process,” he advised.