What is a Channel

Hi everyone, this is Steve Snap and I'd like to thank you for joining us for this episode. I have Kevin Brown, our CEO with me and I wanted to just ask him a few questions about channels and just to share some of his experience with not only the manufacturing side, but also the rep or the agency side when using third party channels. So Kevin, would you just take maybe 30 seconds and just give a quick overview of your background and then after that if you could just describe what a channel is and then we'll just talk about what that concept is and how that applies to people.

That's great, Steve. Happy to do that. So I've spent the last 25 plus years of my career working in the distribution world. So I've been working with manufacturers. I started my career actually as a distributor person, a distributor rep, and, and worked for a large international distributor of industrial safety products. A number of years later I became a manufacturer's rep. So I became an independent agent representing a number of companies and selling to their distributors on their behalf. So we handled, as a manufacturer's rep, we handled the sales, marketing, and I'll say business development and local support for as many as 15 different companies at a time. Following that, I exited that business in 2003, 2002 actually. And then 2003 is when you and I met, is when I became a manufacturer. I got into the manufacturing business, invested in a manufacturing company. And so I've really covered all scopes or all areas of the spectrum of distribution from a distributor, an independent agent and a manufacturer.

Okay. And from in your opinion or in your experience, what type of markets and what type of companies use channels.

Yeah, so let's talk just briefly about channels because you know, the word channel isn't used in every different vertical arena. So you know, when we start thinking about technology. Right. So technology companies, SaaS, software companies, traditional companies, software companies, VoIP, phone systems, server companies, they all use the term channel regularly because they work through a network of resellers and dealers and so forth. When you get into other arenas, perhaps as an example in the industrial world, we typically call it our distribution network as opposed to channel. But really when we talk about a channel, a channel is the method that we use, typically with an external partner to get to market with our products. How do we get to the end user? Do we use a broker, an agent, a reseller, a var, a negotiat, an agent to get to our distributors or our dealers that then sell to the end user customer? So really that's what the channel is the channel is about how do we use external partners that bring some variable costs to things to us to get to our end user customer.

Got it. And so obviously there's pros and cons to any strategy that we implement. Let's start with maybe some of the benefits that you've seen for manufacturers that use third party channels or that use reps in this case.

Yep. So we can talk about it from two sides, both from the, from I'll call it the broker, agent, rep side of things. And then we'll talk about the distributor dealer relationship. And it really comes down to a couple of things. One is local expertise. So if I'm a manufacturing company in Italy, but I want to sell into a Ford Motor plant in Detroit, it's going to be very difficult for me to have the one exposure to know who the right person to talk to is if and have any credibility there. But that local industrial distributor as an example in Detroit or the local value added software reseller in Detroit, he knows how to get into that auto plant because he has local relationships and they've worked together before. So really what happens is you're piggybacking on top of existing relationships. And the same thing happens when we start talking about distribution. Right. If we're talking about maybe just lack of a better example, a hammer. Right. You need to get that local distribution network, whether it's a distributor or a dealer interested enough in your product that they'll take on and represent your product. So you can use a manufacturer's representative in this case to get into that network because they have that local relationship with the distribution network. So whether it's a hard good or a technology product is having that local, local knowledge to get into that end user customer because you. It's a little more difficult for you to do that directly. It's getting easier every day now with the technology tools we have with email and social media and so forth. But that's the mindset behind it. The second piece that's critical with that is there when you start talking about using a broker, an agent or a manufacturer's rep is now you have a variable cost of sales. Right. If you. I could hire an entire from that Italian manufacturer, I referenced reference, I could hire my own team of people throughout the United States. And I've got all the fixed costs that goes with that. I have salary, I have travel, I have insurance. All the loading that goes with that, I lose that when I use that agent.

So with that sort of variable cost, I'm imagining there's probably Some downsides to that. What would you say the struggles are? And obviously I think people watching this probably would. Are familiar with what channels might be. But I'd like to talk a little bit more in detail about some of the challenges that come when you're working with someone that isn't necessarily an employee.

So there's pluses and minuses to everything. Just like everywhere we look in life, Right. The challenge that comes in that while it's great that you do have the variable costs, you have the local knowledge that you get the challenge with it. Whether we're talking about a broker, an agent, or a reseller, distributor, dealer, is they're busy with other things too. So, you know, you and I wake up every morning and the first thing we're thinking about is lead smart. They wake up in the morning and think about what they have to do to take care of their customer. They're never product specific on a day, typically. So if you're a broker or a manufacturer's rep or an agent, you start your day thinking about what do I need to accomplish for maybe 10, 12, 20 or 30 different companies that you represent. Right. If you're a distributor, you're starting off your day thinking about what do you need to do? Because you represent literally hundreds, if not thousands of manufacturers of different products. Right. Okay.

Now, given that, why do companies struggle with their manufacturing reps? Like when they struggle with communication? You sort of touched on already that the manufacturing rep or the distributor has got a lot of irons in the fire, so to speak. So what is the issue and how do we solve that issue related to communication?

Yeah. So again, perfect question to feed into this is that everything is about staying top of mind. We all want to stay top of mind of our consumer. Right. Of the company and people that are using our product. And the same issue happens as we're talking about a dealer, a reseller, a distributor, and. Or that middle place there for an agent or a manufacturer's rep or a broker, Right. It's how do we stay top of mind with those people so that they are thinking about us? And that becomes the biggest challenge because they have so many other companies that they're involved with is how do you find the way to keep you and your products and your leads or end users top of mind with your. With your channel partners?

So I know you talked a little bit at the beginning about when you were a rep and you had your own rep agency. What kinds of things did manufacturers do that enabled them to stay top of mind for you?

Sure. So it's interesting, I've told this story many times. We represented a large manufacturing company. It's literally a household name. We represented a division of Bausch and Lomb and so we sold eye protection related products and we managed the entire western United States for them. Wonderful relationship. But they weren't one of the bigger product lines that our rep agency handled from a revenue standpoint. They were, they were down the, down the run on the ladder. They worked. And this would have been in the late 1990s, early 2000s. So we didn't have the social media tools, we didn't have the email campaigns we could do in the same way. Those were the days where people were still doing broadcast faxes from a phone line. Right. Plug the phone in at night when you leave the office and you hope they all went through the next morning when you, when you get up. And we did that in our company and literally I did that from my home while we had another fax line going from the offices. But I'll use the spouse alarm relationship as an example. Great people, great products. It wasn't a high selling product in our marketplace, but they stayed in such close touch with their internal sales support team and so closely involved and engaged with us by phone. And then soon what happened is by email to let us know what they were doing to support us in the marketplace. We couldn't help but support them because they stayed actively involved with us and the end user consumer. So we knew what was going on with them. So while it wasn't necessarily the largest revenue producing product for us, they had done a phenomenal job of staying engaged much more than our companies that we represented. That might have been 3, 5, 7 times the revenue production for us. We're doing well.

That's great. Well everyone, I'd just like to thank you for sitting through this quick conversation that Kevin and I had. As I said, I'll include any links to any other videos in the description and we appreciate you spending some time with us. Thank you. Thanks Kevin.

Thanks a lot.