Representor Fall 2024 - ERA XCOM Digest

Fall 2024 – ERA XCOM Digest

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Education Update – By Ellen Coan, CPMR

Telling a good story

By Ellen Coan, CPMR

Story telling is the key to our success every day. Whether we are selling our factory, our distributor, our boss, our customer or beyond — we want to be the BEST story teller!

Story telling basics include:

• Knowing your goal

• Choosing the right time and place

• Using a hook to get the audience’s attention

• Being clear and concise

• Watching your emotions

• Being aware of your body language

• Practicing often

• Asking for feedback – always learning and improving

I’m reminded of so many stories that went well and those that did not go well as I write this. Did I jump into the issue too quickly? Was I in the right place, physically and mentally, to discuss the issue? Was I clear with my facts? Did I consider the other side of the story?

We all tend to focus on what we want to say and struggle to listen to or watch the reaction. Today’s business environment is challenging and we are all looking for the best value we can offer to continue to grow our business. The 2024 ERA Virtual STEP program (Sept 24-26, 2024) was presented by professionals who shared the best practices to finding the data for our story, and kept us all on our toes to keep evolving and learning. If you missed the live sessions, they are taped and the archived STEP library is open (a small fee) to explore. Talk to ERA Communications Director Clare Kluck (ckluck@era.org.)

Practice on your friends and family — tell the story of the day. Did they follow you? Did you lose them with all the side stories? The acronyms? The cast of characters? Practice narrowing down your story to the information that fits the goal. In the end, we want everyone to walk away a winner. That may take a couple meetings and different approaches but you can get there — together, we are better!

Membership Update – By John Hutson, CPMR

A challenging year, but a great summer — thanks to ERA networking events!

By John Hutson, CPMR

This year has been a challenge for most in our industry. Although we have certainly experienced worse, I subscribe to the assessment that 2024 has been a “correction” year in many ways, and I am anticipating that things overall should be more stable as we progress into 2025. Many may look forward to entering Q4 knowing that it brings them that much closer to putting this year behind them, but even in this challenging business climate, I can look back at the summer of 2024 fondly thanks to the network that ERA has exposed me to.

This summer was very busy with networking opportunities throughout our industry, and our ERA chapters worked particularly hard by arranging events at the chapter level, including a few that I was lucky to attend. Much time and effort goes into planning these events, and they would not be possible without the volunteers who help organize them, the reps, manufacturers and distributors who sponsor them, and those who attend. On behalf of myself and ERA, we thank you all.

Although the overall market remains soft, the events that I attended contributed to a great summer. It is always comforting being surrounded by industry colleagues, especially my fellow ERA members, and this is particularly true during challenging times. Be it a new acquaintance or an old friend, spending time with my fellow ERA members is always a rewarding experience. The conversations are always passionate and I am filled with a sense of camaraderie. I typically learn something that helps me improve personally and/ or professionally, and I am always reminded afterwards how lucky I am to have the support of my fellow ERA members in what is such an amazing industry.

The word “best practices” is commonly used to summarize many of the great things that come out of a typical conversation at an ERA event. Sharing best practices is the cornerstone of ERA’s annual conference, where the general session and breakout session topics are designed to provide attendees with best practice takeaways. Yet the opportunity to be part of a conversation where valuable information like this is shared is not only found at the conference. Best practices are commonly part of any conversation between ERA members, especially at a networking event, and ERA’s chapters organize them throughout the year. I am very grateful for the ideas that I gathered while attending ERA events this summer, and I encourage you and your team members to capitalize on these learning opportunities by participating in the next ERA event near you.

An ERA membership provides access to so much, but at the top of my list continues to be the ability to network with brilliant people who continually help me improve in so many ways. I have tremendous respect for the power of the individual, but the power of the collective has a compounding effect that can be invaluable, especially during challenging times.

The relationships that I have built through my ERA network remain a primary source of my collective power. Continually communicating with my ERA friends, especially in person at ERA events, remains the bedrock of these relationships. Participating in these events helped make the summer of 2024 a great one. I want to thank my ERA colleagues for helping me be a better person in many ways, and ERA for helping me find and nurture these relationships.

Manufacturing Update – By Ken Bellero

Driving sales in electronics manufacturing with AI

By Ken Bellero

Artificial intelligence (AI) is revolutionizing industries worldwide, and the electronics manufacturing sector is no exception. It has been the #1 topic of conversation for many of us in the electronics industry, as well as a key part of many of our future strategies.

As the market becomes more competitive, manufacturers are increasingly looking for ways to boost sales, optimize production and meet ever-changing consumer demands. AI is emerging as a key enabler in driving sales growth, not only by improving operational efficiency but also by offering deeper insights into customer behavior, enabling smarter marketing strategies and delivering innovative products.

One of the most direct ways AI contributes to driving sales in electronics manufacturing is by optimizing production processes. AI systems can analyze vast amounts of data in real-time, identifying inefficiencies and bottlenecks in production lines. With predictive analytics, manufacturers can forecast demand more accurately, reducing the risk of overproduction or stock shortages. By using AI to streamline operations, manufacturers can reduce lead times and bring products to market faster. This speed is critical in the electronics industry, where product lifecycles are short and new models are frequently introduced. Companies that can rapidly respond to changing market demands and launch new products quickly will have a distinct competitive edge, translating directly into increased sales.

Product quality is a critical factor in driving sales. AI-powered quality control systems use advanced algorithms to detect defects in products that may not be visible to the human eye. These systems can inspect products at every stage of the manufacturing process, ensuring consistency and reducing the chances of faulty products reaching the market. AI can enhance innovation in product development by analyzing consumer preferences, market trends and feedback. It can help manufacturers identify new opportunities for product enhancements or entirely new product lines.

Personalization is becoming a key trend in sales and marketing strategies. AI plays a crucial role in this by providing manufacturers with valuable insights into customer behavior and preferences. Through data analytics, AI can segment customers based on their purchasing history, preferences and behavior patterns, allowing manufacturers to tailor their offerings and marketing efforts more effectively. AI-powered recommendation systems can suggest complementary products or upgrades to customers, increasing the likelihood of additional sales.

AI’s ability to analyze data in real-time allows manufacturers to create smarter, more targeted marketing strategies. Companies can optimize their digital marketing campaigns by identifying which messages resonate best with different customer segments. This level of precision helps manufacturers invest marketing dollars more efficiently, focusing on strategies that yield the highest return on investment.

Another significant benefit of AI is predictive sales analytics. By analyzing historical sales data, market conditions and consumer trends, AI can forecast future sales with remarkable accuracy. This insight helps manufacturers make informed decisions regarding production, inventory management and marketing strategies. AI-driven insights enable manufacturers to optimize supply chains, ensuring that they have the right products available at the right time. This ability to anticipate demand and adapt accordingly can prevent lost sales opportunities due to stockouts or excess inventory, ultimately maximizing revenue.

By optimizing production, improving product quality, enabling smarter marketing and personalizing the customer experience, AI empowers manufacturers to remain competitive in an increasingly fast-paced market. Embracing AI technologies now positions our industry for sustained success in the future, helping businesses achieve both immediate sales boosts and long-term growth.

A personal note from Ken Bellero

After 25 years of dedicated service at Schaffner EMC Inc., including 13 years as president, I am announcing my retirement, effective Sept. 30, 2024. (prior to the publication of this article) My journey at Schaffner EMC has been immensely rewarding, and I am proud of the growth and success we have achieved together.

I want to extend my sincere thanks to my colleagues and partners in the manufacturers’ rep and distribution community. Your support and collaboration have been invaluable, and I cherish the long-term relationships we have built. Although I am retiring from Schaffner EMC, I will continue to serve on the ERA Executive Committee, representing the manufacturing sector.

I plan to stay active and remain available to my friends and colleagues. Please feel free to reach out to me at my new email address, kenbellero@gmail.com, or call me on my cell at 732-910-1717 anytime.

Thank you for your support and friendship over the years—it has truly been a privilege to work with all of you!

Industry Update – By Kingsland Coombs, CPMR, CSP

2024 White Pin Mark Motsinger Internship highlights

By Kingsland Coombs, CPMR, CSP

The summer of 2024 marked another successful chapter for the ERA White Pin Group’s internship program! We extend our sincere thanks to the interns and rep firms who participated. This summer, all three interns gained valuable insights into the rep model and the electronics industry. Here are some key takeaways from the committee’s check-in calls:

Intern: Ethan Bowers

Firm: RW Kunz & Associates

Ethan Bowers spent his summer at RW Kunz & Associates, immersing himself in every aspect of being a manufacturers’ representative. His experience ranged from principal training to CRM reporting, and he even had the chance to make customer follow-up calls. A particularly memorable moment was spending “windshield time” with a veteran supplier, soaking up industry wisdom. Ethan was able to visit customers and learn how “everything cool happens in the backroom with the engineers.” One of his most positive discoveries was the depth of analytics available to the sales team, especially from tools like Budde Marketing. His biggest surprise? Realizing that sometimes, even with your best efforts, you don’t win the business—and it may be due to factors beyond your control, like supply chain issues. As Ethan reflected, “I can see how you want to win, but you don’t want to reach too far and then break a promise.” Exciting update: After earning his engineering management degree from Missouri University of Science & Technology, Ethan has now joined RW Kunz & Associates full-time as a sales associate under the mentorship of his father, Mark Bowers. He’s already making his mark, starting with digital innovations like introducing electronic business cards to the team. We wish Ethan continued success as he grows his book of business in the Missouri and Southern Illinois territory!

Intern: Julia Rowe

Firm: Pinnacle Marketing

Julia Rowe, a business marketing major at East Carolina University, had a rewarding experience during her internship at Pinnacle Marketing. A standout moment was shadowing outside sales on four distinct sales calls, including a factory tour that “gave her blisters from walking the massive factory floor.” She enjoyed witnessing the cutting-edge technology being built in Pinnacle’s territory. Julia also worked with inside sales, diving into CRM systems and helping service customers and suppliers. She applied her passion for marketing to Pinnacle’s LinkedIn strategy, creating a content calendar with posts scheduled well into the future for all their principals. Reflecting on her experience, Julia said, “What I like most about the rep business is that every day is different. With so many different suppliers and products, there’s always variety and continuous learning.” When asked if young people without a technical background should consider the electronics industry, she enthusiastically responded, “Absolutely. People are willing to teach you about the products. It may be a bit harder, but you can do it. This industry is full of opportunity.”

Intern: Nathan Dubsky

Firm: Staffco

Nathan Dubsky, a dual major in business analytics and entrepreneurship at the University of Cincinnati, made an immediate impact during his internship at Staffco. Like many rep firms, Staffco faced the challenge of managing data across multiple platforms. Nathan leveraged project management software to create internal processes that supported data migration and integration, and he automated several tasks along the way. With the data centralized, Nathan developed actionable analytics and metrics to drive sales activity. He became proficient in PowerBI, filtering and analyzing data to create more than 20 new views for the sales management team. Charlie commented that “Nate has elevated our team’s ability to use analytics at both the tactical and strategic levels.” Before his internship ended, Nathan had also designed a weekly scoreboard to track progress on opportunities and supported the sales team with analytics during principal meetings. Staffco is excited to have Nathan continue part-time during the fall semester, where they plan to get him involved in some sales calls.

Next generation of talent

The ERA White Pin Group, in partnership with ERA National, continues to foster the next generation of talent for manufacturers’ representative firms across North America. Through the Mark Motsinger White Pin internship program, three highly coveted internships are awarded annually, offering college students a valuable opportunity to engage with the electronics industry, either during the summer or throughout the academic year. We look forward to welcoming many more applicants for the summer of 2025! For more information, visit the ERA website, where the White Pin Internship program is featured under ERA Resources.

Distribution Update – Gary Zullo

In person versus virtual meetings

By Gary Zullo, ERA SVP of Distribution

Back in the day, (I don’t want to admit how long ago!) there used to be a commercial that had a tag line, “Is it live or a famous cassette tape manufacturer I can’t mention?” It basically challenged the listener to discern whether the music was live or a recording. It was a challenge to the quality of the experience and posed the inference that the recording could offer a similar experience.

Fast forward to the here and now, and apply the same concept to sales meetings. Is it possible to get the same quality of experience between live, in-person meetings and virtual sales meetings? We’ve been at this for more than a few years now and while we’ve figured out that certain task-based meetings can be more efficient in a virtual environment, there are inherent complexities in our industry — supply chain challenges and technology choice being two prominent ones — that make face-to-face engagement most effective.

The purpose of this post is to provoke thought and maybe challenge a bit of the status quo that has evolved since the pandemic. It’s often become more challenging to get face-to-face meetings. The days of the regular drive-by are waning. There needs to be clear purpose and associated value articulated up front, most often directed at solving the complex issues our customers face regularly. And who better to solve these issues than the collective power of the supplier-distributor-rep firm partnership? I think most of us would agree that the most fulfilling part of our jobs is spending time with customers and getting a first-hand perspective on the impact our support has on products changing the world.

As we move towards the close of 2024, the planning process for 2025 will begin across all our partners. It’s the perfect time to understand future challenges and chart new solutions. I, for one, look forward to more live and less virtual.

Rep Update — By Cameron English, CPMR

Understanding independent sales representative commission plans

By Cameron English, CPMR, ERA SVP of Industry

In the realm of sales, independent sales representatives play a pivotal role in driving business growth. These professionals, often operating on a commission-based compensation model, are integral to connecting products and services with potential clients. However, the structure of their commission plans can significantly impact their motivation and performance. One trend that has been gaining attention is the decline in commission rates, which can have detrimental effects on both sales representatives and the businesses they represent.

Often I get questions from executive-level managers, looking for ways to spike sales volume. “What incentive plans work well to get your team to hustle for Acme Electric?” Interesting question. If the company in question is basically functional — meaning they do not have systemic dysfunctionality in the area of quality, communication and responsiveness, they are customer-centric and are in a viable technology, and have some level of industry presence — the obvious answer is to provide a strong commission rate. To the executive asking the incentive question, I would urge you to consider for a moment that a 6-7 percent commission rate would differentiate you from 80-90 percent of your peers and competition. For the example above, a $20 part would cost a manufacturer an additional cost of $0.40 to go from 4 to 6 percent, and would buy you so much more focus by any representative organization’s sales team.

I have always been fascinated with representative contracts that reflect declining commissions as part of their structure. Here is an example of a contract proposal that I received recently, showing commissions declining as sales increase:

Giving this some thought, it hit me that the assumption of this type of downward commission structure with increasing sales volume can be assumed to hold the following possible paradigms:

1. Profit always declines with volume.

2. Margins are so low, we expect to see less profit as volume increases.

3. Margins are so low, we need to shave off 2 to 4 percent from industry standard rates. (typical 5 percent)

Note: With average sales prices of these particular components at $10-$20, going from 5 to 1 percent represents a reduction of commission from $1 per part to $0.20 per part. Is $0.80 per part going to make or break the deal?

Profit—To be or not to be

When you evaluate the actual savings of reducing commissions, as in the above example, you see that it is assumed that the total resulting savings to the customer is maximum of $0.80 on a $20 average selling price (ASP). I cannot help but wonder how dysfunctional a business is that cannot get an incremental margin increase off a $20 part.

The evidence does not hold up when you question the cost accounting. First, we see typical salaries for these technology companies paying out substantial salaries for direct resources: FAEs, field sales people (often with salaries over $150k before benefits) and lots of wasted expenditures. Spending six figures at trade shows, massive executive salaries, budgets for capital equipment at 10 percent or more of annual revenues. And yet, field sales has to be discounted.

Is the problem that cost accounting is structured to minimize profit, avoiding taxes on net income? Is the problem that our industry has seen the profit degradation for components? In the above example, the company in question shows on their public financial disclosures that they are making close to 40 percent profit margins. Its earnings before interest, taxes, depreciation and amortization (EBIDA) and key financial indicators look positive. I would add that a declining commission rate has definite impact on how motivated a sales team would be to focus and devote energy and attention to this particular product technology. It is not a simple question of profit erosion. I believe it is more of a question of the value placed on investing in the sales organization.

This brings up an interesting point about profitability. Whatever happened to the ability of an organization to reduce costs as volume increases? Why don’t we assume that commission rates can increase with increased sales and quantity volume? It points to a negative bias supported in our industry about how sales as a function is viewed in regards to the value contribution to the organization.

You may ask, what if the business is substantial? For example, what if there are a plethora of $10 million opportunities that would dictate a 1 percent commission, but the volume makes up for it? I guess it comes down to ROI. The CPMR courses for representative owners cover ROI on a line-by-line basis. When I attended back in the day, it was an eye opener to take a fresh look at what the individual line represents in returns. The impact of maintaining personnel levels, inside resources for reporting to the supplier’s CRM, maintaining a distribution manager and program, sales meetings and trainings that are not costcovered by the supplier — if you are a representative, the costs are real! Sometimes those largest commission revenue lines are the least profitable!

Some signs of hope

There are great examples of suppliers that have figured out how to differentiate themselves from the recent trend to discount commissions. I can speak to this from recent personal experience. We recently signed a military/aerospace line that pays 8 percent across the board. At first introduction, the sales level for this particular supplier was somewhat limited in the territory. I am not surprised to see a four-fold increase in sales in less than nine months of representation. Coincidence?

Contrast that with a line that recently reduced commissions due to a national decline in sales POS. After a 30 percent reduction in commission rate, their sales have continued to remain flat. Again, coincidence? I try to explain to my sales team that an 8 percent line that books a $1 million dollar order is the equivalent of a 4 percent line booking a $2 million order. Simple math, but sometimes we forget that actual ROI we see as representatives.

The basics of independent sales representative commission plans

Commission plans for independent sales representatives (what we pay our field sales team) typically come in various forms, including:

Straight commission. Sales reps earn a percentage of each sale they make. This model is straightforward and aligns the rep’s earnings directly with their performance.

Base salary plus commission. This plan provides a fixed base salary with additional earnings based on the sales achieved. This hybrid model offers financial stability while still incentivizing performance.

Commission draw. Sales reps receive a regular payment (draw) against future commissions. This system ensures they have a steady income while incentivizing them to earn more through sales.

Tiered commission. This structure offers increasing commission rates as sales volumes surpass predefined thresholds, motivating reps to exceed targets.

Residual commission. Reps earn ongoing commissions from repeat sales or recurring revenue, rewarding long-term customer relationships and retention.

I encourage you to engage sales representatives in the design and evaluation of commission plans. Their input can provide valuable insights and help create a more effective and motivating compensation structure. Representative owners, like me, have probably seen plans that work and plans that are not productive. No matter what commission plan you have, you want to question your representative to make sure they have a healthy commission award plan, one that pays out based on productivity and reflects your contribution to the representative organization. Your contribution should be transparent and directly positively impact the individual field sales representative.

Invest more, expect more

In the given examples, there are myriad variables that make this a “not so simple.” Evaluation of the impact of reduced commissions on sales force productivity can be affected by complex variables.

One thing that every executive should consider is where are you investing your money? Is it on operations to curb cost? Even if you are 100 percent successful in reducing costs, you have a limited result, as reducing costs to zero would not add any revenues to total sales. Why not focus on driving growth? I would challenge every executive sales manager to give the increased commission strategy a try and see what the results are in 30/60/90 days. Make sure it is communicated, exceeds the industry standard of 5 percent and is supported down the chain of command. Invest more, expect more!

Independent sales representatives are vital to the success of many businesses, and their compensation plans play a crucial role in their performance and satisfaction. While declining commission rates might offer short-term financial relief for companies, they can have adverse effects on motivation, turnover and overall sales performance. By adopting best practices and ensuring that compensation plans remain fair, competitive and motivating, companies can sustain a productive sales force and drive long-term business success.

The cost of sales is a real challenge. Consider the cost of “no sales” and everything we know about profitability formulas kicks in. Ninety percent of the relative health of any organization is based on revenues! The way to bust through the sales ceiling is… incentive!