From Independent…to Direct…to ‘Hybrid’
It was clearly one of the most explosive stories I wrote back in May 2011 generating tons of email and phone calls in response. The topic? Lenbrook, darling of the specialty A/V channel that for decades had been selling specialty products through specialty reps to specialty dealers – had decided to terminate their entire network of independent specialty sales representatives. Dean Miller, who had just joined the organization, would go on to construct a dedicated full-time staff of salespeople that would represent only NAD and PSB products.
Now, almost exactly eight years later, Lenbrook has decided to return to utilizing independent sales representatives in their sales network. But why?
See why Lenbrook is going back to reps…
I remember well and wrote about the angst that Lenbrook’s decision caused back in 2011. Certainly, many other manufacturers have made the same decision to go direct over the last so many years. But Lenbrook, because of its deep commitment to – and reputation as a vigorous supporter of – the specialty channel, sent an especially high-voltage shock to the market when they chose to terminate their independent reps.
After my story posted, I heard from reps…I heard from dealers…and I surveyed many manufacturers to see what they thought of Lenbrook’s decision. Remember the time frame…it was 2011, just a year or two after the full impact of an industry-changing recession. These were difficult days in our industry.
Manufacturers Sounded Shell-Shocked
Many of the manufacturers I spoke with back in 2011 sounded almost shell-shocked. Despite reaching deep into their bag of sales tricks, our industry had seen its volume drop dramatically as housing construction came to a halt and credit markets locked up. Sales managers everywhere had their heads in their hands trying to figure out how to get back to growth.
Predictably, in my survey of manufacturers about Lenbrook’s decision to go factory direct, I ran into a range of opinions. Some criticized the decision, some agreed with the decision. But what struck me most about this unscientific survey was that EVERY single manufacturer I spoke with – whether pro or con Lenbrook’s decision – told me that they either had looked at, or were now looking closely at making the same decision. That, frankly, shocked me!
Now, eight years later, Dean Miller has retired…and Stephen Baker (seen here) is now in charge of their sales operations as Senior Director of Sales for Lenbrook Americas. In a prearranged telephone interview with Baker, he explained the company’s thinking, saying that much has changed within the industry and within Lenbrook…and that the company feels that the time is right to re-approach working with AV specialty sales representatives again.
Changing Sales Structure to Meet Changed Market
“We are going to start to selectively hire independent representatives for Lenbrook.”Stephen Baker, Senior Director of Sales, Lenbrook Americas
That is one small statement…with one big impact. Baker hastened to add that this is being done on a controlled, as-needed basis. “It’s not a big deal,” he said, underselling the strategy shift. “It’s frankly what the market has dictated for us.”
Baker noted that although this is “a change of direction,” one could convincingly argue that the market has changed as well…in fact, he believes that the market has shifted “considerably.” So they have made this decision and are already actively interviewing independent sales reps in a few markets. Lenbrook expects to announce their first additions some time during the next two-to-four week period.
A ‘Hybrid’ Sales Network
Baker stressed that this new strategy will not be a wholesale changeover. Rather they envision more of an incremental or progressive process of adding independent reps into their sales network.
“We’re not making a change for the sake of change – and we’re not doing it as an absolute. I expect that we will have a hybrid [sales network] of continuing both our factory direct support in certain territories…and employing the services of independent reps in others, as we need them.”Stephen Baker
What’s Driving Change? – More Brands
So why this change…and why now, I asked Baker. The times, he told me, are changing – and strong forces are at play that make this move make the most sense.
One of these new forces at play is the fact that at the time that Lenbrook made the decision to go direct 8 years ago, they had just two brands to work with – NAD and PSB – one a line of specialty electronics and the other a complementary line of speakers. This is a digestible amount of products to focus on for the new, smaller, but more highly focused direct sales force.
But in today’s world, Lenbrook has expanded to four major lines of products: NAD, PSB, Bluesound, and Dali. This greater assortment of four significant brands, with arguably more divergent market requirements, adds to the complexity, strategic density, and the workload of their small direct force.
What’s Driving Change? – More Intense CI Focus
Lenbrook’s Senior Director of Sales says that the company’s strategy is to increase its focus on the custom integration channel to an even greater degree than ever before as a core corporate strategy.
There are a lot of CI integrators and independents that we need to reach. We think that the best way to do that is through qualified CI oriented independent reps.Stephen Baker
I told Baker that in an interview eight years ago, Dean Miller spoke with me about the strategic reasons why it made sense for Lenbrook to move from a independent rep force to a factory direct model. The main justification he pointed to was dramatic market changes that he felt dictated this shift in approach. So what’s changed now?
How is Today’s Market Different Than 8 Years Ago?
Baker noted that he was not part of Lenbrook then, and can’t really speak to the factors that management at that time looked at. But in terms of what he sees today – it is clear to him that there have been dramatic changes in the market as we know it now that has forced them to reconsider their go-to-market strategy.
Some of the market changes Baker pointed to:
- The nature and the number of brick-and-mortar retailers has certainly changed
- The growth of the CI market has changed conditions
- Bottom line? “We’re looking to do whatever’s necessary to reach our existing dealers and potential new dealers and give them the best possible service.”
Baker bristled slightly at my characterization that this is a dramatic or major shift in strategy. “I would disagree that it’s ‘radical’ [not the word I used] in the sense that it’s what the times and circumstances require.”
Reps Can Add ‘Considerable’ Value
While at one time there were as many as four direct salespeople working NAD and PSB, more recently there were three, Baker told me. As one of them recently left, the new sales structure will be based on two regional sales managers – David Carr as Western Regional and Jim Price as Eastern Regional. These two will both maintain some direct dealer relationships, and they will oversee the independent sales representatives located within their geographic regions.
I view the CI business as requiring a deep knowledge base that is largely gained through experience. As a result, there are certain rep firms that have that kind of general and very specific knowledge. Those types of reps we think can add considerable value [to Lenbrook’s sales efforts].Stephen Baker
Baker said that the plan is not to go out and hire a rep firm for each territory. Rather he plans on a more “deliberate” process that will be highly selective to ensure the company adds the right rep firm and only where they feel one is needed – in a market where there is a lot of additional CI business to be had. Baker also remains very confident of the capabilities of his existing direct salesmen to both service their direct relationships and manage their new independent rep salesforce.
“We will continue to sell to many accounts, and in some cases, to many territories, on a factory direct basis, as our specific needs would dictate,” Baker told me.
‘Experienced, Knowledgeable, Professional’ Reps Wanted
The company is now seeking to augment their direct force with “experienced, knowledgeable, professional sales representatives covering those markets” where they feel there is a large untapped pool of custom integrators. The first of these hirings will be announced “within the next couple of weeks,” Baker said.
Lenbrook had an “absolutely great year” in their fiscal 2019 year, Baker claimed. He said they saw a strong percentage gain in sales last year. Baker also said that they saw greater acceptance of Bluesound by “quite a few of our independent dealers, in addition to the inroads we’ve made on a national basis,” at accounts like Magnolia Design Centers.
This is an evolution of what we’ve been doing…as opposed to any sea change. We see the market heading towards CI. We see the market requiring a higher level of expertise and deep knowledge of the applications of the product and the potential customer’s needs. And we think this is the most efficient way to get it. Our goal has always been the same, it’s just that the conditions have changed that merit us taking this step.Stephen Baker
The Plan: Four Lines for Each Rep
I’ll wrap up this report with one final thought. One of the issues that I heard from Dean Miller that was echoed by some other specialty manufacturers is that unless you are fortunate enough to be the primary line for an independent rep firm, it was hard to get the time and attention of the field rep to pitch your line to integrators. Most specialty lines don’t hold that hallowed position.
So in a follow up question, I asked Baker if Lenbrook is planning to centralize all four of its brands with a single rep in each territory. His answer was that generally, yes, that is the plan. Although exceptions will undoubtedly present themselves in specific situations which may alter the line mix offered to a rep firm. With Lenbrook now offering four brands (as opposed to two brands in the past), it is likely that they view this as a way to have more leverage with their reps in order to get more of their time and attention.
This perhaps, is the change that to them makes a return to independent reps seem more likely to yield success.