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Agents Amid Chaos

Jan. 23, 2018
The shifting roles of lighting rep agencies provide some insights on ways to deal with disruptive technological change.

Have a little pity for your lighting rep. Not because the flowers around his beachfront lanai got frostbite a few weeks ago, but because his business has gone crazy. If you want insights on how to manage through disruption, your friends in the lighting agencies are living that dream right now.

We’re all getting used to lighting being a fast-moving market driven by new technology, new possibilities and rapid research and development that bring a constant stream of new options to market. It was not so long ago that lighting was a fairly slow-moving, bread-and-butter market where the pace was set by new construction projects and “you could have any color you want as long as it was cool white or warm white,” recalls Steve Woodward, president of MH Companies, a lighting rep agency in Denver, CO.

“In the last five to six years, the complexity of the sale has gotten a lot worse,” Woodward says. Where before the sale of a lighting fixture carried a one-year warranty and might include a lamp as an option, the rep selling it wasn’t responsible for the light source or the ballast. Now the fixtures include the light source, drivers, maybe sensors, and a five- to 10-year warranty that the rep must be accountable for.

“Our sale before was, sell it, get the commission, when the warranty’s up, I’m done,” he adds. “Now I have to live with that for five to 10 years and I don’t get any additional compensation. The cost of doing business has gone up. It’s gone up in the amount of work, the hours per dollar of sales.”

The range of subjects in which a lighting rep must be an expert has exploded in all directions — light source efficacy and color, driver compatibility, controls, sensor networks and the functional integration of all those capabilities, just to start. In response to these demands, many reps have built new organizations within their agencies staffed by more technically oriented people to provide that expertise. Those who saw the change coming and put the resources in place are flourishing.

John Palk, vice president of sales and marketing for SESCO Lighting, Maitland, FL, remembers when it became clear to him that LEDs would bring tremendous change to the lighting industry. It was in Tupelo, MS, in 2009. Jim O’Hargan, who at the time was Philips Lighting’s vice president of sales for the Southeast (now CEO of Day-Brite) introduced the company’s new LED downlight.

“We were there with four customers from Knoxville,” Palk recalls. “Jim O’Hargan said by 2020, 95% of all commercial lighting sold would be LED. We were like, ‘Yeah, right.’ That number has stuck in my head. Philips at that time had one downlight. Now LEDs are in everything. 95% of hi-bay lighting is LED now. That’s three years ahead of time.”

SESCO has now grown to be one of the largest lighting reps in the nation, through a combination of acquisitions and organic growth, and a large part of the reason has been the firm’s willingness to adapt its solution-oriented philosophy to an increasingly varied range of technologies and market niches.

“SESCO was always built on providing solutions, both at the specification end and the distributor and contractor end of the business. That solution-based sales process is now on steroids,” Palk says. To keep its people and its partners in the industry at the front of the technological curve, SESCO built a new training center in the Atlanta suburbs. “We invested in the opportunity to train the people we partner with. We got sophisticated enough to take the most progressive distributors and help educate them so together we become stronger solution providers for our industry.”

The lighting market has long been divided into two sales processes — developing specifications for new construction projects and the “stock and flow” sales of lighting largely driven by distribution. Both processes have changed dramatically with the surge of new lighting technologies.

Lighting agents get a lot of grief about their role in the specification market because of the leeway for enhancing their compensation inside the black box of a package specification. Their manufacturers support this because the wins are so big and the work on specifications is so speculative that the reps have to do better than break-even across many projects to stay in the game.

The time and work required to get a package of products specified on a new construction project has grown significantly. “You do have to spend a lot of time with specifiers because for an electrical engineer lighting is just one part of what they do. Architectural lighting is an even smaller part,” says Palk of SESCO. “They have to have an incredible knowledge base. For us, being the resource for them on energy codes, on why they have to have controls, it behooves us and our manufacturers to be that resource.”

The pace of project construction has also extended, increasing the time and investment required to cultivate a package specification. “The cycle time on projects is growing,” says Woodward of MH Companies. “It used to be 12 to 18 months. I believe that has extended six or eight months to more of a 24-month cycle. So now we’re investing effort in a two-year cycle and cost to manage that has gone up by at least double.”

Along the way, as specifiers have become more savvy and gained greater access to product pricing online, the ability to hold the line on a package specification appears to be eroding. Nicole Bagozzi, who sold her Phoenix lighting agency EDG Reps to Ewing Foley last year and is now a lighting consultant, sees online pricing driving more aggressive “value engineering” that breaks specs late in the project. For her the answer lies in the rep’s relationships.

“Giving specifiers more education on products is a good thing, but going and finding the products on Amazon is not the way we need to compete. You can’t fight that sort of scenario,” she says. “Nobody is going online and furnishing a big project on Amazon, but they’re going through and value engineering. They will use online prices as a catalyst to get this price. That’s where having relationships with the specifiers counts. Today’s rep has to look beyond that at the entire sales cycle. Nowadays, with specifications, if someone has relationships on the spec side, it’s really who is controlling that sale that determines who gets that last look. Working directly with the end user, I’m going to be controlling that sale.”

Once the job is won, reps must also deal with much more intensive demands in after-sale support. The rising importance and complexity of lighting control systems and new connectivity capabilities are a big part of that. Despite the number of manufacturers aiming to develop “plug and play” control systems that automagically configure themselves for optimum performance and compliance with energy codes such as California’s Title 24, getting lighting systems to work the way the end user wants is a huge challenge on every single project.

MH Companies addressed this challenge with two separate divisions, MH Controls, which designs and engineers the systems for specification in a project and ProSite, which sends field crews to do on-site configuration and end-user training.

The need for end-user training on lighting controls never really ends. “People think the owner is going to go in and learn to program it and they just don’t,” says Woodward. “We built ProSite to handle those after-sale calls. We can come back a year later and retrain people or reprogram the system, change the way classrooms work, where in the past we would have to have the manufacturer fly someone out.”

The stock-and-flow end of the market, where margins are more compressed, relies more on distributors to provide after-sale support, or they can turn to a lighting system integrator such as John Tkach of Electrical Lighting Professionals, Tustin, CA, who after years in field configuration for lighting and control manufacturers has developed a specialty in making lighting systems work together.

Tkach has seen the burden on electrical contractors grow as every job they install may require a completely different system. He provides the expertise in systems design and configuration for contractors that don’t have a built-in team of lighting control specialists.

Like the specification market, the stock and flow end of the business has seen a huge influx of manufacturers looking to penetrate the market. The National Electrical Manufacturers Representatives Association (NEMRA) has seen a constant flow of new and established companies seeking introductions to “hybrid” reps — essentially traditional electrical “pipe and wire” reps who are adding lighting lines to their mix and who have established relationships with top distributors, says Ken Hooper, president of the association.

“I’m hearing from lighting manufacturers, including some who are still tied into specs, and they say ‘Ken, we need an avenue to the distributor’s discretionary lighting business.’ They see the value of stock-and-flow business where you sell 10 fixtures, 20 fixtures, where a lot of discretionary over-the-counter flow business goes on. For someone focused on driving specs, it’s hard for them to have the people in their organization that can work both sides of the street. They want access to the channel and reps who have good relations with the distributor lighting people.”

For distributors looking to build on their share of the lighting market lighting reps are asking them to get more involved in the process, follow the reps’ lead by investing in more technically astute talent and pushing constantly for more education and training on the latest technologies. And reps want distributors to be aware of how the rep side of their partnership has changed.

“The amount of work an agent puts in today for that same dollar of sale has exploded,” says Woodward of MH Companies. “Twenty years ago reps got paid 10% commission on sales. Were they providing 10% value in that project? I would have said ‘yes.’ Today the rep provides 30% value for that same 10% commission and I’m not sure distributors see what goes on behind the scenes and what it takes to make this a simple process for them.”