The pluses and minuses of dealer programs

Wednesday, December 1, 2004

Do you remember when the big three U.S. automobile manufacturers dominated the automobile market? During their dominance almost every family was loyal to one of the big three automakers. For our family, it was General Motors that earned our loyalty. When it came time for a new car we never considered anything but a General Motors produced product. Do you have that kind of loyalty to the dominant manufacturers in our industry?

I see similarities between the auto and security manufacturing markets. Both rely on regional dealers. Both started out with many small manufacturers. In the auto industry, competition and acquisitions eventually reduced the number of manufacturers to a few very large corporations. The same thing appears to be happening in the security industry right now.

In recent years manufacturing giants GE, Honeywell, and Bosch, who are similar in size to the big three automakers, have entered our industry in a big way. Through acquisitions and internal development several of these corporate giants are close to providing complete lines of products in the access control, fire alarm, intrusion and CCTV markets. It is conceivable, in the near future that you could select and rely on one manufacturer for all products.

The competition to sign up the dominant installing dealers in each region is fierce between manufacturers. Several have created dealer programs that reward dealers who are loyal to their products. Of course, loyalty is measured by the volume of product purchased. Some of the loyalty incentives for dealers are volume-based discounts, design assistance, custom marketing, shared marketing cost, sales leads, sales training, sales contest and prizes, and one of my favorites, in the field sales and technical assistance.

As an installing dealer, you must decide if you want to partner with just one manufacturer or with several. There are certainly advantages and disadvantages to both scenarios.

What are the advantages of partnering with just one of the large manufacturers?

- Expertise. Your technical and sales representatives become experts in a few products rather than a jack of all products and master of none.

- Lower training and product certification costs.

- Limited inventory in service vehicles and sitting on the shelf.

- Fewer product invoices to process each month. Theoretically you could write just one check every month. Your accounts payable people will love you.

- True integration between systems. We are beginning to see seamless integration between systems designed and provided by one manufacturer.

- Reward programs. You certainly have a greater chance of earning the prizes if you are selling just one line of products.

- Greater leverage with the manufacturer. Your manufacturer will be more willing to respond favorably to a special request if they know you are loyal to them.

What are the disadvantages of partnering with just one manufacturer?

- All of your eggs are in one basket. If the manufacturer you partner with has problems, you will share in the pain.

- Limited project opportunities. If you are in the bid market you may be shut out of some opportunities if your manufacturer’s product isn’t specified.

- Technology advancements. If your manufacturer doesn’t keep up with the latest technology you will miss out on opportunities. If they are too far ahead of the latest technology you will be on the bleeding edge rather than the leading edge.

It is certain the majority of the security industry products will be manufactured and supplied by just a few very large corporations. It remains to be seen if these large corporations will learn from the mistakes of the big three automakers that caused them to eventually lose market share to the foreign auto makers.
Brian Modglin is regional general manager for Interface Security Systems. He has 18 years experience in the systems integration industry. He can be reached at