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Selling Through Gatekeepers: Process Matters

Posted on 9/12/2019 10:43:01 AM By Ujjval Vyas
  

This is part one of a two-part article on the unusual nature of the sales process for manufacturers in the building and construction (B&C) industry, and the important role of the information that manufacturers provide as part of that process.

Many major manufacturers, including adhesive and sealant manufacturers, are in multiple market verticals.  Materials such as steel, wood, aluminum, ceramics, and fasteners are sold into the B&C markets and also have many other applications.  Adhesives and sealants, too, are found in a variety of markets apart from B&C such as aerospace, consumer products, automotive, and so on. Outside of B&C, materials are sold through a direct process, where the manufacturer offers a product (and information about the product such as description, available options, technical details, and price) directly to the purchaser who buys it.  If I want to buy a new printer, I can get it directly from a manufacturer or from any number of commercial intermediaries.  I don’t need someone’s permission or stamp of approval before I make the transaction. 

In the B&C industry, sales are made through an indirect process that is fundamentally different. In this process (simplified here to its basic elements), the manufacturer has to deal with two completely separate streams that must converge for the sale to take place. In the information stream the manufacturer offers information through a representative to a gatekeeper, who gives documentation to the purchaser that must be obtained before buying the product. At the same time, in the product stream, the manufacturer provides the product to a supplier where the purchaser goes to complete the sale.

Indirect Sales Process-Generic
                (click to enlarge)


Moving from the generic process to a specific example, anyone who has ever taken a prescription drug understands the indirect sales process in medicine. In the information stream, the pharma company (manufacturer) creates a detail aid (information) that the sales rep (representative) uses to provide facts about their drug to the physician (gatekeeper), who gives a prescription (documentation) to the patient (purchaser). In the product stream, the pharma company provides the drug (product) to the hospital or pharmacy (supplier) where the patient buys it.


Indirect Sales Process-Medical
                   (click to enlarge)

In B&C it works the same way. In the information stream, the adhesive company (manufacturer) creates a product sheet (information) that a manufacturer’s rep (representative) uses to provide facts about the adhesive to the architect (gatekeeper), who gives a specification (documentation) to the owner (purchaser). In the product stream, the company provides the adhesive (product) via a distributor to the retailer (supplier) where the contractor buys it on behalf of the owner.


Indirect Sales Process-B and C
                   (click to enlarge)


In both medicine and B&C, direct sales to the end user are rare or, in many cases, not practicable or even illegal because the gatekeeper is a licensed learned professional who acts as what I call an information intermediary for the customer. In these markets, the customer is thought not to possess the requisite skill or knowledge to make the decision for him/herself, so society has created a class of intermediaries who have that knowledge along with the judgment to prevent harms resulting from self-diagnosis or self-purchase on the open market. In essence, society—represented by the courts, legislators, and regulatory bodies—has awarded a monopoly to physicians and architects, who provide this judgment-based service. 

The monopoly encourages entry into the profession through licensed status, and provides access to a valuable societal good that is not allowed to be compromised in open market transactions by ignorant purchasers. Only a physician can provide the prescription for the drug, as only the architect can give the owner the documents that will allow the contractor and subcontractors to purchase the products and materials to build the building.  Any attempt to circumvent this set of relationships is prohibited by law.

In the indirect sales process, the information stream arises as a result of the interrelationship of ignorant purchaser, societally sanctioned professional, and manufacturer.  Here, the party that needs to be convinced regarding the appropriateness of the product is the intermediary, not the end user.

Since the end user is assumed to (and usually does) lack the requisite knowledge to make an informed decision as to what the product purchase should be, here lies on the Information intermediary for judgment about the scope and nature of the desired outcome, and for fact-based recommendations about what to purchase in order to achieve it.

The owner must procure legal permission from a learned professional before the transaction can be consummated.  An owner cannot bypass the licensed architect or engineer if he wants to put up a building asset.  And without the stamped project drawings and specifications that pass the approval process of the permitting authorities, no product can be used for constructing the building.  Manufacturers in B&C must be highly attuned to this, and both the quality and nature of the information provided to architects or engineers needs to address their specific needs.

The indirect process also introduces uncertainty into a manufacturer’s sales activities as well as increased transaction costs in personnel and resources.  This often leads manufacturers or trade groups to try using other mechanisms to get around gatekeepers and assure continued sales, such as governmental capture, standards and regulations manipulation, or diverting resources to support lobbying and proxies.  These non-market activities can be effective, but they can’t substitute for understanding and engaging with the realities of the highly competitive B&C market.

In part two of this article, I will address the fiduciary duty of the gatekeeper and why this should guide the information that manufacturers provide to architects and engineers.



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