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Eliminating the solar MIDDLEMAN stigma between customers and solar brokers. An intermediary approach.

Overcoming customer resistance to the MIDDLEMAN in solar energy brokering…

When I started my solar broker business back in 2007 I knew I had an uphill battle in educating my clients about the merits of solar energy brokering.   Because consumers have been inculcated into a society that loathes the middleman archetype, we naturally snub our noses to the NEW solar middleman… anyone whom we perceive may be earning a mark-up on the goods or services we buy.  In essence, we want to “eliminate or cut out the middleman”.

The reason I wrote this paper was to help de-mystify the solar middleman and help my clients understand this intermediary role and remove the perceived threat of mark-up or hidden fees.   To do this, I present the various forms middlemen take within commerce and their roles in facilitating business between buyer and seller.


DEFINING THE MIDDLEMAN: 

You may be familiar with some of these terms, and some not so familiar, like intermediary, go-between, liaison, distributor, marketing channel, marketing networkers, network marketing channels, gap bridging, facilitator, independent agent, and even broker.

THE MIDDLEMAN AS TRADER:

“The middleman trader exercises the essential entrepreneurial functions of exploring and creating market exchange opportunities and bears the risk, financial and otherwise entailed in this task. It operates in two markets – helping the customers access resources needed, as well as, the holders of resources to reach the users. The middleman has an important function in the economy of the gap-bridging activities in the market network. By creating a different bundle of resource elements offered to customers, the middleman takes on the function to “economize” on costs of bridging the supplier – customer gap, i.e. lowering the costs of transactions”.  

(Lars-Erik Gadde Chalmers University of Technology Industrial Marketing and Ivan Snehota  Stockholm School of Economics).

MOST LIKE A SOLAR BROKER:

“The assortment offered to the customers by the middleman is different from what can be offered by each of the firms supplying the middleman. The middleman offers thus his own ‘product/service’ in which the various suppliers’ products are but components. The business, like any other business, depends on developing and maintaining exchange relationships with customers – and suppliers – for which it competes with others”.

(Lars-Erik Gadde Chalmers University of Technology Industrial Marketing and Ivan Snehota  Stockholm School of Economics).

THE MIDDLEMAN AS DISTRIBUTOR:

“Middlemen distributors position themselves to develop close relationships with end users. Therefore, many of these have gone through another shift in the middleman’s role in the business network, and we can observe a change in the allocation of business functions among the players involved in gap-bridging. The focus of many middlemen’s business becomes the identification of exchange opportunities based on the user’s conception of suitable resource bundles and then searching for appropriate sources of these resources for the user”.

(Lars-Erik Gadde Chalmers University of Technology and Industrial Marketing and Ivan Snehota  Stockholm School of Economics).

THE MIDDLEMAN AS PROVIDER:

“The current concern with supply chain management both in practice and in theory indicates that the emergence of the middleman as provider is not a marginal phenomenon and concerns numerous middleman businesses”.

(Lars-Erik Gadde Chalmers University of Technology  Industrial Marketing and Ivan Snehota  Stockholm School of Economics).

‘The middleman is not a hired link in a chain forged by a manufacturer, but rather an independent market, the focus of a large group of customers for whom he buys’.  

(McVey 1960:64)

WE USE MIDDLEMEN EVERY DAY AND IN EVERY STORE:

“Taking an extreme interpretation, any business can be seen as a middleman business, since most companies are in-between other companies”.  

(Lars-Erik Gadde Chalmers University of Technology Industrial Marketing and Ivan Snehota  Stockholm School of Economics).

For instance: Walmart, Amazon, Macy’s, and  Costco… These middlemen are distributors of products and services to end users, for which we pay a middleman to achieve this convenience for us.  In the case of brokering solar installations to my clients; I locate the best price, terms and conditions from various solar installation companies, of whom they buy their supplies from a manufacturer, who may in turn use a broker or a factory direct salesperson to sell to them.  Middlemen are ubiquitous, and unavoidable.  Unless you buy your own land, grow your own raw material and manufacture your own merchandise… from cradle to grave, inception to delivery… from laboratory to launch; middlemen are a part of the backbone of any economy.

WHEN I BEGAN PAYING ATTENTION TO MY MIDDLEMAN DILEMMA:

A great example recently came about on a solar equipment installation for a potential customer.  The transaction concerned a competitive and price aggressive solar integrator/company which I brought in for a proposed project to be installed onto the roof of a very large laboratory.  This was a family owned laboratory, run by a father and son team, and other family members. And oh boy, what a valuable lesson I learned!  Things seemed to run smoothly until the third sales presentation.

MY PROBLEM:

The laboratory owner, (father, not the son) became confused as to why I was in the middle of this transaction. From his point of view I was the middleman to be eliminated, and who could blame him?  Even though the father had met me during the second presentation, (we had exchanged business cards and brochures) AND he knew exactly who the solar installer was, I had not made him fully aware of my place in the transaction as “solar broker”.  Hence, I was called out as the dreaded “middleman”.  Ouch!  Even though I defined “solar brokering” to the son, I failed to confirm my role with his father at the second meeting.   Lesson Learned… I would have felt the same way if I had been in his shoes.   

FROM OBJECTION TO RECEPTION:

But still, convincing would-be commercial buyers to use a solar energy broker is still no easy task.  To demonstrate  value requires helping them to see the reward from their perspective… that is, a business owners perspective, rather than solely from a buyers’ perspective.

BUT FIRST, WHAT IS THE VALUE OF A SOLAR BROKER?

Solar brokers reduce the cost of doing business because we are independent and outsourced marketing and business development freelancers.  We take on the entrepreneurial risk; the time, effort and monetary cost that go with reaching our audience. We earn strictly by sharing commission splits from “winning solar bidders”; we receive ONLY when a sale goes into contract, and we take a percentage of the commission from the solar salesman.  The solar companies we broker to NEVER pay us for a failed sale, nor do we represent their interests in the outcome of any sale.  They enter agreements with us with the understanding that they act as a resource; we remain impartial to them and advocate for the buyers best interests.  We earn no salary, sick leave, vacation, health insurance, car allowance, cell phone or computer stipend.  The solar companies save on Worker’s Compensation, payroll, employment taxes and rented office space and supplies. Essentially, we are one less GIANT cost of doing business to their bottom line.   Because my solar broker services are strictly performance based, my solar company affiliates have learned to LIKE me, rather than loathe me as the middleman.  I’ve effectively reduced their cost of doing business, where they can be more competitive at winning my clients business.

NO HIDDEN FEES OR MARK-UP?

Even if no middleman exists within a sale, the salesman will still take his full commission, OR he will agree to split it with a participating middleman-broker.  The upshot:  there is no additional expense to the sales process.  In fact, expenses are reduced because the salesman and middleman have collaborated to economize the sales process by shortening the sales gap between user and supplier.  Hence goods and services move more effectively and efficiently from one point to another in shorter period of time.  

TRANSLATING THE MIDDLEMAN  VALUE TO MY CLIENTS WHO ARE BUSINESS OWNERS THEMSELVES:

When a business owner is bogged down by the expense of doing business, he’s always on the lookout for ways to reduce these costs so he can be more competitive, increase his profit margin and take less financial risk. 

“One of the best ways I can exemplify my value to a business owning client is to reverse the paradigm with the help of “empathy”…  asking him if he sees the value of my middleman role as if I were providing brokering services to his company”.

CASE IN POINT WITH THE LABORATORY:

What if I could provide the laboratory owner with SEVEN MAJOR accounts this year?  I propose to him that I shall go out and market and cold-call and educate to his target audience about the benefits of potential customers using his laboratory services.  Once I have an educated and pre-qualified buyer, then I will introduce that buyer to the laboratory salesperson, from which I will arrange introductions, liaison and facilitate, and manage the transaction until buyer and laboratory have a “deal” for a closed sale.  What if this broker-agent-middleman service cost the laboratory absolutely nothing for my time, labor and expense? What if I only expected to get paid a percentage of the commission from their in-house salesman after the buyer and the laboratory reached a close of sale?  What is this worth in shaving the cost of doing business over and over and over again?  The result:  I have just spared the laboratory the cost of acquiring new business.


FOR MORE ON THE MERITS OF THE MIDDLEMAN:

http://www.examiner.com/small-business-strategies-in-philadelphia/the-benefits-of-being-the-middleman

http://www.enotes.com/business/q-and-a/what-importance-middleman-business-41005

 

 

Article written by Jennifer Coleman, Owner of Sun Source Solar Brokers,  serving  San Francisco, Marin, Sonoma, Napa and Solano Counties.  A provider of solar buyer agent-advocacy and solar business development.

 

 

References

Rethinking the Role of Middlemen  Lars-Erik Gadde  Chalmers university of technology  Industrial marketing
Ivan Snehota  Stockholm School of Economics
Alderson, W. (1965) Dynamic Marketing Behaviour. A Functionalist Theory of Marketing.
Richard D. Irwin, Homewood, Ill.
Bucklin, L. (1965) Postponement, Speculation and the Structure of Distribution Channels. Journal of Marketing Research, Vol. 2, February, pp. 26-31.
Chandler, A. (1977) The Visible Hand. The Managerial Revolution in American Business. Harvard University Press, Cambridge. Mass.
Drucker, P. (1990) The Emerging Theory of Manufacturing. Harvard Business Review, May-June, pp. 94-102.
Kirzner, I. (1973) Competition and Entrepreneurship. The University of Chicago Press, Chicago
Kotler, P. (1988) Marketing management. Analysis, planning, implementation and control.  Prentice Hall, Englewood Cliffs.
McVey, P. (1960) Are Channels of Distribution What the Textbooks Say? Journal of Marketing, January, pp. 61-64.

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