Manufacturers

Major lighting agency disruption: Cree’s changes impact 80% of its reps

During an
earnings call with financial analysts last month, Charles Swoboda, chairman,
president and CEO of Cree, said, “In January, we took the next step in our
integration of the Cree lighting and BetaLED product line as we combine the 2
product lines into a single lighting agency for each major market. In most
every market, we now have a new agency for either the Cree or BetaLED product
line.

“In some cases,
we selected a new agency for both product lines. As a result, we lost some
sales momentum in the short term, especially on the Cree indoor product line. A
number of projects were delayed and some projects simply moved ahead with
traditional technology in the near term.

“While this was
disruptive in the short term, we believe we made the right decision for the mid
to longer term as we were able to upgrade our agents by leveraging the strength
of the combined product lines.”

The
transcript
of the company’s Q3/12 earnings call includes analyst questions
and answers from Swoboda and John Kurtzweil, Cree’s CFO and executive vice
president.

It’s
important to note that Cree
acquired Ruud Lighting
in 2011. BetaLED was one of the Ruud lines now under
the Cree umbrella.

In
response to a question on the rep transition, Swoboda said, “…when we did the
agent transition in the last quarter, we went through a process where I think
80% of the agents are new to either the BetaLED line or the Cree line. So
that’s a lot of agent retraining and a lot of momentum to build back.”

That
answer led an analyst to say, “We’re going to beat your agents to death
here, Chuck. About how many agents did you switch? And about—over what period
of time, did you make that transition? And are these agents now, and I think I
missed this, are they regional or are they specific in verticals?”

Swoboda
answered, “I think we have a little over 50 agents and a little more than 80%
of them switched. So in over 80% of the cases, the agent is new to either the
indoor line, the outdoor line; or in some cases, they’re new to both product
lines. And so you basically have less than 20% of the agencies were not
disrupted by this. It all happened in early January.

“We went
through a process over the first 6 months, looked to see who we thought would
be best to drive the product line going forward, made that call in early
January and did it all at once. And so, obviously, I think anyone who’s ever
had a sales team change 80% of them at one time, you realize that it was
disruptive.”

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