Random House maintaining a big field force while the industry wisdom is to cut
I was brought up to believe in the virtues of a large field sales force. One of Dad’s early successes in his career as Director of Research at Doubleday was when he analyzed sales rep effectiveness to advise the company about the optimum number of reps to keep when they combined sales forces that had 10 and 14 members, respectively. The company expected him to come up with a number between 10 and 14, or, perhaps, between 14 and 24. His careful analysis of the impact of reps calling on stores led him to recommend that the new sales force consist of 35!
This decision was contrary to the contemporary practice and reasoning of all other publishers.
And very quickly thereafter, Doubleday concluded that taking orders was not the most important function for the rep. Influencing display, store merchandising, and sales clerk awareness of Doubleday titles were where they came to believe the big wins were.
A lot has changed since then, of course, including the ubiquity of computerized inventory management tools, very fast service nationwide from well-stocked wholesalers, and the growth, and then decline, of bookstore chains. But, most of all, we have gone from a country where the number of bookstores was organically increasing to one where it is, clearly, organically diminishing.
Is a large field sales force still a good idea? Dad died 10 years ago, but I am pretty sure he would think it was. He’d be very pleased to see what Random House is doing. They are maintaining a force of well over 100 reps in the field (among several different sales organizations with defined product or account specialties) while everybody else is cutting, usually from a much smaller base. They are, as he did, operating contrary to the contemporary practice and reasoning of all other publishers.
We’ve tried to get at the question of sales force deployment before but I had clearly not focused sufficiently on Random House. We had a session at Digital Book World in 2011 about it and Jaci Updike of Random House (who, as you will see, was a key actor in all this) was on the panel. But the Random House initiative we’ll be talking about below was only in development then. The story that was told at that session, and in industry news reports from time to time, was that the combination of field realities (fewer stores) and new capabilities (like electronic catalogs created by some houses and the industry electronic catalog Edelweiss) made it possible to cover the retailers with fewer reps. Not only that, sales conferences — a very expensive exercise that requires enormous travel expense to bring reps together — were sometimes being replaced by videos of editors pitching their books. The videos, unlike the reps, travel for free.
What made me want to learn more about what was going on at Random House was a conversation I had two weeks ago with another Big Six executive who wondered what they were doing. That person was aware of cuts at their own company and at others, but not at Random House. It seemed impossible that the biggest publisher in town could be cutting sales force and nobody else knew about it; those dismissed reps would be out looking for jobs and knocking on all the competitors’ doors. What was going on there?
I got the chance to ask the question of a friend on Random House’s corporate strat team a few days later. I was told that, indeed, Random House senior executive Madeline McIntosh and the adult sales director who had been on the DBW panel, Jaci Updike, had been redefining the role of the sales rep, broadening the responsibilities so that they remained productive and could be retained in large numbers even with fewer stores. Not only that, but they were proud of what they were doing and were happy to talk about it.
So last Friday I sat down with Updike for an hour and learned about the project that Random House calls “Rep 3.0″.
Whenever you learn about a company innovating, a recurring theme is “it requires support from the top” and that is true here. Jaci’s first reference, when asked “where does this come from?” was to the support the sales reorganization has gotten from CEO Markus Dohle. In his most recent end of year note, he specifically cited the work that Random House’s field reps do. (Updike also pointed out that she’s not the only sales executive leading this. She made it clear that Joan Demayo, leading the children’s sales organization, is doing the same thing.)
There is a belief in Random House, not necessarily documented and perhaps impossible to document, that half of sales come from word of mouth. They are also convinced that their field force is a primary tool to generate the dialogues that sell books. With Updike heading adult sales, they had a leader who had started out as a sales rep at Random House 22 years ago — after working in a bookstore before that — and who was their first Director of Independent Bookselling.
Jaci lived through many shrinkings of the Random House sales force in the 1990s and earlier in this century. But starting about three years ago, they started to disassociate the sales rep’s work from billings and look hard at what reps do “in the community”. Reps already did staff presentations in stores and connected to local media and to libraries. This was behavior that grew organically, but Jaci believes that Random House was unusual in that they encouraged it. If you’re stretched thin trying to cover all the accounts, it is harder to be supportive of what appear to be extra-curricular activities.
But three years ago, with Madeline McIntosh, Jaci’s predecessor in her current job, now running sales and all related operations, they embarked on their Rep 3.0 program. A core element of this was to reorganize the workflow of the rep’s job, using such tools as iPads and electronic catalogs, to make order-generation take less time and free up time for other activities. And those new activities, presenting to libraries and corporations as well as to bookstore staffs, became part of what the company expected their reps to do.
Implementing this strategy required that they make some changes in philosophy and approach that would seem counterintuitive to most sales executives.
They no longer compensate reps based on the sales they generate. Reps are compensated, as are many at Random House, on the overall company performance.
They encourage blogging and speaking engagements without corporate control of the messaging. In fact, they’re quite comfortable if the books their reps talk about aren’t all Random House books. This comes from their conviction that their community-building exercises won’t be taken seriously if they’re seen as shilling for their own stuff. On the other hand, they’re sure their own stuff benefits the most.
And they’ve invested in supply chain in general, seeing the connection between improving the tech in the reps’ hands, the speed of shipment from the warehouse, and the development of such capabilities as vendor-managed inventory, as worth the effort even in an era when the number of bookstores is getting smaller.
The community-building, non-bookstore efforts by the reps get very ambitious. There are Random House reps organizing “retreats” with authors where readers pay to join the group. These bring in attendeees from far afield, including from other countries who want to participate in the discussion about books. The attendees are not book sellers, primarily, although a bookseller is always involved. They are book readers, book lovers. But Random House doesn’t see this as a brand-building exercise. Updike believes that a part of what makes this all work is that the reps are “credible”; they’re not just pushing Random House books.
“We don’t touch what they do with their blogs,” Updike says. “We don’t influence. We don’t suggest.” It is the independent view the reps offer that “makes efforts like this work”, in her opinion.
With these new marketing practices largely arising from reps’ creativity and initiative and then being spread as “best practices” throughout the sales force, the company-wide sales meetings remain very important and Random House continues to run them twice a year.
So Random House sustains an investment in covering field accounts that none of their competitors appear to believe is sustainable, and they do it employing very unconventional techniques that are hard to measure. Is it working? Do they believe it is working?
Updike was convincing on this subject, even while she rejected as somewhat inflated a colleague’s report that independent store sales were measured as “up 40%” in February. (Like her reps increasing their credibility by not limiting their discussions to Random House books, Jaci’s willingness to discount what she thinks is an inflated measurement of their success reinforced her credbility with me!)
She figures some of that 40% increase was simply a shift of sales from wholesalers to direct because Random House had a few-month program of 2-day-shipment that ran through February. But she also knows that “POS was up” and she believes “our in-stock position was better than other publishers. We were in stock on a lot of hot titles when others were not; that was part of it.” And even with Borders closing, which we all know put wind in the backs of many independents, the 15% increase in indie store sales she thinks is the accurate number, is a very impressive feat in these times.
Random House figures that its “army of marketers”, which is how Updike now sees her sales organization, is helping them sell more books, build more titles from obscurity to success, and is thus giving them an edge winning over agents as well. This is a strategy not likely to be duplicated by any of their competitors. It will be interesting to see how clear a competitive advantage it can deliver them, and for how long.
Here’s another family anecdote that brings all this home. In 1975 I was working for my father, running sales at Two Continents. He had met a young sales director at Frederick Fell named Charlie Nurnberg. “Go meet him, Mike,” my father said. “You’ll learn things.”
I did, and I did, starting with the very first conversation we had when Charlie explained to me that if the permission line when somebody excerpted your book included a price and an address, you’d get orders.
In any era before the current one, the executive who got me started on this investigation by wondering aloud what was going on at Random House would have just picked up the phone and taken somebody there out to lunch to find out. “What are you guys doing about sales force deployment?” would not, in and of itself, have been seen as a “price-fixing” or “combination in restraint of trade” question.
But the reason why they don’t act that way today became very publicly evident yesterday, with the announcement of the DOJ suit against Apple and five publishers and the settlement agreed to by three of them. Publishers can’t talk to each other about the industry anymore. Aside from many other things, this means publishing just isn’t as much fun as it used to be anymore. (Even as I write this, I can hear the ridicule that statement will inspire in some quarters.)
I want to let the dust settle for a couple of days while people smarter about this than I am make clear what the legal papers actually say and what the timetables are for changes to become effective before I try to spell out some things it might mean.
This will certainly make for a lot of interesting conversation starting this weekend at the London Book Fair.