Rock Solid Featured

7:00pm EDT February 23, 2009

Mike Brooks was between a rock and a hard place. Or so it seemed at first. The chairman and CEO of Rocky Brands Inc. knew his biggest retail customer wasn’t playing fair. The customer was selling Rocky merchandise below target prices and duplicating hot-selling Rocky products overseas under its own name. Yet, the customer accounted for more than 10 percent of Rocky’s total sales. “They were powerful,” Brooks says. “They were driving the business, and they could sell tons of stuff. But they were really a pain, because you could never trust anything they said. It was not a pleasant relationship.” One potentially fateful day in 1992, Brooks decided he’d been pushed around enough.

“I just got tired of all the games they were playing,” he says. “I went out, by myself with a salesman, and I sat down with the president and the buyer and said, ‘We’re no longer going to do business with you.’ I was young and foolish then, but that’s what I told him: ‘I’ll complete all orders that we have at the price you were quoted, but I have no trust in you, so I’m not going to do business with you anymore.’ The buyer and owner looked me in the eye and said, ‘Are you sure you want to do that?’ and I said, ‘Yup.’ I was a little apprehensive. What happens if my sales just go south? But I’d tried everything. It was my personal decision.”

It was also a huge gamble. Not only because Rocky was certain to lose a big chunk of its sales as a direct result of that conversation, but because the company was in the midst of preparing for its initial public offering at the time.

“That was my largest single customer, and I didn’t tell the public that I was going to divorce my largest single customer,” Brooks says. “But I just felt it was the right thing to do, and I didn’t know the public game very well at that time.”

Fortunately, the story has a happy ending.

“Our volume went to nothing in about six months, but we sold that up elsewhere and didn’t miss a beat,” Brooks says. “And I didn’t hurt myself in the public eye, I don’t believe.”

Rocky went public under its previous Rocky Shoes & Boots name in February 1993 without a hitch, selling shares at its original asking price of $10 each on the NASDAQ for a net of roughly $15 million.

Clearly, Brooks won’t let maverick or high-maintenance customers push him around. Here’s how he has built, rebuilt and maintained strong relationships — and a $275 million company — without compromising his principles.

Rebuild relationships carefully
Brooks takes honesty very seriously. It’s a cornerstone, upon which he — and his father before him, as well as his grandfather before him — built the Nelsonville-based footwear and apparel business.

When he bid adieu to his largest customer in 1992, he didn’t permanently write it off as a bad apple. People can change, after all. Therefore, companies can change, too.

As it turned out, that customer wanted a second chance.

“They stayed in touch with us and continued to kind of court us,” Brooks says. “[They’d call and ask,] ‘Hey, when can we come back? We still like your product, and we could sell a lot of your product,’” he says. “But we stayed away from them for about two and a half years.”

Finally, Brooks acquiesced.

“I said, ‘OK. Let’s try it again, but we’ve got to follow some rules,’” he says. “What’s interesting is they started buying the shoes again and became our No. 1 customer again within 12 months. That taught me a lesson that sometimes you’ve got to have tough love with a customer. Sometimes you can go back and rekindle that relationship.”

But it takes time. And the agreement to play fair requires continuous monitoring.

“They still play some of those games,” Brooks says. “They’re not a customer I enjoy calling on or have fun with or really look at like a partner.”

But the relationship remains intact and lessons have been learned. The jump in Rocky’s sales was a nice byproduct, too.

“It was amazing to see how it skyrocketed from nothing to millions of dollars annually just like that,” Brooks says, snapping his fingers. “They’re powerful.”

Make intelligent compromises
Brooks believes in partnerships. He wants to help all his customers be successful. After all, if he can give customers like Bass Pro Shops, Dick’s Sporting Goods and Wal-Mart what they want, he should get what he wants — higher sales, more and better shelf space, a better market position — in return.

Walking that fine line between supplier and friend can be tricky.

“Sometimes customers ask us to support them and help take inventory back,” he says. “We never want to do that. But sometimes we will. If exceptions have to be made, they will be made, but that doesn’t mean it’s carte blanche, that anytime you’ve got an inventory problem we’re there to relieve that for you.”

That’s when you can make creativity come in to play.

“We’ll do other things,” he says. “We’ll run a promotion. We’ll do a trunk show.”

In rare circumstances, Brooks might even partner with a customer to offer an exclusive product line, but even that has to have some preset limitations.

“We’ll give a one-season or one-year exclusivity,” he says. “Not for any longer than that.”

Allowing a product to remain exclusive to one customer for too long would risk upsetting other Rocky Brand customers and possibly compromise the product’s true sales potential. Brooks has been fire-tested on this policy, too.

In 2002, executives at Dick’s Sporting Goods agreed to be the sole seller of Rocky Brands’ new line of hunting apparel.

“We gave them a test on Rocky Brands for one season, and it was extremely successful,” Brooks says. “They sold the stuff out like it was free.”

But when the season drew to an end, executives at Dick’s weren’t ready to let go of the exclusivity.

“They had so much success, they said, ‘Wow. Let’s do a five-year contract,’” Brooks says.

But that wasn’t their original deal.

“We were at a crossroads,” Brooks says. “We could’ve let them license it, and they probably could’ve sold, maybe $25 million worth of stuff, and I could’ve gotten a nice licensing fee. But I wasn’t going to have as much control over the quality and the pricing and the innovation. They were all about selling a lot of stuff. I just wasn’t comfortable going down that road.

“So, begrudgingly, I said to one of my good customers, ‘Thanks for the test, but we’re not going to give you the exclusive right to this brand of apparel for a licensing deal. We’re going to do it ourselves.’ So I elected again to upset another good customer for a couple seasons.”

Dick’s didn’t take the refusal lightly.

“They didn’t buy from us for a few years,” Brooks says. “They were very, very upset over that. It took two or three years to get them back involved. But they’ve come back, and they’re a big customer today.”

Create face time for every customer
Brooks appreciates slow-and-steady, old-school selling techniques. He knows the key to winning, retaining and, in some cases, regaining customers is ongoing, open communication. But that takes time.

“It’s finding the time to speak with your sizeable customers or new customers you want to bring on board,” he says. “Find the time to really listen to their concerns and opportunities. It’s just old-fashioned communication. There’s not any magic or secrets there.”

Yet in an age dominated by convenient, immediate electronic communication, finding time to physically visit customers has become increasingly difficult — but more important than ever.

“Have face-to-face time,” Brooks says. “Have dinners together. If you can, recreate together.

“One of the greatest things we ever did here when we were a smaller company was annually we would do a raft trip down to the New River Gorge in West Virginia,” he says. “We would invite anyone who assisted us in having a successful year. It could be a banker, a customer, a lawyer, a supplier. We’d bring them into Nelsonville and have a cookout at my house or my brother’s house and walk them through the business and show them what we’d done that year and then we’d get in the bus and go down to West Virginia. We’d spend the night and whitewater on the New River. I may have a retailer in the boat and a leather supplier in the boat and the mayor of Nelsonville in the boat. So you’d really get to know people and build trust. Many people help build your successes. So I remember that as a really good building stone for our business.”

Today, such outings are done almost exclusively with Rocky’s largest customers — but they’re still an integral part of building and maintaining those relationships.

“We’ve got a half-dozen or a dozen key account executives who have to reach out and do some things with their special customers,” Brooks says.

“If a salesman has not visited a customer annually, it’s a problem,” he says. “It’s a big problem. We have a lot of customers. In our Georgia [Boot] division alone, we have 15,000 customers. So if they’re a small customer, we may only see them once a year. If they’re a big customer, we’re going to see them every 30 days. We want to be there, listening to their concerns and working closely with them.

“It’s my belief that you have to have quality face time and be honest,” Brooks says. “Don’t tell them something you can’t deliver on. Don’t try to overinventory them. Be their partner.

“At the end of the day, it’s all about us working together to solve problems and make money. We both have to make money. It’s pretty simple, really.”

HOW TO REACH: Rocky Brands Inc., (740) 753-9100 or