What Happened to Straight Commission Reps? — Part One

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The manufacturer who called me was sincerely puzzled. “I am trying to hire reps and all of them are asking for Life of Part/Life of Program (LOP/LOP) or shared market development fees.*”

  1. “What happened to just paying the rep based on each month’s commissionable shipments?”
  2. “If I gave a rep LOP/LOP and then replaced him or her with a new rep, then the new rep would end up handling price negotiations on repeat orders that are commissionable to the old rep. Why would the new rep try to maximize the selling price if commission goes to the old rep?”
  3. “And if the new rep handles negotiations on repeat orders that are commissionable to the old rep, what incentive does the new rep have to work to keep the reorder from going offshore?”

To answer the first question, let’s say you are a casting manufacturer who wants to target Ford Motor Company.

Before any commissionable parts orders ship, your rep must:

  • Introduce your company to Ford.
  • Get your company through Ford qualifications.
  • Wait for a new program to come up (say a new rear-view mirror design).
  • Get your part on the print.
  • Wait for tooling to be produced.
  • Wait for prototypes to reviewed, perhaps adjusted, and resubmitted for approval.
  • Wait for the program to be released.

Without LOP/LOP and/or shared market development fees the rep risks working 3-5 years for free and then being terminated after the first production order ships.

And making the rep’s situation even worse, for every project he or she works on that becomes an order, the rep also probably worked on 5-10 similar opportunities that did not become orders for reasons that were completely outside the rep’s control.

That’s why manufacturers who want their reps to hunt for elephants put LOP/LOP and/or shared market development fees in their contracts.

For the answers to the manufacturer’s last two questions, watch for next month’s “MANA Minute.”


* The manufacturer’s comments have been edited for clarity and brevity.

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When my mentor hired me to work in his small manufacturers’ representative firm decades ago, no one had heard of algorithms. But my … Read the rest

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Letters to the Editor

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I just read the April 2018 article “Principal CRMs” with great interest and would like to add to this discussion. Personally, I have been using online CRMs for many years and would like to take exception to the use of the phrase “fill out reports online.”

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In today’s highly competitive workplace, reputation makes a difference. Your competition can be down the hall, across the country, or 10 feet away. It can be someone who wants your customer or your job — maybe both.

When it … Read the rest

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I’ve often thought that this is one of those fundamental challenges for a salesperson. It’s one thing to focus on closing the sale and presenting to a … Read the rest

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If this holds true for managers, how much training do front-line employees get?

A long-term research project commissioned by Middlesex University for Work Based Learning found that from a 4,300 workers’ sample, 74 percent felt that they weren’t achieving their full potential at work due to lack of development opportunities.

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Steps to take with the initial sale:

Step 1: Verbally thank the client for his business when you close the sale.

Step 2: Review expectations and what will happen next.

Whatever your particular steps are, go over these steps with the client and let him know how and when he will be kept up to date.

Step 3: … Read the rest

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Don’t ever underestimate the value of being able to network with non‑competitive peers.

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I have data that show that the very people who don’t score well at hunting (reluctant, ineffective or both) also score poorly at social selling while those who score the highest for hunting score higher for social selling too. Check out this data:

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