While the conference was industry-specific — in this case the electrical industry — the National Electrical Manufacturers’ Representatives Association’s (NEMRA) 36th Annual Conference earlier this year included two presentations that were of specific interest to manufacturers in all industries who work with manufacturers’ representatives.
The first involved initial findings of a study of how reps and their manufacturers can eliminate waste in their channel, the second was an educational session attended by reps and manufacturers and included how the former evaluates the latter.
Electrical manufacturers report that they recognize and appreciate the fact that their reps develop and maintain strong local relationships. Similarly, reps recognize and appreciate the quality of the products their manufacturers bring to market.
At the same time, both reps and manufacturers acknowledge there is much that can and should be done to improve each other’s performance in the marketplace.
These and other findings were detailed during the NEMRA Manufacturers’ Group (NMG) Forum during the NEMRA conference.
To follow are some of the initial findings from the NMG project, entitled “Eliminating Wasteful Activities in the Rep and Manufacturer Sales and Marketing Channel.”
Manufacturers give “excellent/very good” ratings to their reps when it comes to developing and maintaining strong local relationships. Also highly rated are their abilities to:
- Provide responsive and knowledgeable customer service personnel.
- Perform order entry, complete quotes and RGAs, etc.
- Have aggressive and knowledgeable outside sales personnel.
- Provide frequent local market intelligence.
- In the “fair/poor” category, however, manufacturers cite the reps’ lack of performance when it comes to:
- Pushing new products to end-users.
- Developing and maintaining strong local relationships with end users.
- Providing local marketing merchandising programs.
- Developing/executing sales and marketing plans.
Reps, on the other hand, are complimentary when it comes to giving credit to their manufacturers for consistently providing high-quality products. Reps also rate manufacturers’ performance as “good” in the categories of:
- Their ability to deliver products within satisfactory service guidelines.
- Their responsive and knowledgeable customer service personnel.
- Providing responsive, competitive and consistent pricing.
In the “fair/poor” categories, however, reps point to their manufacturers’ failings in the areas of:
- Providing frequent and professional product training.
- Ability to handle order entry, quotations, RGAs, etc.
- Having in place responsive/knowledgeable regional sales management.
- Handling returns, discounts.
- Providing timely and accurate sales and commission reporting.
- Producing effective sales and marketing tools.
Taking dead aim at the major subject of the study — channel waste — manufacturers and reps identified specific areas that they felt needed to be improved. For instance, by a large margin manufacturers feel their reps are guilty of waste when it comes to communication. According to Tom O’Connor, The Farmington Consulting Group, who conducted the study, manufacturers maintain that “reps can’t perform administrative tasks without calling us,” and “when we send reps written communication, only one in 10 will actually read it.”
Wasteful Report Writing
For their part, reps point to sales activity reporting as a wasteful activity on the manufacturing side. The consultant noted that reps maintain, “The biggest waste is monthly reports, because we spend a lot of time on them and they just fall into an abyss.” Reps also complain about “urgent requests for weekly and monthly sales forecasts” and “asking for product and market input” while providing no feedback.
Another prominent time waster that reps lay at the feet of their manufacturers, according to this study, is their failure in terms of “system integration.” According to some of the reps’ views that were provided, there is a great deal of paperwork redundancy; “Manufacturers’ processes take way too much time, whether paper or online”; “Manufacturers ask us for contact information on each customer that we can’t provide through automation.”
When it came to “sales management” as a category for wasting time, reps maintain that:
• Unqualified and poorly trained regional sales managers conduct no value-added territory visits.
• Manufacturers have untrained factory salespeople.
• Factory salespeople don’t understand customer needs.
• Repetitive approvals are required for pricing, quotes, marketing support funding, etc.
The presentation at the NEMRA Conference provided an introduction to the NMG study. Once the study is completed, a white paper will be presented to the industry.
Reps Evaluating Manufacturers
In a second presentation, insight was provided for manufacturers in attendance at a session entitled “How Representatives Choose and Evaluate Manufacturers.” Conducted by Larry Fisher, electrical division managers for Erico, Inc., the interactive seminar discussed what manufacturers’ marketing partners think of manufacturers’ business skills, and provided some comparisons on how one company’s marketing strategies compared to other organizations that the reps go to market with.
At the outset, the session considered some of the attributes that manufacturers’ rep agencies find desirable in their principals:
- Manufacturer personnel tenure
Just as manufacturers ought to be concerned with the length of time an agency has been at work in a territory, so too are reps concerned with how long manufacturers’ personnel have been in place. That concern especially manifests itself in the length of time a regional manager has been in place, according to Fisher. “Most reps are cognizant of the fact that the longevity of a regional manager covering a particular line comes in at a little over two years.” Compare that to the average longevity of a rep in the territory, which, according to Fisher, is about seven years. “That means that typically a regional manager position is simply a rung on a career ladder. Once the regional manager climbs that rung, he leaves. At the same time, the rep has to go through a retraining of the regional manager three times during the time he represents the line. That’s a lot to expect.”
- Current market position
Where does a potential principal rank vs. the competition in terms of market position, visibility, reputation? An agency is most attracted to the manufacturer that has a reputation for providing innovative products to the market. Reps invest a lot of their time promoting new products. As a result, they want to know that there’s going to be a steady flow of new products that he can work with.
What’s the word from other agencies concerning ease of doing business with a manufacturer? Is the manufacturer “fun” to conduct business with?
- IT capabilities
“Ten years ago this would have been the number-one concern that a manufacturer has with his potential reps,” Fisher said. “As time has passed, the weight of this concern has passed over to the rep. The agency wants to be sure that a principal has the latest and greatest when it comes to information technology, and they also want assurance that the manufacturer exhibits a commitment to remain as a leader in this area.”
Evaluating the Potential Principal
While there were other attributes mentioned during the session, talk quickly moved on to what a rep considers when a choice of potential principals is imminent. Among reps’ concerns are:
- What’s the manufacturer’s current representation? What type of agencies does it work with in other territories?
- If the manufacturer is planning a change in a specific territory, has the company notified its current representation that they are making a change?
- Why is it making such a change?
- Does the manufacturer exhibit flexibility in its contract or do they say there’s just a standard contract for all their reps? Discussion among the manufacturers and reps who participated in the session indicated that most manufacturers are willing to be flexible in this area. Different situations require different terms, and the rep and the manufacturer should be willing to negotiate.
- What territory is covered by the agreement between manufacturer and rep? Are there any house accounts?
- What’s the level of marketing/sales support that the rep can expect? Manufacturers in the session indicated they found it useful when considering a potential agency to provide examples of exactly how they support their field sales effort — some even going as far as providing references that potential reps can contact.
- Training — Manufacturers should communicate the types of training programs that are available and detail their frequency. Who pays — including airfare and hotel?
- Commission structure — How are quotas established and what incentives exist for exceeding those quotas? Are there incentive commissions for new product pioneering? The majority of manufacturers present indicated that such incentives were an ideal way to get their reps’ attention.
- Termination procedures — Reps want to be sure that their contract with the manufacturer covers termination considerations (e.g., what the severance agreement is, whether extra commission will be given considering the number of years the rep has represented the line).
Holding Up Commissions
An interesting side discussion took place during this session regarding paying or not paying commissions to reps if the customer fails to pay for an order. According to one of the manufacturers present, “We generally will not pay commission if the customer has failed to pay for their order. Rather, we’ll wait until we receive a check for the order and then issue the rep his commission.”
Taking issue with that approach was one rep who asked the question: “Let’s assume for a moment that you use a direct vs. an outsourced sales force. Since your direct salesperson is on salary, if the customer fails to pay for the order, do you stop paying the salesman his monthly salary? Of course not! Unless it’s been agreed upon ahead of time, it’s not the rep’s job to collect for orders. The rep has done his job by securing the order. As a result, he’s completed his job and should be compensated for it.”
Acknowledging the obvious difference of opinion, Erico’s Fisher said, “There are two widely different approaches to this problem. This serves as a perfect example of how a solution might be forthcoming through the use of a rep council. That’s what a true partnership can result in, and it’s a true partnership that the rep and the manufacturer should be working toward. I’m not saying that running this problem through your rep council is going to result in the ideal solution, but at least you will air different approaches for solving it and probably will come up with something that is workable for both sides.”