In a room filled with manufacturers and reps, a manufacturer made a comment concerning qualifying sales leads that somewhat surprisingly met with almost unanimous approval.

“I don’t qualify leads for my reps. Instead, I just pass along all the information I have concerning a prospect, and here’s why. The rep knows the territory much better than I do. After all, isn’t that why I work with the rep? Doesn’t he know the level of business activity and who the best contacts are? As a result, I trust him to take the proper action when I forward a lead to him. He may take no action whatsoever or he may immediately follow up. I leave it to him. He’s my eyes and ears in the territory. If I tried to follow, qualify and follow-up, I’m sure I’d make a lot of wrong decisions.”

Interestingly the reps in the room concurred with him and wished their manufacturers would act accordingly.

Value Complaints and the Complainer

An article on dealing with complainers came our way that we thought provided a perfect rationale for why manufacturers ought to consider implementing a rep council.

Written by Berkeley, California-based author and speaker Craig Harrison, the article maintained, “The complainer is actually doing you a favor. They are the extension of your research, testing and quality assurance departments… they’re providing you with invaluable, often real-time feedback on what isn’t working in your business or your relationship with them.”

Providing feedback — doesn’t that sound much like what manufacturers’ representatives do for their principals?

Harrison maintains that complainers ought to be celebrated. “The information they provide makes improvement possible. Their feedback provides end-user validation of your processes and procedures, your product lines and your service levels.”

And, what better place or venue to receive that feedback than within the parameters of a rep council?

While the gist of his article focused on customer feedback, it is easy to extrapolate the author’s message to the world of principals and reps when he says:

• Be open to their feedback.
• See the long-term value of fixing a problem they have experienced.
• For each complainer, many more may have already moved away from you — or will soon if you don’t fix your problem.

He continues that the task for the manufacturer is to make it easy for these people in the field to provide them with feedback. “Listen generously when they do come forth.” Telling them that “nobody else has complained” misses the point. Consider the following action steps when complainers do their thing:

• Thank them for taking the time to let you know of their less-than-stellar experiences.
• Honor their courage in speaking up.
• Reward their input in meaningful ways — e.g., future preferential treatment.
• “When you act on their complaint let them know you’ve done so. As a result, they’ll feel their power, and your responsiveness will strengthen the bond between you and them.

“In its own way a complaint is a compliment — they cared enough to let you fix the problem. They think you’re capable of doing so and will be delighted when you do.”

A Quick Primer on Missionary Line Compensation

Last fall when a group of manufacturers and their reps were discussing hot topics in a round-table session, the subject of repping missionary lines was introduced. The immediate reaction of a couple of the manufacturers to this subject was that such lines were ideal for them to begin relationships with reps. Their reasoning was that since they didn’t have to pay the rep until the rep sold something, there was little risk involved.

While they were surprised at the reps’ reactions, in their favor the manufacturers listened attentively as the reps explained their positions. A centerpiece for what the reps explained was a publication from NEMRA entitled Guidelines for Developing New Markets with Independent Sales Representatives. A subtitle explained that the publication was directed at manufacturers without market presence: “How to Attract and Fairly Compensate Independent Sales Representatives for Pioneering Your ‘Missionary’ Lines.”

Editor’s Note: It should be noted that the NEMRA publication was adapted directly from the white paper, Manufacturers Without Market Presence, developed by MANA and ERA.

Key information in the publication, according to the reps who cited it, included: Even for manufacturers with existing business in a territory, paying a share of the up-front costs incurred by a newly appointed representative is actually part of the straight commission model. In effect, the commission on residual business helps defray the new rep’s expenses for investing resources and time to create demand for the new principal’s products among the rep’s customer base. Therefore, those so-called ‘traditional’ models are also shared investment plans. The main differences are that, for missionary lines, the representative’s investment is great, and there is no residual business to help defray the costs.”

In providing additional guidance, the publication continued: “For missionary lines, the manufacturers and representatives can share the investment in pioneering the line by choosing one, or a combination, of the following options:

• “The manufacturer pays the representative a market development fee for a specified duration, or until commission income reaches a specified level. This type of fee can cover whatever specific services the rep and manufacturer spell out in their agreement.
• “The representative provides the manufacturer with a menu of various services available at specified fees, with the manufacturer choosing a customized package of services the rep is to perform.
• “The manufacturer pays the representative a minimum commission per month while also agreeing to a specified minimum contractual time period, and an extended post-termination commission clause.
• “The manufacturer pays an increased rate of commission for an agreed-upon time during the start-up period.
• “The manufacturer agrees to compensate the representative for commission due or specified cost reimbursement in the event the manufacturer sells to an outside company.”

We don’t know if the manufacturers left the meeting convinced that they should share in the reps’ risk, but they all admitted the argument had its merits and they wouldn’t be quite so ready to assume reps always would jump at the chance to represent a product that didn’t necessarily enjoy a foothold in the territory.

Are You (And Your Reps) Adding Value?

Manufacturers’ reps and their principals truly believe they are adding value for their customers. Despite this belief, however, many of them have seen their profit margins become razor thin because of deeper discounting, extended terms and special offers.

The question at the front of everyone’s mind is this: “If we are adding value, why do our customers continue demanding lower prices?”

In answer to that question, consultant Bob Nadeau, managing principal, Industrial Performance Group, Northfield, Illinois, offers some thoughts that manufacturers ought to be sharing with their reps.

Customers have heard the promise of added value from advertisers and salespeople for the past 20 years. Yet in reality, this promise has rarely been delivered in a measurable way. In fact, our research indicates the majority of salespeople cannot quantify the dollars-and-cents value they add for customers — not because they lack the desire, but rather, because they simply don’t know how to do it.

• How do you respond when a customer demands lower pricing?

If your customers are not aware of the economic value they will derive from your product, you have left them no choice but to view your product as just another commodity that should be purchased on the basis of price alone.

When a customer gets to this point, it’s very difficult to convince them to pay more.

The good news, for manufacturers and reps is that you probably are in fact adding value. You just need to start measuring it and communicating it to your customers.

• What is measurable value and how is it created?

Measurable value is the dollars-and-cents benefit customers derive from purchasing and using your product. Lower labor costs, improved productivity and/or reduced exposure to risk and liability are all examples of measurable value. Measurable value is created for customers by addressing the root causes of their business problems. But what if your customer does not understand the root causes of their business problems?

• Selling value rather than price.

The traditional approach to selling has been to inform the customer about how they will benefit from a product’s features. The assumption behind this approach is that the customer will see the dollars-and-cents value they will derive from the possession and use of the product. This sales approach works well when the customer’s business problems are relatively simple and the dollars-and-cents value they will derive is obvious to the customer. For example, the added value is obvious to the customer if your product lasts twice as long as the product they are currently using and it’s only slightly more expensive. However, when a customer does not understand the root causes of their business problems, they tend to focus on the one thing they do understand: price.

How do you convince a customer to pay more for a product that creates measurable value by addressing root causes they’re not even aware of?

Selling value — rather than price — requires that you spend more time on the “front end” of the sales process, making sure the customer understands the root causes of their business problems. Selling value also requires that you help the customer understand how your product will deliver measurable dollars-and-cents value by addressing these root causes.

If you and your reps are adding value for your customers but they continue to demand lower pricing, perhaps it’s time to modify your sales approach.