Candid Advice for Manufacturers
As a manufacturer, one of the best things about using manufacturers’ reps is that you only pay for success. We generally preach this as a key benefit, but there is a scenario where it is not entirely true. The exception occurs when you have an arrangement to pay a shared territory development or pioneering fee to the rep.
Trust me — this is a good thing to do, and it will result in success if you create clear expectations and a mutually agreed upon plan for the pioneering territory. And, as a manufacturer, it is important to accept the fact that the rep selection process cannot be a whiz-bang ‘shoot from the hip’ type of deal.
To start, manufacturers need to carefully review all potential reps in a territory. From there, narrow the choices down so that there are 4-8 rep companies remaining. Then, get on an airplane and go interview each of the companies at their rep offices. Hiring a new rep to be your outsourced field sales force should be regarded in the same light as hiring a key executive for your company. Be sure that your interview plan includes meeting all employees, understanding the company’s business philosophy, examining their line card for synergy and leverage opportunities, and reviewing their customer base for compatibility. And most importantly, be sure that your plan will accommodate you in getting a good feel for them… the chemistry.
If you want really good reps, you may have to share the operational costs necessary to develop business for your products in their territory. If you find yourself in this scenario, agree upon a monthly shared territory development fee to be offset by any current commissions coming in, and set a fixed period of time for which the fee will be paid (usually 1-2 years). Also, set in writing the expectations that you have of each other. Determine what the rep will do for the fees, and what the rep will need from you, the manufacturer, to cultivate new business and grow sales. Communication and teamwork are the keys.
If everyone does their job effectively, sales from the newly acquired customers will result in commissions that offset the need for the fee. Reps are willing to work hard to launch a new line, and the best reps do it well.
Be open to the options and remember — a direct sales force would cost a bundle!