The United States and the United Kingdom share a great deal. Part of our name, for a start, describes the coming together — the uniting at some point in history — of groups of disparate peoples. Common values, personal liberty, culture, economic and political ideology, language — hang on a minute! Did I say language? Did I say “pavement” when I should have said “sidewalk”? Did I say “nappy” when I should have said “diaper”? Tap/Faucet? Semi /Lorry? “I may do it later” vs. “I’ll take a rain check”? The list goes on. And here in our own business of outsourced selling lies one of the most common and hotly debated differences of all — “rep” or “agent”?
Definitions
In the United Kingdom a person operating his own sales business on behalf of a group of non-competing principals is almost always referred to as an agent. He’s an agent because he is an independent link between a supplier and a seller of goods or services. A rep (or sales representative) is an employed salesman, working for one company to sell that company’s products. He is employed solely by that company. He is paid a salary and probably given a company car, pension and healthcare plan. He may be able to improve his basic salary with commission and/or bonus. Americans would call such a person a “factory rep.” But your self-employed people are also called reps. And, they own (or work for) rep firms. So, who is right? And does it matter?
George Hayward, MANA’s District 4 Director and Manager of International Development, and Chairman of Cincinnati-based United Sales Associates (USA) has wrestled with this subject for many years. To shed some light on the difference, he wrote a paper dedicated to the subject. It’s fair to say that while agreement has been reached pretty much in North America, your European friends certainly beg to differ.
In the United States a manufacturers’ representative is “an independent contractor, a natural person or legal entity, contracted with continuing but very limited authority, if any, to obtain customers and/or orders for, and at times negotiate and conclude, the sale of goods or services for another legal entity, a company, or person(s), typically a manufacturer which is usually referred to as a principal. Typically, representing several, various, synergistic, non-competitive companies products or services.”
Conversely, the almost identical definition used in the European Union and endorsed by IUCAB (International Union of Commercial Agents and Brokers) refers to such persons as commercial agents. Hayward’s point is that an agent, as far as the United States is concerned, is a person or legal entity, formally authorized to negotiate and act on behalf of another, typically representing only one company. Such a person, as far as IUCAB is concerned, would be a broker. Hayward has a further definition for a broker — but let’s not go there just at the moment. Let’s just agree to disagree — at least until such time as the world becomes one and a single authority decrees that it must be one way or the other! For the sake of this article, I will defer to Hayward’s experience and authority on the matter (and because I am writing primarily for a U.S. audience) and refer to us as reps.
Well, I’m so glad we cleared that up!
A Day in the Life
I recently spent a day in the field with Paul Castro, one of United Sales Associates’ seasoned veterans, to observe a typical day in the life of a sales rep. Castro has been selling most of his working life and has been part of USA for 27 years. I don’t know what I was expecting on this day — perhaps a flash of blue light, a blinding revelation, a lesson in some kind of “alternative” selling as achieved stateside. The myriad books on your airport bookstore shelves that I have witnessed during several trips to the United States over the past 24 months, had led me to believe that I might be missing something in the UK. How to Quadruple your Sales Success, 101 Secrets of a Great Salesman, How to Make Your Customers Buy From You – Guaranteed. But thankfully, no. The basic process remains constant whichever side of the pond you are on. A salesman’s job involves many hours in the car — a car probably laden with samples, literature and customer records. It involves calling on a variety of people; in Castro’s case, distributors and end users. Some of these people will have boundless enthusiasm for you and your products while others will be wracked with suspicion and doubt.
One thing I have detected stateside, however, is a greater respect amongst people in other professions for those engaged in the sales function, particularly for independent reps. In the UK, salespersons are lumped together in one murky category — there is a common perception that we are slightly slippery characters. We have a reputation of distorting the truth, exaggerating and even lying in order to achieve our objectives, and our trust rating comes up only slightly above lawyers and realtors! In the UK, there is little understanding of the differences between reps and employed factory guys. I frequently find myself having to explain to acquaintances just what it is a rep does. Some people have no idea that the sales function was something that could, or would, be outsourced.
The typical day remains common, however. It involves describing features and benefits, solving problems and obtaining commitments. It involves gaining trust and building relationships. It involves a great deal of hard work, where the term “nine to five” simply does not apply. If the phone rings on Saturday, it may be an order you could lose if you don’t take the call. If it’s a problem to be solved, and you at least acknowledge it, even if you can’t solve it on the day, you go up in that customer’s estimation by some good measure. You deal with the good and the bad, the nice and the nasty, the rough and the smooth. We operate in competitive environments and face the same kind of challenges. We strive to achieve the best for our customers, our principals and of course, ourselves. Our dedication to our craft is extremely high; our livelihoods depend upon it.
Costs
Cost control for the rep has always been a very important part of running a rep business, never more so than last summer when gas prices soared. (There’s another one — we call it petrol! Mr. Burns of Simpsons’ TV fame, calls it petroleum distillate!) Gas for the UK rep is probably the biggest single annual cost, especially if you are a one-man business. In the UK, sales territories tend to be smaller than in the United States and air travel is rarely necessary. On average, we pay three times more for gas than in the United States. We can’t recoup such increases by raising our commission rates; only an increase in our principal’s cost prices can improve our income, and that is invariably swallowed up by inflation. Gas prices, more than any other expense, are directly borne by the rep and come off of his bottom line.
This is leading to a need to work much smarter — longer working days with a greater number of calls being made in carefully planned routes and more days in the office planning, emailing, faxing and calling customers to secure business. Yes, there is nothing like the personal face-to-face visit — but there is nothing as expensive as the face-to-face visit and these now have to be scrutinized and justified more than ever before. Getting the balance between controlling costs and maintaining contact is hard, and it makes journey planning more important than ever.
Associations
Trade associations do their bit to raise the profile of the rep, and it is certainly true that reps are likely to give a more professional impression simply by being members of a trade association.
Problems associated with contracts, commission rates, changing territories, etc., are issues that affect reps worldwide. In the UK, the Manufacturers’ Agents’ Association (MAA) exists as a membership-owned trade association, and reps from all sectors of industry are given legal and commercial advice, contact information and networking facilities. MAA’s close relationship with MANA, (both are members of IUCAB) underpins its status as a general organization owned by, and dedicated to the rep. In the United States there are many associations for reps from specific sectors of industry and commerce (e.g., NEMRA, ERA, MAFSI).
In the UK, while we have plenty of trade associations, no others dedicate themselves to the work of the rep. MAA and MANA represent similar numbers of reps (allowing for the difference in our populations). One thing that is hard to define is just how many reps there are operating in our two countries. A United States Census Bureau survey in 2002, put the figure at about 67,000. The figure in the UK is more difficult to come by. The UK government-run Office of National Statistics is unable to categorize the rep, but IUCAB believes the figure to be 10,000 to 15,000. Again, if accurate, these figures are close given our population difference.
My guess is that if you were to try to find out how many plumbers there are in the UK, another trade for whom registration or certification is not mandatory (although it is highly desirable), you would stand a much greater chance of getting close to the true figure, because a plumber would have a greater recognition of the importance of belonging to a trade association than a rep. Of course, a plumber’s market is the end user, the consumer, and so trade association membership would be of greater benefit in gaining business and trust from the wider public, but it remains sad, and a little ironic, that reps do not see the benefits and importance of association membership. Not only can it aid the rep in terms of access to legal representation, principal/line card searching and marketing services, it would help the whole “status” of being a rep gain recognition by being able to provide a more complete and accurate view of who, and how many, we are.
Agency law in the UK is another grey area and one that the MAA, more than any other organization, has tried to clarify, with some degree of success. However, the drafting and implementation of the law is still open to much interpretation, and several test cases in recent years, not MAA cases, have not always gone the way they were expected to, with judges ruling against agents in agency termination disputes. The abiding rule of thumb must be to have a relationship that does not necessitate recourse to law. Many reps in the UK will hang on to a principal in the face of a deteriorating relationship in the hope of a payout, which may not come in their favor, rather than moving on and getting a better agency elsewhere.
Ultimately, it is up to reps themselves to improve their image. Continuing education and study can certainly contribute towards gaining greater respect from others, particularly customers. In simple terms; to be perceived as professional, be professional.
That Special Relationship
We often hear talk of “a special relationship” between our two countries. USA’s George Hayward relates a great story about special relationships that shows very clearly, how we can be successfully set apart from our employed counterparts. United Sales Associates once lost a principal who accounted for 23 percent of their income. USA laid off no one. Instead they very quickly took on two new principals and, before very long, USA was doing better with these two new suppliers than they were with the original.
According to Hayward, “If your customer fires you, that’s it — you’re done. But if the manufacturer (principal) fires you, that means not nearly as much because we own the relationship with the customer and the end user — no one can take that away. But if we screw that up, we’re dead.” And that sums up the fundamental difference between the independent rep and the factory rep. Our principals task us with the function of developing the relationship, and they effectively pass ownership of that relationship to us.
This interdependence between the two links in the chain is what makes independent reps stand apart from their factory rep counterparts. There is a common interest to do what is right for both principal and customer. There is far less opportunity for conflict, and I believe in the UK, this message is not as widely understood as it is here.
As George Hayward puts it most succinctly, “When everything is equal, people make the difference.”
