During the year I get lots of opportunities to talk to manufacturers. These range from phone conversations to presenting at national sales meetings to conducting manufacturers in-house seminars, but they mostly occur when I give presentations to manufacturers’ associations, where we engage in great dialogue about this topic — rep vs. direct. Can you guess which side I stand firmly on?
Certainly there are situations where it really makes sense to have a direct sales force, or a hybrid sales force comprised of both direct and independent reps. The most common reasons I hear in support of this option are generally “our product is too technical” or involve issues of being able to control their salespeople. Large organizations certainly are more likely to have a direct sales force, but this is not always true. The key is to have the right sales reps, whether direct or rep.
Note that I am very confident that the manufacturers who are reading this article are not the ones who really need to read it. We know that our MANA manufacturer members “get it.”
Ok, so why reps? Why do MANA manufacturer members outsource their field sales to our professional rep members? There are several key advantages for successful sales growth with reps:
- Multi-line selling: Reps have more than one product and company to sell, which gets them in to see many diverse customers, often providing opportunity to present their other lines. The complementary and synergistic nature of the line card then allows manufacturers to gain leverage from the rep’s other lines. This is a huge advantage for the customer who can purchase multiple products from one rep, further enhancing the relationship via the level of sales.
- Customer knowledge and relationship: This is the intellectual property of reps. They have grown these customer relationships wide and deep, and really know their customers’ needs, wants and how to best solve their problems. Reps are problem-solving, solution-seeking, marketing salespeople. Typically the Reps have been in a territory for a long time and have ‘grown up’ with these customers.
- Reps only get paid for success: Manufacturers only pay when reps successfully sell — this creates the ultimate motivation for the rep.
- Market intelligence: Good reps are solid businesspeople and know their market and industry very well. They can act as a great resource for their manufacturers to give advice on what other lines are doing with sales and marketing strategies, and also offer solid ideas about new product introductions. Reps are the eyes and ears of the manufacturers.
My great friend, who recently passed away, talked and wrote about the three ‘myths’ surrounding reps and how strong and wrong these perceptions are engrained. Bob Trinkle’s three myths are:
- Reps are an additional channel in sales. Not true: A salesperson, whether direct or rep is needed to sell stuff. The rep is the same as a direct person and should be treated as an extension of the factory. The best manufacturers do this, and treat their reps with respect and mutual trust.
- Manufacturers don’t get the reps “mind share.” Time spent on a line is the wrong thing to measure. Manufacturers sometimes ask reps to do crazy things (like create useless reports) thinking that this will help them get more of the rep’s time, which translates to more attention and then more sales. Would someone really care if I spent 10% of my time on their line and sold $2 million vs. spending 20% and selling only $1 million? I hope not. I would recommend that you help the rep have more selling time, be easy to deal with, and measure sales dollars instead of time spent. Remember also that the other lines that a rep carries are not competitors for your time; these lines very often provide leverage for a manufacturer who gets pulled into a customer via another product line interest.
- There is some level or break-even point where it makes sense to terminate the rep and go direct. This is a terrible misconception. This cost analysis is usually incredibly inaccurate and leaves out many costs that are built-in to the independent rep model. Recall that if the rep is getting paid lots of money, it must mean that the manufacturer is getting tons of revenue since the rep operates on just a small percentage of the total sales. See the solid comments from my friend Glenn Thompson in the feature article about liking to send reps big checks and about paying higher than average commissions on time.
Reps are running a business. Commission does not equal income and in many cases the total earnings of all employees at a rep firm is about 50-60% of the total commission dollars received. The other 40-50% goes to ever-increasing rep expenses like health care, automobile, travel and entertainment, technology updates, etc.…
Re-reading this, I’m asking myself, “Gee, are reps the greatest thing since sliced bread?” Certainly not, and of course there are some not-so-good reps out there. The key is to find, hire and motivate the right reps — the great reps — the MANA reps!
Create solid business partnerships built on trust and respect, and help knock down obstacles that block sales from happening. Be easy to deal with, say “yes we can” and have some productive fun. You will succeed! Good luck and good selling.