As the economy stays stalled longer and longer, reps increasingly find themselves in the crosshairs of manufacturers looking for ways to cut costs. In some cases those cost-cutting goals have trumped fairness and excellent reps face unilateral cuts in commission or unwarranted conversion of hard-earned customers into house accounts. This month’s Agency Sales looks at sales commission erosion.
By the time a manufacturer announces a commission cut or new house account, the decision usually has been made and the rep gets a take-it-or-leave-it ultimatum. So how can a rep company protect itself from these kinds of losses? One rep’s solution was to preemptively promote and prove his company’s value proposition to his principal.
“We have almost a decade-long relationship with one of our principals, and I have always made it a policy to be in regular contact with that principal so they knew exactly what we were doing on their behalf. About a year ago, their regular-as-clockwork commission check was late. They had been on time for so long that I assumed it was an oversight and that the check would come soon, so I didn’t call them until the check was 10 days late.
“When I called they were very apologetic and agreed to rush me a check, but the reason for the late check was a little jarring. ‘Sorry that your check is late. What happened is that we took a look at the value we were getting from all of our reps and realized that the only rep we were getting any value from was you. So last month we fired all of our reps except you. The accounting department didn’t realize we still had one rep left so they didn’t make a commission check run this month.’
“On one hand, I was flattered that my consistent message about my company’s value proposition was received loud and clear. But on the other hand, I couldn’t help but wonder what had happened to all the other reps who had represented that line. They couldn’t all have deserved to be fired. I couldn’t have been the only rep worth keeping, but apparently I was the only rep who had consistently communicated my long-term value proposition. And because I was the only rep they knew brought value, I was the only one they kept.”
So many reps fired at once is an extreme example, but it could just as easily apply to a situation where a manufacturer is considering a commission cut or adding house accounts. Your best defense is to proactively communicate to each of your principals your rep company’s value proposition, so if any of those manufacturers start to look for ways to achieve cost reductions at the expense of its reps, your company will stay out of the crosshairs.
