This is the third of three installments of a Small Business Guide to help manufacturers and sales representatives understand each other better, so that their relationship is not adversarial — as it is in many instances. Parts one and two appeared in the July and August issues respectively of Agency Sales magazine. Both parties — principals and reps — need each other and a mutual understanding should create a positive partnership that will yield more profits for each, while extending the duration of their relationship.

A link to this complete e-book may be found on MANA’s website: www.manaonline.org.

Advice For Both Parties

Study the complaints of your opposite partner and address them and work to alleviate them.

•  For Manufacturers

Have patience — It is a long process to build an effective sales rep organization, and you will need to be changing many reps each year. The better your product performs in the marketplace and the more you prove your competence and integrity, the more top reps will be approaching you to be their representative.

Do not make the fatal mistake that many short-sighted manufacturers make by firing a rep because the commission checks are too high. Remember, for every dollar of commission you pay out, you get three, four, or five. You may think your newfound sales hire will save you many dollars. Rarely does this work out. There is a reason the rep in question earns so much money. Their customers (who are also yours) like them and are satisfied with their performance and usually loyal to them. If you fire them, they will get a competing line (often with the help of their buyer) and compete against you with a ferocity that will cause you to regret your action.

Replace reps whose commission checks are too small.

Realize that the biggest reps in a territory will not necessarily perform well for you because they are carrying too many lines. Often you are better with a smart but less-experienced rep who can give your products more selling time and with more passion.

Understand that reps usually carry too many lines because they know from experience that many manufacturers will replace them when their commission checks get too big.

Don’t ask reps to sell products to their customers that you know have run their course and don’t sell well. Take those products, cut the price, and close them out. Pushing bad products through your reps and onto your customers will kill your integrity quotient with your rep and the buyer.

• For Reps

Don’t take on new manufacturers unless you can give them a fair effort.

Sometimes less is more. We discovered that eliminating lines we represented that carried small earnings and concentrating on the stronger lines put more money in our pockets at the end of the year. All your buyers don’t have unlimited attention spans, so you can’t show them 20 lines on a sales call.

Concentrate on giving your manufacturers feedback. You don’t have to write up every sales call for them, but let them know which items buyers like and their reasons for turning others down. Keep them abreast of competition. Send them copies of any ads on the manufacturers’ products. Share ideas on how manufacturers can improve their operations and ideas for new products or presentations you may have.

Don’t give inflated projections to your manufacturers to insure that they have adequate inventory for your customers’ reorders.

Knowing that your living depends more on your larger customers than any manufacturer, nevertheless, you need to stand up for your manufacturer if the buyer is totally unfair in their dealings with them. The manufacturers do write your checks.

Both Parties Tip

Periodically major companies pass down an edict to their buyers not to deal with any sales reps. Their heads in the sand somehow tell their brains that they can get the manufacturers to pass on the reps’ sales commission to them to help their margins, which are under attack from their stockholders. This ploy never works, and I believe the courts would overrule it if litigation came about. The buyers know the value of a good rep. To get around this problem, your rep should be given a business card of the manufacturer’s with a title such as sales manager, regional sales manager, director of special accounts, etc., with the rep’s name on it and give it to the buyer. Presto, he/she is no longer a rep. Nothing really changes, but you have just given the buyer cover to continue to do business with the rep. Without exception, in my experience, the edict eventually gets reversed.

However, manufacturers be advised that if you use a sales rep to call on a major account, you must empower them to make major decisions (not all) on your behalf. If they must say that they have to check with the home office on every question, then the buying company has a right to ask for removal of the rep on their account and get a high official of the company to deal with them.

When I was a national rep, to deal with this problem, I made a deal with my manufacturers that I could commit to giving the customer advertising dollars (within defined reason) without checking with the manufacturer, and if the promotion didn’t pay off, I would split the ad dollars loss with the manufacturer. This worked out well and reinforced my value to the buyer.

The Future of Reps

As the preceding pages amply illustrate, the manufacturer/ rep relationship is a complicated one, and frequently adversarial. But most of the time, in my experience, the relationship can be made beneficial to both parties, if both parties want to make it work. Both parties need each other.

I do perceive some outside-world trends that are today posing a threat to the traditional manufacturer/rep relationship. If you are contemplating signing on reps, you should be aware of these kinds of potential problems.

Technology plays an important role in the manufacturer-retailer relationship and will continue to do so. This fact can diminish the role of the rep. However, this could be an opportunity for the savvy reps themselves to become technologically proficient — in many instances more so than the smaller manufacturers. The reps’ value can increase with their retail buyers by helping interpret the mass of computer reports spewed out to them and with little time to read. Reps can spot early positive trends on their products and use that knowledge to persuade buyers to advertise and give better presentations to their products.

Many large retailers are going to dominate manufacturers, giving them permanent real estate in their stores, and telling them to manage the space to produce a certain level of profits. When this happens, reps become less important. At the same time, many retailers are going to private labels on volume products, thereby increasing their margins. Again, the need for a rep is diminished.

Large retailers are consciously scrutinizing the amount of business they do with small companies, to prevent any of those companies from becoming too large a percentage of their business. At the same time, they are pressuring their buyers to deal with fewer resources and carry fewer sku’s (“stock-keeping units,” a common industry reference to every product offered for sale).

And not least important, given consolidations and economic dislocations, there are both fewer retailers and fewer manufacturers out there.

In light of these more or less ominous trends, it seems clear that manufacturers and reps have to get their act together and work more closely and honestly with each other. They have a shared challenge: to persuade the customer that their team has something of value to offer to them. This is getting tougher, and you should be prepared to deal with it — but it’s not impossible to do, and succeeding at it can be immensely valuable to your business.