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The manufacturer who called me was sincerely puzzled. “I am trying to hire reps and all of them are asking for Life of Part/Life of Program (LOP/LOP) or shared market development fees.*”
- “What happened to just paying the rep based on each month’s commissionable shipments?”
- “If I gave a rep LOP/LOP and then replaced him or her with a new rep, then the new rep would end up handling price negotiations on repeat orders that are commissionable to the old rep. Why would the new rep try to maximize the selling price if commission goes to the old rep?”
- “And if the new rep handles negotiations on repeat orders that are commissionable to the old rep, what incentive does the new rep have to work to keep the reorder from going offshore?”
To answer the first question, let’s say you are a casting manufacturer who wants to target Ford Motor Company.
Before any commissionable parts orders ship, your rep must:
- Introduce your company to Ford.
- Get your company through Ford qualifications.
- Wait for a new program to come up (say a new rear-view mirror design).
- Get your part on the print.
- Wait for tooling to be produced.
- Wait for prototypes to reviewed, perhaps adjusted, and resubmitted for approval.
- Wait for the program to be released.
Without LOP/LOP and/or shared market development fees the rep risks working 3-5 years for free and then being terminated after the first production order ships.
And making the rep’s situation even worse, for every project he or she works on that becomes an order, the rep also probably worked on 5-10 similar opportunities that did not become orders for reasons that were completely outside the rep’s control.
That’s why manufacturers who want their reps to hunt for elephants put LOP/LOP and/or shared market development fees in their contracts.
For the answers to the manufacturer’s last two questions, watch for next month’s “MANA Minute.”
* The manufacturer’s comments have been edited for clarity and brevity.
How do you prepare to consistently execute a good plan now in your manufacturers’ representative firm? By studying past problems and challenges and having a response ready when those problems and challenges recur.
In today’s world, we borrow from the jargon of computer programmers and call this list of possible events and appropriate responses an algorithm, defined by Google as “a process or set of rules to be followed” to calculate an answer or solve a problem.
When my mentor hired me to work in his small manufacturers’ representative firm decades ago, no one had heard of algorithms. But my … Read the rest
For years after I started my manufacturers’ representative company, I had what I thought was my own closely‑guarded secret. Sometimes I would spend as much as 20 percent of my time on a line that was only 10 percent of my representative company’s income. And sometimes I would spend just five percent of my time on a line that was 10 percent of my company’s income.
Turns out that I had only rediscovered a fact well-known to reps but little-known to manufacturers. The amount of commission a manufacturer pays a representative is only one of the factors representatives use to … Read the rest
When Agency Sales was notified earlier this year of The Whittemore Company’s goal of expanding its territory into Kansas and Missouri, it couldn’t help but cast a spotlight on the agency’s rich history stretching all the way back to 1918 to the time when World War I was winding down and a flu pandemic was working its way around the world.
As the company readies itself to celebrate its centennial anniversary this year, Dave Zaval, who heads the Addison, Illinois-based agency, took the opportunity to recount not only how he forged a career as an independent manufacturers’ rep but also … Read the rest
Do It in All the Right Places in the Right Ways
Hiring reps should be easy. You have a good line. You are willing to pay decent commissions. You already have several excellent rep firms selling well for your line. You should be pretty well assured of success.
But, there can be problems. Two or three of the best rep firms in the territory are already selling your competitor’s lines. In the open territory you do not have much existing business. The open territory does not have as many good prospective customers as other areas of the country. The potential, … Read the rest
Response to “Principal CRMs”
I just read the April 2018 article “Principal CRMs” with great interest and would like to add to this discussion. Personally, I have been using online CRMs for many years and would like to take exception to the use of the phrase “fill out reports online.”
I would argue that, if used correctly, a CRM makes the job of the Field Agents — of everyone — simpler by eliminating this filling out of reports. Please follow my line of thought. What does a Field Agent do when they leave a customer visit? Typically they review and … Read the rest
Since he’s the relatively “new guy on the block,” Bernat Riera can’t be blamed for having the normal concerns that any start-up rep firm has. Attracting quality principals, gaining a presence on the Internet, negotiating exclusivity with principals in the territory, etc., are all matters that keep him busy.
But if anyone has the qualities that will make it work, it should be MANA-member Riera, who heads Les Produits BR, Sherbrooke, Quebec, Canada.
Before beginning his journey as an independent manufacturers’ rep earlier this year, Riera packed several years of selling experience under his belt. Ten years as a pharmaceutical … Read the rest
It always comes as a shock to learn that others see us quite differently than we see ourselves. More often than not, it can be distressing, particularly at work. “I don’t get it. I’m not that way.” Maybe not. But it happens. And when it does, a bad rep can stick tighter than super glue thanks to word-of-mouth and social media.
In today’s highly competitive workplace, reputation makes a difference. Your competition can be down the hall, across the country, or 10 feet away. It can be someone who wants your customer or your job — maybe both.
When it … Read the rest
I’ve been pondering an e-mail I recently received. In it, the young salesperson described his most pressing challenge: The sales roller coaster. When things go well, he’s up, emotionally; and when things don’t go well, he’s down. The swings from up to down were wearing on him. His real question is one every salesperson must confront and successfully resolve: How do I manage myself to keep my emotions up and my energy high?
I’ve often thought that this is one of those fundamental challenges for a salesperson. It’s one thing to focus on closing the sale and presenting to a … Read the rest
The U.S. Bureau of Labor statistics found that companies with fewer than 100 employees provided only 12 minutes of manager training every six months. Organizations with 100-500 employees provided just six minutes.
If this holds true for managers, how much training do front-line employees get?
A long-term research project commissioned by Middlesex University for Work Based Learning found that from a 4,300 workers’ sample, 74 percent felt that they weren’t achieving their full potential at work due to lack of development opportunities.
The lesson here: invest in retaining and constant training of your present employees. After all, the cost of … Read the rest
I’ve had a lot of people ask me about client retention because it’s something I’ve been very successful at over the years. On that note, here’s how I did it from the initial sale all the way through the entire long-term relationship.
Steps to take with the initial sale:
Step 1: Verbally thank the client for his business when you close the sale.
Step 2: Review expectations and what will happen next.
Whatever your particular steps are, go over these steps with the client and let him know how and when he will be kept up to date.
Step 3: … Read the rest
Don’t ever underestimate the value of being able to network with non‑competitive peers.
That’s what one manufacturer found during his attendance at an industry meeting. While this manufacturer had been working with reps for years, he had recently undergone considerable turnover among his reps. As a result, he was faced with the prospect of hiring new firms. But since it had really been several years since he had to go through that process, he was a little wary of what he was going to do. Coming to the rescue were several of his industry acquaintances, who offered a number of … Read the rest
Several recent LinkedIn posts have urged readers to pick up the phone instead of trying to find new opportunities by using social media. I wrote a very popular article about using the phone three years ago called “The Next Can’t Miss Game Changer for Sales.”
I have data that show that the very people who don’t score well at hunting (reluctant, ineffective or both) also score poorly at social selling while those who score the highest for hunting score higher for social selling too. Check out this data:
- The weakest 10% of all salespeople own the lowest average scores for
… Read the rest
This is the second part of a two part series on asset sale protection for sales representatives. I would strongly recommend that you read part one, published last month, either before or after reading this article.
What to do when your principal is in the process of selling its assets and your sales representation agreement has no asset sale protection language — I would venture to say that most sales representative agreements do not have asset sale protection language in them. The only times that I have seen such language in a sales representative agreement is when either the sales … Read the rest
Have you ever had the opportunity to watch the program Who Wants to Be a Millionaire? The premise of the hit TV show focuses on a contestant who selects one of four multiple-choice answers to a trivia question. The more questions they answer correctly, the more money they can win.
But, of course, the questions get progressively more challenging, so the contestant is offered three “lifelines” when they’ve become stumped on a particular question. One lifeline is called “50-50” where the computer takes away two of the wrong answers and leaves the contestant a 50-50 chance of guessing the … Read the rest