This is the 17th in a number of articles serializing The Sales Force — Working With Reps by Charles Cohon, MANA’s president and CEO. The entire book may be found in the member area of MANA’s website.

“As long as you brought up finances,” said Ruth, “let’s discuss that for a minute. Jim, getting the feedback you want probably is going to have some sort of cost associated with it. You’ve been talking about some sort of a commission-based system that doesn’t involve the current sales force, which means you will end up paying some percentage of sales to somebody. To implement this system you’re going to have to fund it, so you’ll need money in your sales budget to pay for it.”

“You’re right,” Jim admitted. “I don’t think we’re going to get an enthusiastic response from our company if we try to sell the idea that it needs to pay a percentage of sales just to get feedback for the purpose of identifying management’s shortcomings. Let’s go back to the second point on my wish list — more sales. If we come up with a system that pays for itself by generating additional sales and, as an added bonus, provides me with that feedback, that system probably would be doable.”

Harold wrote, “Pay for itself” under the word “Financially.”

“What about ‘Geographically?’” Harold asked. “Shouldn’t we talk about that too?”

“You know, I had a conversation about that with Maria Gonzales,” said Jim. “She made the point that the only way to get vigorous feedback was in some sort of an exclusive relationship. We would have to have a partner who didn’t sell competing products so they couldn’t just move their business to a different source during hard times, and we would need to give that same partner some sort of an exclusive trading area in exchange for forgoing alternate sources. So we’re looking at a commission-based system with an exclusive trading area. And if it’s commission-based, then it’d be a different arrangement from the one we have with our distributors.”

Jim recounted the story Pete had told him about Acme’s exclusive distribution program, and added, “Whatever we come up with, we have to avoid the problems Pete experienced with Acme.”

The morning had sped by. Ruth seemed ready to wrap up for the day. “Harold, I think now is the time to recap. We are looking for some sort of a commission-based system in which Troothe issues invoices, has the ultimate control over selling prices and allows some kind of exclusive trading area. It would have to allow us to increase sales, get feedback, provide surge and sag capacity and it has to work over a broad range of geographies and sales ranges.”

Harold wanted to add one more comment, “Ruth, that’s a good summary of what we want, but I think we should get some input on how our customers might react to this sort of system. Jim, why don’t you discuss what we’re considering with Pete in purchasing on Monday to see how he would react if one of his vendors came up with a scheme like this?”

Jim caught Pete in the company break room Monday morning just as he was pouring his first cup of coffee. Jim and Pete sat down at one of the tables, and Pete sipped his coffee while Jim laid out the results of the meeting he’d had with Harold and Ruth on Saturday. Jim continued to explain the program, but was puzzled by the small smile on Pete’s face that grew into a wide grin, and finally a chuckle.

“Jim, I would not have any trouble dealing with a vendor who worked that way — many of our best vendors use that system already. As a matter of fact,” said Pete, glancing at his watch, “if we keep talking much longer I’m going to be late for my first meeting, which is with a salesman who works for one of our vendors on exactly that basis. So why don’t we put this conversation on hold, and I’ll bring him by to see you after our meeting.”

Jim was a little bit disappointed that the idea he, Ruth and Harold had labored to create was not an original one, but he was excited to hear that some sort of workable system already existed, saving him the burden of creating one from scratch. He thanked Pete, refilled his own coffee cup and went back to his office.

About 45 minutes later, Pete walked into Jim’s office with a visitor in tow. “Jim, this is George Harbison. George works for a company that is organized on the basis you were discussing. I’ve got to run, but George, I’d appreciate it if you could give Jim a little time to explain how your company operates.”

George shook Jim’s hand and settled into the chair next to Jim’s desk. “So, Jim, how can I help you?”

“I was talking to Pete earlier today about creating a system that would involve having people sell our product on a commission basis in some sort of exclusive territory, and he said your company does that and you probably could give me some insight into how it works.”

“Do I understand correctly, Jim, that you’re not necessarily talking about hiring my company to perform that service for you — you’re just interested in learning how the system works?”

“Exactly,” said Jim. “Could you just tell me what already exists in terms of structures like the one I described, so I won’t need to reinvent the wheel?”

“Happy to help a good customer, Jim. Let me give you an overview,” George said. “I work for a company that operates as an outsourced sales force for manufacturers. The most common terms to describe this function are manufacturers’ representative, manufacturers’ rep and manufacturers’ agent, but most people just refer to companies in this line of work as reps or agents. One of the things to bear in mind is that we are manufacturers’ reps with an ‘s apostrophe’ at the end, not ‘apostrophe s.’ This means we represent a number of manufacturers rather than just one. And the term ‘agent’ really is a misnomer, because a true agent would have legal authority to bind the company it represented into contracts with third parties, which is a power manufacturers’ agents or reps don’t have. Instead, we represent a group of non-competing manufacturers that make products that tend to be used by the same sort of customers.

“For example, salespeople from my company call on Troothe and other companies that use manufacturing processes similar to the ones you use. By focusing on selling to companies that use similar manufacturing processes, we identify a market for a group of products used in those processes and provide our services as sales representatives to companies that want to reach that market. As a result of my past efforts, several of the companies we represent currently sell products to Troothe, and based on the meeting I had today with Pete in purchasing and your engineering department, it looks like I’ll be adding one more of the manufacturers I represent to your vendor list soon.”

“I think I understand the concept,” said Jim, “but could you tell me how you are different from a salesperson who works as a direct factory employee, and how you are paid?”

“In terms of the kind of people who work for reps, there really isn’t a lot of difference between the salespeople working for my company and most salespeople working directly for a manufacturer,” George replied. “I can say that with some authority because I worked directly for a manufacturer before I took this job with a rep company, and I’d say at least half of the other salespeople at the rep company where I work have worked for a factory, too. Each of the manufacturers we represent pays the rep company I work for a percentage of sales in our assigned territory, which is the northern half of the state.”

Jim noticed George was stealing quick glances at his watch, and didn’t want to tie up George too long, so he stood to let George know it would be OK to close the conversation. “I’m sure that you’ve got appointments, George, so I won’t keep you, but I would like to get into this topic more deeply sometime soon.”

George nodded. “I just work for the rep company, but if you really want to get into the nuts and bolts of how a rep company works, why don’t I have my boss give you a call?”

That idea appealed to Jim. “Good thinking, George. Would you have him give me a call and we’ll set something up?” George took Jim’s card and promised that Jim would hear from George’s boss soon.

To be continued next month.

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