Elsewhere in this issue of Agency Sales magazine, a rep offers his definition of the value that he delivers to the principals he works with. Conversely, a manufacturer recently communicated to Agency Sales how she defines the value proposition.

According to the manufacturer, earlier in her career she was faced with the task of justifying the continued use of her company’s network of independent manufacturers’ representatives. She quickly offered a convincing value proposition that tipped the scales in favor of retaining reps. Her experience serves as a valuable lesson to others faced with the same dilemma.

Here’s how that national sales manager detailed the scenario that involved a company she previously worked for: “The company had a national sales manager and regional sales managers, each of whom managed three independent rep firms in their respective regions.

“Their decision to scrutinize and consider eliminating their reps all came down to trying to save money. That’s obviously an argument we’ve all heard before. It fell to me to examine the positives vs. the negatives of using reps.”

According to the manufacturer, “The company figured we already had the sales managers in place. Why couldn’t they sell and serve the business we had? Approximately 50 percent of our business was rep-based. The thinking was that by eliminating reps, we could save in the neighborhood of a quarter of a million dollars annually and thereby increase our cash flow.”

Though that kind of thinking could be considered positive, she found that a more detailed study of the situation revealed the rep’s real value proposition. “We were a company involved in component sales. As a result, all the customers we served had need of different components. That translates into a lot of knocking on doors.”

As an example of what the manufacturer would face in the absence of its rep sales force, she cites the business the company had throughout New England. In the six New England states alone, we had approximately $8 million in business. Without our reps, that means we would have one person knocking on all the doors in those states to accommodate the business. That just wasn’t going to happen. Conversely, if you’ve got three rep firms — each with four salespeople — selling in the same area, you’ve got 12 feet on the street working for you.”

Then she goes on to mention all the “opportunity selling” that would be missing with the absence of field reps. “Because the reps have all the relationships in the territory, they are able to take advantage of their time with the customer in order to develop future sales. They are constantly looking for additional business. Without reps, we easily would have been missing more than $20 million in future sales. No seeds would have been planted for the future.”

She goes on to note that when this was explained to upper management, made up largely of financial people, their reaction was one of surprise. “All they did was look at the bottom line. They always complained about the size of the checks they had to write for our reps. They really didn’t have an appreciation for the opportunities we were concerned with.”

Expressing her own opinion on the subject of size of check, she explained, “It’s really quite simple. The more we pay them, the more we as a manufacturer are making. I manage reps and sales managers for a living. I truly want them to make more money than I do. And, when all expenses are considered, bonus and commission checks are only a fraction of our expenses.”

The end result of this was that “The company I was with decided that instead of looking to rid ourselves of all our reps, we decided to take a close look at those reps who were producing the most for us. That’s something any and all companies should do on a bi-annual basis.”

Thanks for the Rep Council

When some of his company’s reps weren’t living up to expectations, one manufacturer was extremely grateful for some valuable input from its rep council. According to the manufacturer, “There was a considerable fall off in the performance of a small number of my reps. Admittedly, I should have been smart enough to put two and two together on my own since the drop in business took place at the same time I put a new person on board as the inside contact for those reps. Things were going from bad to worse about the time when we had one of our two annual rep council meetings. Looking back, I’m extremely thankful that the reps on the council were forthcoming in letting me know that this new person wasn’t providing the support they had grown accustomed to. In all fairness, it was a position that didn’t exactly suit his talents. I made an immediate change and got things back on track in a hurry. The change brought business back to where it should be and my reps were performing at or above their expected levels.

Not stopping there, in addition to moving the inside person to a position that was more suited to his skill set, this manufacturer continued his discussion with his reps and learned from them the basic characteristics that were highly undesirable for an inside person to have when working with reps:

• “The inside person who is a big believer in regular communication, but when he calls us, it’s usually about nothing important.”
• “Stay away from the manufacturer who regularly gossips about other agencies. That kind of behavior diminishes him in all of our eyes.”
• “Be wary of someone who is reluctant to delegate responsibilities that should rest with an agency. These control freaks are usually the ones who undermine the relationship faster than anyone else.”
• “A person who always makes a big deal out of errors reps may have made but is slow to publicly acknowledge when reps go the extra mile to get an order.”

Beginning the Right Way

Here’s how one manufacturer described the positive way he began his relationship with a new agency: “Over more than 30 years of working primarily with reps, we’ve been able to create what I consider to be a fairly comprehensive list of the things we automatically provide them. In addition, however, when we’re taking those first few baby steps in the relationship with a new agency, we’re always sure to ask: ‘I think we’ve included everything that you’re going to need from us, but is there anything else that we should provide that will make your job and our relationship that much easier?’

“Our experience in the past has been that usually everything they want — or need — is included on the list. But occasionally a new agent will ask for something that I think all of our present agents can benefit from. When that occurs, the new agent gets all the credit and the team gets whatever it is that the new agency suggested. It’s all about communication and teamwork, and it’s worked well for us and all of our reps.”

How Much Is Too Much?

It shouldn’t be too surprising that a manufacturer fairly new to working with reps asked the question about how much he should do in order to direct his independent outsourced sales force. In other words, he was asking were there any ground rules concerning how much control the manufacturer should exert over an agency.”

Here was the manufacturer’s dilemma: “We made the move to reps about 18 months ago for a number of reasons, not the least of which were to improve our sales and naturally to save some money on the sales process. Since we had a long history of working with direct sales, one of our first concerns was how much influence we could exert when it came to directing our rep sales network. Internally we found there was no simple answer to this question. As a result, we opened the lines of communication with the reps we had contracted with and they provided us with what has proven to be valuable feedback.

“One of the first things we heard from a rep was that it’s up to the manufacturer to clearly define what an agency sells — but, not how he sells it. He went on to say that in the past manufacturers who have attempted to control how they did what they did, didn’t last very long. On the other hand, it’s the manufacturers who seek to make reps a valuable part of their corporate family that wind up being their best principals.

“I know our history with reps is still pretty limited, but the philosophy we’re employing is one that calls for us to acknowledge whether a rep is doing a good job for us or not. If it’s the former, then I’d say they can operate pretty much in whatever manner they want. If, on the other hand, the performance doesn’t measure up to our mutually agreed upon expectations, then perhaps it’s time to make a change.”

The Value of the View From Outside the Tent

One national sales manager for a manufacturer was quick to point to his years as an independent manufacturers’ representative as a major contributor to the way he has embraced the company’s network of agencies in the company culture.

“I spent more than a decade as a rep,” he explained, “and I’d have to admit that I felt the strongest feeling for those manufacturers who made an effort to include me as a member of their corporate family. I’ve tried to do the same with all of our reps.

“As an example, whenever our reps make a plant visit, we make it a point to allow them the run of the place. They don’t have to ask our permission to go anywhere or do anything. If they have a question that needs answering or a problem that needs solving, one of our people had better be ready to take care of them.

“In addition, whenever we have an open house at our headquarters, we’re sure to send an invitation to every one of our reps that we think can make it. To further that level of involvement and communication with them, we expect each of our reps to visit our office at least once a year. And, when they’re here, we fully inform them regarding any changes that have occurred.”

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