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A very successful rep recently called to share his experiences with Market Development Fees (MDF).

“MDF are an excellent way for manufacturers with no existing sales and no name recognition to access a more experienced rep like me who usually would not take on their product line.

“Normally, I can’t afford to take on a ‘pioneering’ line. After all, during most sales calls, customers usually give me only 30 to 45 minutes, which means I focus that time on two or three principals that are already generating commission income.

“Principals with no existing sales who offer MDF share the cost of introducing their unknown product into my territory. MDF don’t cover all my costs, but they do mean that I’m not shouldering the entire cost of introducing a new product to my customers.

“I had an interesting conversation about MDF with a manufacturer who asked: ‘But what will happen if I pay you a monthly MDF and there are no sales?’

“My answer was straightforward: ‘I am meticulous about only accepting MDF from manufacturers whose products fit my customers and market space, so I always bring my MDF manufacturers solid opportunities. Sometimes those opportunities don’t turn into sales, but the reasons have been things like the manufacturer:

• Didn’t have enough staff to prepare a proposal on a timely basis.
• Didn’t have the plant capacity to accept the orders I tried to bring them.
• Couldn’t sell their product at price levels that similar manufacturers were offering in my market.

“Sometimes, I invest 6-12 months of work on a pioneering line only to discover that they did not have the resources to capitalize on the opportunities I brought them. Sharing those up-front costs limits my potential losses and is the only way for me to take on the risk of a pioneering line.”

Note: The rep’s comments were edited for length, clarity and content.