The president of an electrical products company recently emphasized how important it was for his fellow manufacturers to be on the lookout for rep firms that have reinvented themselves.

According to the executive, the kind of rep that he looks to go to market with is one that operates in a lean and efficient manner. “The pressure for cost reductions in our marketplaces will certainly not subside. As a result, we’ve got to challenge everything we’ve always done. Once you do that you’ll be surprised at what you can do without.”

In the course of challenging everything you do, he went on to advise that manufacturers and reps should make it a point to implement activity-based costing analysis. “It’s critical to know where you make money. Stop doing what isn’t generating adequate return.” At the same time, he emphasized the importance of investing in technology. He maintained that the rep’s real product is time and information, and technology helps the rep gather and communicate information.

In addition, he continued that it was critically important to partner with rep firms that promote standardization and take the necessary steps to expand their geography or line cards in order to leverage their fixed costs.

With an eye to the future, the manufacturer advised that other manufacturers would do well to follow as they consider their relationships. “Representatives will continue to add value through their efficient coverage of multiple tiers of accounts. They will also add value through the depth and breadth of coverage of major accounts.” In addition, he stressed that valuable reps will:

• Develop and nurture partnerships.
• Provide critical, needed customer service support.
• Serve as a marriage broker/matchmaker melding the manufacturers’ customers’ technology roadmap with that of the principal.
• Add value through the delivery of expanded services — accompanied with commensurate payment from the principal.

Truly Listening to What the Rep Has to Say

During the course of a business dinner, one manufacturer with a lengthy history of working with independent manufacturers’ representatives offered his solution to not only gaining an understanding of what the rep does, but also retaining and communicating that information to his constantly changing cadre of regional sales managers.

The manufacturer maintained that he had been blessed with a long-standing and mutually beneficial business relationship with one top-performing rep in the Midwest. It began years ago when the manufacturing executive himself was a young newly appointed regional manager. When he traveled his region, he encountered this one particular rep that had already grown weary of the seemingly endless turnover in the regional manager position. When the new regional manager arrived for an in-the-field visit, the rep thought he’d try something different. Instead of the typical night out at a local restaurant where he would endure the expected grilling about the market and customers he called upon, the rep offered an alternative. Why not dinner at his house? His wife was an expert cook and loved any opportunity to exhibit her ability. But the bottom line was that the rep wanted to get the new regional manager alone and educate him concerning what he did, what a typical rep does, and how the manufacturer could maximize the relationship.

The manufacturer was initially taken aback because this wasn’t the way he had traveled other markets in his territory — but he decided to give it a try. After an excellent meal and an honest give and take with plenty of questions, the manufacturer walked away with a detailed course on how the rep works. Not only that, he went back to his headquarters and put all the salient details into a report. That report has been passed along to other new regional managers over the years. In addition, when this manufacturer, who is now an executive with the company, appoints another new regional manager, he makes sure he sends them to the same territory, not on vacation, but for a similar dinnertime initiation with this rep — who’s grateful for the opportunity.

Always Inform the Manufacturer

The head of a rep firm that was in the midst of its transition period during which he was turning over the day-to-day operation to his son and one other person provided some very important information that manufacturers ought to pay attention to. One point he made during the conversation that should be high on the list of many manufacturers’ concerns is that manufacturers be kept completely informed on any changes with the agency — including succession and transition plans. Thankfully, this rep, who has been in business for more than three decades, took the proactive approach toward informing his principals. As a result, he’s been assured that all of his principals approve of the changes taking place and look forward to working with the new team. But, in general, the manufacturer should make it clear to his reps that when anything happens that will affect sales and marketing activities, he should be consulted.

Selling Into New Markets

One of the best rationales for making the change from a direct sales force to reps was offered by a manufacturer. While naturally hoping to improve sales, this manufacturer explained that she was faced with a double-edged dilemma. “Our direct salespeople were experiencing difficulty selling our existing product line into new markets and selling new products into existing markets that we had been serving successfully for years. At the same time, we were faced with the onerous task of financially supporting those salespeople during times when their sales were not increasing.

“We made the switch to reps in several of our territories and have been more than satisfied. In hindsight, reps provide the perfect outsourcing move for us. We’re expanding our efforts and expect the same level of success elsewhere.”

Who Does the Marketing?

There has been a years-long discussion among manufacturers and their reps concerning which of the two should carry the major weight of developing marketing information. One manufacturer maintains that the rep’s knowledge of a given territory provides him with the marketing information he craves. On the other hand, we have heard from any number of reps that they depend upon manufacturers to provide them with the market data they need in order to be pointed in the right direction. In general, we’d expect that the job of marketing should be a shared venture, and one manufacturer contacted us with his thoughts regarding the benefits of providing the rep with the best and most accurate data available — because he knows his reps will take the information and run with it.

“As a manufacturer,” he notes, “I am often questioned by the independent representative on marketing conditions; the economy in general and what her market is expected to do next quarter, year, etc. Furthermore, the inquisitive rep asks questions pertaining to specific marketing segments (industrial, commercial, and contractors) and specific geography.

“I have often found that reps have a thirst for information and appear to gather it in an informal way with little to no knowledge of how to integrate market information with their planning and budgeting process.

“Speaking strictly from a manufacturer’s perspective, a rep should want accurate market information and I would want him to have it and use it for the following reasons:

1. To gain a better understanding of the marketplace.

Armed with that information, the rep has an opportunity to enhance their level of understanding and knowledge of their marketplace, and the agency will be aided in determining what market/customer segments are driving the overall volume within their respective territory. A representative, through the proper analysis and review of marketing information, can be better prepared to:

• Perform product-line analysis relative to their marketplace.
• Estimate share of market in total and by product line, and project future outcomes.
• Evaluate rep agency performance relative to their marketplace.
• Evaluate rep sales personnel performance relative to the marketplace.
• Identify accurate economic data specific to a representative firm’s market.
• Identify opportunities for growth.
• Identify market/customer trends.
• Allocate and apply resources by industry, key market segments and geography.

2. Cost-effective solution.

“If the rep brings his own market information to the table and couples that input with what I, a manufacturer, can provide him, he’ll allocate his resources and time in a much more efficient manner, thereby bringing profits to both of us.”

Considering Buy-Sell

There are some products that don’t require a great deal of space to store, and some of these products are often needed on an immediate basis. One manufacturer of instrumentation for the process industries communicated to us that his miniature pressure regulators occasionally fail because of fatigue of a small counter balancing spring. It’s not a faulty product, rather it’s just that the spring, to be most effective, flexes a great deal and the flexing sooner or later breaks the spring. He asked his agents to stock these springs so their customers would not be inconvenienced. Some of the agents asked that they be able to distribute the springs, that is that they be able to buy and sell the springs. At first, he thought this was a good idea, but soon realized that this allowed the agents to charge what they wanted for the springs. Since he wanted to make sure that his customers weren’t inconvenienced, he also wanted to make sure that they got their springs at a fair price.

He agreed to the buy-sell notion, but insisted that the agents maintain a factory-set pricing system. Some balked, others agreed, but he wanted a uniform policy for all agents. One agent suggested that rather than act as a distributor in the legal sense that they simply stock the springs and charge the manufacturer a small fee for the service. Since a good supply of all the different springs could be stored in a small closet, space was hardly a concern for any of the agents, and the fee that all agreed to made the system practical.

The manufacturer was happy, the agents were fairly compensated, and the customers experienced a high level of service.

The point of this is that a solution to the problem was found by discussing all the issues and cooperating on a workable solution, rather than going head-to-head. You should hear some of the head-to-head stories we hear that could be solved if everyone cooperated rather than acting in an unreasonable manner.

MANA welcomes your comments on this article. Write to us at [email protected].