Manufacturers’ reps and their principals truly believe they are adding value for their customers. Despite this belief, however, many of them have seen their profit margins become razor thin because of deeper discounting, extended terms, and special offers. The question that should be front and center of everyone’s mind is this: “If we are adding value, why do our customers continue demanding lower prices?”

In answer to that ever-present question an industry consultant offered some thoughts that manufacturers ought to be sharing with their reps.

Customers have heard the promise of added value from advertisers and salespeople for years. Yet, in reality, this promise has rarely been delivered in a measurable way. In fact, research indicates that the majority of salespeople cannot quantify the dollar-and-cents value they add for customers — not because they lack the desire, but rather, because they simply don’t know how to do it.

• How do you respond when a customer demands lower pricing?

If your customers are not aware of the economic value they will derive from your product, you have left them no choice but to view your product as just another commodity that should be purchased on the basis of price alone. When a customer gets to this point, it’s very difficult to convince them to pay more.

The good news for manufacturers and reps is that you probably are in fact adding value. You just need to start measuring it and communicating it to your customers.

• What is measurable value and how is it created?

Measurable value is the dollars-and-cents benefit customers derive from purchasing and using your product. Lower labor costs, improved productivity and/or reduced exposure to risk and liability are all examples of measurable value. Measurable value is created for customers by addressing the root causes of their business problems. But what if your customer does not understand the root causes of their business problems?

• Selling value rather than price.

The traditional approach to selling has been to inform the customer about how they will benefit from a product’s features. The assumption behind this approach is that the customer will see the dollars-and-cents value they will derive from the possession and use of the product. This sales approach works well when the customer’s business problems are relatively simple and the dollars-and-cents value they will derive is obvious to the customer. For example, the added value is obvious to the customer if your product lasts twice as long as the product they are currently using and it’s only slightly more expensive. However, when a customer does not understand the root causes of their business problems, they tend to focus on the one thing they do understand: price.

How do you convince a customer to pay more for a product that creates measurable value by addressing root causes they’re not even aware of?

Selling value — rather than price — requires that you spend more time on the “front end” of the sales process, making sure the customer understands the root causes of their business problems. Selling value also requires that you help the customer understand how your product will deliver measurable dollars-and-cents value by addressing these root causes.

If you and your reps are adding value for your customers but they continue to demand lower pricing, perhaps it’s time to modify your sales approach.

Feedback From Readers

Agency Sales magazine received some thought-provoking reactions from manufacturers concerning articles that have appeared over the past couple of months in the magazine. In the first case, a manufacturer was responding to an article that described some reps’ experiences in terminating relationships with their principals. The relationships ended for a variety of reasons:

• The rep determined that serving a particular principal didn’t provide him with the proper return on investment.
• The rep was moving in a different direction and didn’t feel it would do justice to the relationship to continue.
• The principal’s merger with another company caused a line conflict for the rep.
• Lack of manufacturer support caused the rep to realize the business relationship was no longer tenable.

In response, one manufacturer wrote to us and detailed his experiences with one of his reps. “We had been working together for six years and were completely satisfied with his performance. He regularly communicated with us and showed good growth in the market. However, due to the acquisition of some new lines, this rep felt his firm was moving in a different direction and he wasn’t sure he could give us our fair amount of time or continue to show the same progress in the territory. Rather than just leaving us cold, however, this rep let us know the move didn’t have to happen immediately, and he’d like to help us make the transition to another rep firm.

“True to his word, in short order he came up with recommendations for three rep firms in the territory. We followed up on his recommendations, signed one of them and haven’t missed a beat.

“While we certainly didn’t want to part company with this rep, he couldn’t have handled it any more professionally. We parted as friends, and remain so to this day.”

The second article had to do with planning and executing joint calls in the field with reps. When one manufacturer read about the practice of some reps of sending a questionnaire to manufacturers in preparation for the sales call, he decided to take the lead.

According to the manufacturer, “I’ve got to admit that in the past, we were a little selfish when it came to these calls. We generally figured that when we wanted to visit a customer in the territory, the rep should drop what he’s doing and provide us with the assistance we needed. After reading about the needs of our reps, we’ve changed our approach. Now we give the rep plenty of advance notice, and if he doesn’t have a practice of asking us questions concerning what we hope to accomplish, we make it a point to submit a proposed itinerary that includes the calls we’d like to complete — if it meets with his plans. At the same time, we communicate to him that naturally we’d like him to emphasize our line during those calls, but we also understand his need to conduct other business while we’re there.

“We began this process with a few of our reps, and it’s worked out beautifully for all of us.”

Expecting Too Much From the Rep

One manufacturer cautions to be careful not to dump the whole marketing and sales process in your rep’s lap and then expect miracles.

On the one hand, you’ve got some manufacturers that look at contracting with independent manufacturers’ reps as more than just outsourcing sales. On the other hand, you’ve got some manufacturers’ reps who resent the fact that more and more responsibilities are being relegated to them — not always accompanied by commensurate compensation.

What some of these manufacturers are doing is handing over their marketing and sales duties to reps. Here’s how one manufacturer views that scenario: “They don’t just delegate the job of selling into a particular territory to a rep — they dump the whole marketing and sales process in his lap and expect miracles. And, when miracles don’t result, what do you expect their reaction is? Those companies abdicate their fundamental marketing and sales responsibilities because they believe guiding the process is just too expensive or too hard. It’s the lazy man’s way out. Short-term, you avoid a lot of time and work. Long-term you perform a disservice to yourself, to your company and to the reps who are involved.

“That type of thinking continues along these lines: ‘That’s what we’ve been doing, and it works fine.’ Well, I’ve got news for you — just about every sales manager thinks they’re doing a great job, regardless of the bottom-line results. In truth though, many of them are astonishingly uninformed.

“By continuing along with this process,” he continues, “a number of (bad) things can and often do occur. For instance:

• You wind up prematurely severing relations with one rep and replacing it with another — never really achieving the results you desire.
• You never achieve the market share you could and should be shooting for.
• You really never get a feel for how your business is performing. You actually have no idea if there’s a germ of a good idea in your marketing strategy.”

What this manufacturer advocates is to choose your reps carefully, communicate with them and support them to your fullest. And listen to what they report from the field. “Remember — you hired them to be your eyes and ears. Let them tell you what they see and hear.”

Detailing Success With Reps

“We’ve got to refine the way we choose the agencies we go to market with.” That’s how one manufacturer opened a conversation with another. After reviewing a litany of poor choices, the first manufacturer asked the second how she could account for her enviable track record with reps.

In response, the second offered her recent experience in filling a vacancy in a territory. “We had been emphasizing our presence on the East Coast and were looking to expand to the Midwest. We had no agent in the territory but had identified three fairly successful agencies to interview. I visited each. While the first two were very impressive, their presentations left me with the problem of how to choose between them. Any indecision was taken care of, however, following my interview with the third agency. Here’s how the owner of the agency got my attention and, in fact, made my decision for me. First, he not only took the time to gain a familiarity with our product line, he went further. He visited with potential customers he felt might have a need or desire for our products. From the contacts he made, he not only gathered great ideas concerning how he would open the territory for us, he also brought forth an idea for a modification to make the product more saleable in his territory.”

What really impressed the manufacturer was that the agency owner demonstrated his ability to serve as a consultant, a solution provider, and a salesperson.

“In the end, the decision was a no-brainer. That was two years ago, and our continued success in the territory shows us we made the right decision.”

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