© Charlize D/peopleimages.com | stock.adobe.com

For every action there naturally is going to be a reaction, and that’s exactly what happens when a manufacturer makes an inquiry of a rep. That point was made recently when a rep asked the following: “One of my lines’ competitors tried to hire me. I declined out of loyalty to my current principal. Is it unprofessional or bad manners to share that information with my current principal?”

What’s important to keep in mind here is that reps are going to react — one way or the other — to questions of that type. Here’s some of the feedback on this scenario from some reps that manufacturers might find interesting:

• “There’s really nothing to be gained from telling anyone about this other than feeding the flames of paranoia. Take the inquiry as a compliment and leave it like that.”
• “In one regard, you are actually obligated to share this information. Not only is this entity one of your line’s competitors, it is also one of your competitors. This type of market intelligence — a competitive line seeking a new rep — is important for the factory you state you have ‘loyalty’ to. Assuming two things here: 1) They approached you, and 2) You did not sign an NDA with the inquiring factory after they approached you, you can and should share whatever you uncovered including the competitors’ sales goals, commission rates, and more.”
• “A competitor seeking new representation can be important market information you may wish to share with a manufacturer; however, would your manufacturer share with you if they were seeking to replace your agency?”
• “You are obligated to tell your current principal. I represent companies in industries where everyone has worked for the competitors at least once. They all know each other, and they talk to each other. If my principal found out that a competitor tried to hire me and I didn’t tell him, his confidence in me would be destroyed.”
• “It’s important to keep in mind that loyalty works both ways and is built on trust through open and honest discussion. Shared information is paramount in maintaining that relationship, especially where the competition is concerned. I suspect your loyalty to this principal was built on trust and both could benefit from a discussion about the competitor’s unscrupulous attempts to hire you. I suggest you open that discussion as the competition is likely vulnerable in your region and you may be able to gain some market share.”

Improving the Relationship

When a sales consultant was asked if he had any tips that might guarantee a successful working relationship between manufacturers and reps, he answered with the following: “There are always going to be underperforming reps. However, I’m a firm believer that the rep recruitment process is essential when it comes to eliminating concerns about the potential relationship if the recruitment process is conducted properly with a profile of what the rep should possess — educational/ technical background, customer base, established relationships with target customers and synergistic, non-competitive products — the manufacturer is mitigating the risk of rep failure.”

“At the same time, the manufacturer is always going to be concerned about the unending challenge he faces in getting his fair share of the rep’s time. Getting sufficient time to promote their products and services is the greatest challenge a manufacturer faces. This can be alleviated by offering a quality, differentiated product, product training, sales tools, and an attractive compensation package. The greatest challenge the rep faces when dealing with manufacturers is unrealistic expectations, especially if the manufacturer has not done their homework regarding their target markets/customers and competition.

“If a manufacturer is unfamiliar with the way independent reps work, they should learn all they can about how independent reps operate before they decide on a sales strategy using reps. At the same time, the rep should clarify what services besides actual selling they will provide, i.e., competitive information, installation assistance with customers, etc., before a contract is signed.”

The Value of Synergy

When a manufacturer was touting the benefits of reps’ ability to synergistically sell his products, he sounded like a welcome public relations practitioner for MANA. Repeating many of the benefits of synergy that MANA has been preaching for years, the manufacturer explained, “You immediately gain the benefit of association with their other lines and their leads. We, on the other hand, get the benefit of the leads generated by their other principals. When they make a sales call in response to one of these leads, the rep has an opportunity to sell our products as well. In addition, their other lines complement ours and support the sales of our complete line of products. For example, there’s one product that we don’t manufacture that goes hand in hand with our product line. We know we couldn’t properly field a direct sales force without that other product. What a rep does for us is to carry that product from other manufacturers. As a result, there’s a perfect marriage for us. This is one of the major reasons other manufacturers want our reps to handle their lines. We have the best rep organization in this market and other manufacturers want to jump on.”

Defining Value

It’s inevitable that when a rep is interviewed by Agency Sales, they’re quick to boast that they provide “value” to both their principals and customers. A manufacturer with a long history of working with an outsourced sales force didn’t take issue with that boast, but they did give it more credence when they offered what in their view was the true value that the rep provides. For instance:

• Long-standing relationships in the territory — “Here’s the real difference between a direct sales force and an agency. If the agency is firmly established in the community — as the ones we work with are — they are simply the most cost-efficient means of going to market. They know where the business is, and they know who the decision makers are.”
• Cost savings — “I hear figures all over the place about how much the typical sales call costs and how much it costs to maintain one direct salesperson for a year, but all I care about is getting an economic return on the investment I make for sales and marketing and if the rep fits into that equation. Does he provide me with a better return than any other method of reaching the market? For me, the answer has always been a resounding ‘Yes.’”
• Synergistic selling — “The rep has got to show me how the other lines that he represents complement my product offering, and that’s not all. He’s then got to answer the question, how does my line fit into a typical sales call? I know I’m not going to get all his time, but I do desire my fair share.”
• Broader customer base — “Experience has shown me that any direct ‘feet-on-the street’ that I use will only chase the high-profile business that everyone is after. A rep has to demonstrate to me that he knows everything that’s going on in the territory and can develop business where no one else is able to.”
• Product and company knowledge — “Knowing the products that his customers need had better be second nature for any rep that works for me. Likewise, he had better make the effort to learn all he can (including sales goals) about the workings not only of my company but also the competition.”

Finding the Right Fit

A mid-sized manufacturer recently described a situation he’s run into that we’ve heard from others over the years. According to the manufacturer, “We’re having some difficulty finding reps that we want to work with. What we’re seeing is that following some merger and consolidation activity among rep firms, a number of agencies have been dropping lines — including ours. When we go looking for a replacement, we’re having some difficulty for a couple of reasons:

• First, the established firms have all they can handle.
• Second, while some smaller agencies have been created as a result of the merger consolidation activity, we’re not sure we’re going to get the attention we need in the market that we want to make an impact on.”

As a means of countering the latter problem, this same manufacturer offered, “We’ve had some luck when we front-load our agreement with the rep by offering some incentive. For instance, for a period of time (e.g., three or six months), we’ll offer a higher commission rate just to get ourselves and our product offering established. That’s worked well with a number of firms.”

Line Profitability Analysis

When a group of non-competitive manufacturers got together to discuss some of their experiences in working with reps, the subject of reps performing line profitability analysis was introduced. In the course of the discussion, one manufacturer asked his peers how they evaluated the performance of their reps. In answer, the others offered the view that ultimately an agency should be measured on its ability to perform and produce the amount of volume that both the manufacturer and the rep agreed the territory could produce. They all concurred that the territory’s potential had to be mutually agreed upon by manufacturer and rep. One of the other manufacturers offered more to the discussion when he said, “There are a number of points that have to be considered and each of them should be carefully viewed against current marketing objectives.

“For instance, what if your goal is to develop as many new customers as possible in all territories? Then you might look at your agencies in view of their ability to prospect. On the other hand, if your goal is to maximize business from existing customers, then you’re obviously going to be using a different set of criteria. More specifically, your criteria for judgment should always be specific, and should be viewed against a background that is the same for all of your agencies.”

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