While begrudgingly acknowledging the benefits of “shared territorial development” fees, one manufacturer bemoaned the fact that such agreements can put him in an untenable financial position.

Here’s how he stated his predicament: “I’m in the process of making the move from a direct to an outsourced sales staff. As I’m progressing with locating and hopefully signing independent reps, more and more I’m encountering those who require a fee or some sort of retainer since I don’t have any sizeable business in their territory.

“On the one hand, I recognize why they ask for such fees. Their time in the field developing new business is valuable and they — and I — feel it’s important for the manufacturer to have some ‘skin in the game.’ But on the other hand, if the majority of my new-found reps are requiring such payments, I’m not going to be able to afford to make the move to reps.”

When a rep was informed of this view, he came up with some valuable advice. “Sometimes slower is better than faster. Why try to cover the entire country at the same time? Slow down. Why not start in just one territory? Why not identify one of the most strategically important territories, locate a rep there, initiate a relationship with the rep and fine tune things before making the move to another territory?”

He continued, “It’s important to keep in mind the fact that shared territorial development fees should not be confused with permanent retainers that reps will always be drawing on. Rather, the shared fee that’s referred to here is something that we’re both hoping to eliminate as quickly as possible. In other words, as soon as the rep develops enough business to cover (in commissions) the amount of that fee, the fee is eliminated.

“By completing his move from a direct to a rep sales force in a gradual fashion, this manufacturer could quickly learn whether reps are for him or not. At the same time, he can learn from his mistakes in one territory and ensure that they don’t happen in another.”

Listening and Taking Action

Over the course of one national sales meeting, a manufacturer let his reps know that plans for the next year involved doubling the company’s sales. A natural follow-up to that statement was to ask his reps what he could do to truly get their attention in order to achieve that goal. The manufacturer shouldn’t have been surprised — but was — when virtually all the reps responded that if their commissions were doubled, then that goal was achievable.

“When I first heard their response,” he said, “I figured they were just joking around and if we put our heads together we could come up with a workable plan. By the end of the weekend meeting, however, they were wearing me down. Finally I let them know that while I couldn’t double their commissions, I could increase it by a sizeable amount if they truly felt that would assist or motivate them in their efforts.

“Now as I look back at that experience, we didn’t double our business; we actually tripled it. My takeaway here is not to emphasize that this approach will always work. What I learned was that it’s critical to listen to what my reps are telling me. And if they’re letting me know that I can get more attention in certain cases by increasing their compensation, then I had better listen to them.”

He concludes that this was a lesson well learned and one “I’m continuing to follow in the future.”

Who Carries the Bad News?

Who’s first in line when it comes to communicating bad news to customers? That’s a question that has beleaguered reps and principals forever. It makes sense that the rep is the first on the firing line. When this question was asked of a manufacturer, here was his approach: “Good reps have to be depended upon to deliver bad news and they must do it quickly and accurately. That’s exactly what we expect, but one thing we try to do is to take the heat for him. Often we’ve found that if we label ourselves as the bad guys, the situation works out better for all of us. Remember the rep has a number of other lines that he represents with customers. If the customer is upset with him, it may affect his overall performance. We let our reps know that this is our approach, and we’ve stayed true to it.”

Realizing Success From Failure

It’s no secret that when a rep fails to get an order, he and the manufacturer aren’t going to be too pleased. Turning a negative into a positive however, isn’t impossible according to what one manufacturer told us.

“I’m pleased to report that this doesn’t happen too often, but one of our best reps has made it a practice that when he fails to land an order that was anticipated, he will go through a formal process to determine why he didn’t land the business. His feeling is that this is the best way to determine what he did wrong and to learn what steps to follow in the future in order to ensure that it doesn’t happen again.

“In addition, he determines for himself and communicates to us what he’s identified and then he details what steps he’s going to take to better identify and anticipate the needs and demands of the marketplace.

“I emphasize that he’s done this all on his own. For our part, we haven’t dropped the ball. When he communicates this information to us, we put our heads together to determine how we can best support his efforts in the field.”

Proof that this effort breeds success is the fact that this rep is one of the manufacturer’s top performers — and he’s just entering his second decade of partnering with the manufacturer.

Paying for Valuable Market Intel

One manufacturer was quick to admit that if he can’t develop the market intelligence he needs to propel his business, he’s not afraid to pay someone else to do it for him.

Here’s what he had to say: “We’re a fairly small manufacturer. As a result, we don’t always have the personnel on hand that we can assign to the field — that’s why we use reps. At the same time, we’ve got to know what’s happening out there. That’s where our reps come in — in addition to getting us orders. When we have a need for marketing ‘intel’ in a specific territory, we’ve had remarkable luck asking our reps for assistance. While we’re not afraid to ask for their help, we’re also not afraid to pay for it. This approach has provided us with what we need, while providing them an additional revenue stream that they’re more than willing to take advantage of. We both win.”

Defining the Regional Manager’s Mission

No stranger to complaints about the performance of regional sales managers, one manufacturer spelled out how his proactive approach to defining the sales manager’s job has done much to defuse potential problems.

According to the manufacturer, “We determined long ago that the primary job for the regional manager is to ensure that everyone understands the rep’s mission. This means that everyone at the factory has to be on the same page when it comes to understanding what they expect from reps. At the same time, it means that all hands are to pull together to see that tasks are performed. If the agents have questions, the regional manager should be able to answer them, or to get answers from those at the plant who can provide the correct information. In addition, a regional manager knows the limits of their authority and responsibility and works overtime to see to it that they have access to corporate people who can make the decisions that obviously can’t be made in the field.

“Finally, a good regional manager is secure person, that is, he doesn’t attempt to steal credit for a job well done by an agent.”

The Value of a Sincere Thank You

While one manufacturer was quick to recognize the value of sales awards, he was equally quick to note that many reps value a pat on the back just as much as a framed award.

“One of our reps for instance, makes it a point to frame and hang awards on a special wall in his headquarters. He’s received such awards several times, and as a result, he’s got a wall full of them that he makes sure to show any visitor. There are other reps, however, that don’t want awards, but do appreciate a heart-felt pat on the back. When they have done something special, whether it leads to an order, or solved a problem for us or the customer, they simply like to feel that their efforts are noticed and appreciated above and beyond just getting their commission checks on time. We make sure the latter group receives our words of thanks.”

Growing Apart Isn’t Always Bad

When a small-sized manufacturer perceived it wasn’t getting enough time from one of its reps, the owner wasn’t about to let the situation grow any worse. What had happened was that the rep firm had experienced tremendous growth in other areas and ultimately was spending more it its time on more profitable lines. The manufacturer and rep had years of working together and enjoyed a close personal relationship. Rather than let a relationship deteriorate any further, the manufacturer decided to speak up. What resulted was a split-up, but a split-up on terms both could live with.

The two agreed that this was the best route to follow. For his part, the rep helped quite a bit by recommending three other reps in his territory, one of whom is now representing the manufacturer — and doing a great job at the same time.

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