While some of the comments in this issue of Agency Sales focus on reps gaining back-end protection when it comes to conducting pioneering work for principals, the importance of the shared territory development fee is still uppermost in the minds of many reps. For instance consider the views of the two MANA members that follow.
According to Roger Ralston, Tri-State Components, Inc., Newnan, Georgia, “We have some principals that work with us and pay a territory development fee. And with those companies, once the need for such a fee has been communicated and accepted, the result has been very positive.
Ralston, who serves as MANA’s District 3 director, explains, “I make sure to address the subject at the very beginning of our relationship. I put it all down on paper in a proposal. If the principal is one that doesn’t have a presence or any activity in the territory and they’re looking for us to serve as their sales and marketing arm, then I’ll be sure to raise the subject of such a fee. I explain that this is something we’re looking to have in place for just six months to a year. At the end of the agreed-upon period of time, we’ll review our activities, provide them with a report and then we decide whether it’s opportune for both of us to move forward. On the other hand, if we determine the market doesn’t exist for their offering, then we’ll cease the agreement.”
Ralston continues that when he broaches the subject of such fees, “Manufacturers are generally patient, understanding and willing to be communicated with.”
Ralston, just as so many other reps who introduce the subject of retainers to principals, has heard typical responses such as, “Well you already call on those customers anyway. What’s the big deal with just introducing our products during the course of your normal sales call?”
“It’s not quite so easy,” he responds. “Many of the companies I’m talking about are involved in niche markets. Those markets don’t necessarily fall into the same category of customers we normally call upon. We have to conduct research ahead of time and determine what customers are potentials for such niche-market products. That takes an investment on our part. In our favor is the fact our agency already has a footprint in the territory and we have four people who know where the business is.”
In the end, however, Ralston notes, “I’m not afraid to walk away from something. When that happens, I offer the manufacturer information concerning other rep firms that I know about that might be able to assist them.”
Historical Is Nothing But History
Regular readers of Agency Sales will recall that Joe Cook, president, Eastern Technologies, Inc. (ETI), Raleigh, North Carolina, was the subject of an article on this subject six years ago.
As he revisits the subject, one of the first things he bristles at is the notion that so many manufacturers have that reps only get paid when they sell something. “When a manufacturer says to me that historically reps work on a commission basis only and they receive payment only when the sale is made, my response is: ‘Historically is just that; history.’ Look at so many other processes that we engage in today that are no longer as they used to be. Is dealing with the automotive industry different today than it used to be? How about the medical industry? Or, how about the fact reps didn’t used to have written contracts with their principals? Everything has changed, and so has the subject of retainers or territory development fees.”
When it comes to such fees, Cook is adamant that it’s up to the rep to introduce the subject professionally and immediately with prospective principals. “The rep must be preemptive in his effort to educate and communicate with a principal. Here’s what we do at ETI. Before we even sit down for that first lunch with a prospective principal, we’ve sent an informational package to them explaining that because so many changes have occurred in the industry, business between the manufacturer and the rep has to be conducted in a different manner. It’s all about being prepared.”
Cook adds that it has occurred that principals will balk at such arrangements and “If that’s the case, it’s not a problem. Then we don’t move forward together. But the whole message here is that the situation is addressed right up front. There’s no yelling at each other or discussions that delay the process.”
He adds, however, that the manufacturer with no existing business in the territory is faced with the prospect of attempting to develop business with his own direct sales force. Then he’s faced with the expense for supporting such a staff — all with no guarantee of success.
