“How can I find a high-quality independent manufacturers’ rep in a territory and what can he or she and I do to introduce my product to the marketplace?”
That was the question posed and answered by Hank Bergson earlier this year in the course of one of MANA’s popular and well-attended teleforums. This teleforum, entitled Developing New Markets With Manufacturers’ Representatives, tackled the situation faced by manufacturers and reps when manufacturers seek to introduce a new line or new product into a territory.
At the outset of the discussion Bergson, president of Henry Bergson & Associates, LLC, and the former president of NEMRA, sought to draw a distinction between pioneering and missionary work that the independent rep would undertake.
Pioneering work is best defined as the desire of a manufacturer who already has existing business in a territory but is seeking to develop a new line of products for prospects and existing customers.
Missionary work, on the other hand, entails the manufacturer who is new right out of the box and no one has heard of him in the marketplace. Obviously, this manufacturer has no business in the territory.
The very idea of taking on a manufacturer’s line on a pioneering or missionary basis flies in the face of the traditional manufacturer-rep relationship, he continued. “Obviously this type of relationship is in contrast to the traditional relationship where from day one the rep is dealing with existing sales and their job is to increase sales and hopefully increase their commissions. With that traditional relationship, the rep is making money and covering expenses from the very beginning rather than dealing with a situation with a protracted selling time and obviously no commission being paid from the beginning.”
Facing Challenges
Keeping the above definitions in mind, Bergson stressed that either scenario — pioneering or missionary — presents major challenges for both the manufacturer and the rep. “The biggest challenge for the manufacturer is to locate a rep who is willing to develop a new market. That means that the rep is going to have to perform a rather stringent analysis of the risk vs. reward of undertaking the effort.”
If that is what the rep has to undertake, work remains on the manufacturer side also, he maintained. “There’s quite a bit of homework that has to be completed here. A partial checklist might include:
- “Is the product manufacturable?
- “Is the product ready to go to market?
- “Has all the testing been completed and certifications obtained?
- “Has the pricing been established?
- “Do you know your potential customer base?
- “Has the manufacturer completed the needed homework by consulting with MANA and making use of the MANA online directory to target some reps who seem to have a profile that would be appropriate for the product. Key here is determining if they call on the type of customer who would potentially purchase the product.
- “Has the manufacturer reviewed information MANA has available relative to recommended contracts and practices and policies to follow within the industry?
- “Hopefully some market research has been completed that allows the manufacturer to at least come up with a list of two to four reps in the territory that they think are worth speaking to about the product line in question.”
Why Take on the Task?
Bergson then offered a couple of questions the manufacturer has to be ready to address if, in fact, he plans on going to market with reps. “Why should a rep invest his time and money on your product to the exclusion of other products that he already represents? In addition, why should the rep even think about working with you unless you as a manufacturer aren’t ready to market and sell your product in the territory?”
He emphasized the importance of the latter question by pointing out that if a manufacturer thinks it can “pre-sell” a product to the marketplace it may be in for a surprise. “It’s very easy to get off on the wrong foot when it comes to pioneering or missionary selling. Remember you can’t expect the rep to be selling out of an empty wagon. Make sure you’re ready to go to market. As much as it might sound interesting to presell in the marketplace — people aren’t going to pay for something they think will come down the line. Manufacturers must make sure they’re ready to market and sell their product and at the same time have a compelling story as to why a rep should take on the line.”
The Compensation Question
Then there’s the question of compensation, and it’s a question on which the teleforum offered a few considerations. The point was made that traditionally “No one gets paid until the rep sells something.” With pioneering and missionary work, however, there are more times than not that there’s an upfront investment in terms of time and money that the rep has to make before a sale is made. During that time, there is no return on the rep’s time/money investment.
According to Bergson, “There are a number of ways to work around that. One successful scenario involves the rep and the manufacturer agreeing upon a market development fee whereby the rep is retained to begin to build the market. There are a lot of opportunities here for monthly payments or other incentives to be agreed upon that would allow the rep to stay interested and focused. There might also be a draw in lieu of commissions for a fixed period of time allowing the rep to reach a particular sales level, at which time the fees stop. There are a number of creative ways to look at this that reps and manufacturers are familiar with.”
It was at this point in the teleforum that one of the attendees offered his unique perspective on the pioneering/missionary question. Admitting that he was in a position different from most, MANA Board member Ed Juline, CSP, CPMR, Mexico Representation, Guadalajara, Mexico, explained that “It’s not unusual for us to receive three to five calls a week from manufacturers that want us to represent them in Mexico. As a result, while we wind up kissing a lot of frogs, when we do identify a manufacturer that we want to work with, we’ve learned how to structure the deal. On the one hand, there can be a risk for us to work the line and not have the principal willing to pay a monthly fee with no assurance that they’re going to get anything out of it. On the other hand, we don’t want to have a commission-only agreement and then have us get nothing out of it.”
Staged-Date Retainer
He continued, “One of the strategies that we employ is agreeing on a staged-date retainer program. For instance, let’s review our performance after three months. At that time we decide whether to move forward. Then, after six months if there’s not a fit, we can determine to terminate the agreement.” He added that such agreements usually called for a nominal figure to be paid by the principal, “depending upon how much effort we believe it’s going to take on our part to develop the business. This allows the principal to have some ‘skin in the game.’ It shows a commitment on their part.”
As a part of such agreements, Juline indicated that it was important for the rep to provide the manufacturer with pertinent information on how the effort is progressing.
Bergson agreed with Juline’s belief in the value of having the rep report back to the principal. “There doesn’t have to be a formalized method of reporting. Something like that can take away from the rep’s valuable selling time. At the same time, however, the rep should be feeding intelligence back and letting the manufacturer know that the rep is aligned with the common goal of developing the marketing and sales effort.”
Bergson concluded his comments on the subject of pioneering/missionary selling by noting, “A critical component of the good manufacturer-rep relationship is an understanding that there should be a shared investment plan model where they’re both assuming risk. They’re both going to share in the development of the marketplace if they want the ‘marriage’ to work. They each must understand the role that the other plays and share the cost equitably. When that happens, everyone wins.”
This teleforum was one of the several jointly presented by MANA and SalesWise. The sessions, which have addressed any number of pertinent issues facing reps including Opening Doors for Women Rep Owners and Hiring Salespeople, are conducted periodically and are moderated by Nicki Weiss, president of SalesWise. Check the member area of the MANA website for information on the latest teleforum offerings.
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