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A manufacturer who was switching from a direct sales force to reps called recently for some guidance.

During the course of the conversation, he mentioned that he planned to take on each rep in each territory on a trial basis. When he was asked why and what he thought an appropriate trial period should be, he answered, “I want to make sure that I’m doing the right thing by switching to reps and I want to make sure that each rep I appoint is going to be able to do the job to my satisfaction.”

When it was explained that it was a better idea to learn all he could about rep selling before he made the switch, and that a trial period was certainly not going to be very attractive to very many agents, he then said that he hadn’t planned to let them know that they were on trial. Maintaining our composure, we then asked what he planned to do if any of the reps didn’t cut the mustard in the six months he thought appropriate for the trial. He replied that he would simply “fire” them. This, of course, led to the question of how he perceived the manufacturer-rep relationship and how he was going to handle all this in his contract. “What contract?” he asked.

There’s more, but we think the point was made. This manufacturer had absolutely no idea of how reps work and how to work with them. His notion was to “hire and fire” as he would a clerk who hadn’t panned out.

Get It in Writing

The question of the relative importance of a manufacturer and a rep working together with a contract is constantly raised during the course of MANAchats. Recently the consensus among a group of reps during a chat session was to always “Get it in writing.” No one questions the wisdom of that advice but many individuals continue to conduct business in the absence of a contract.

It’s not unusual for a rep to be told by a manufacturer that “We always operate on a handshake. There’s no reason to put anything down.” When that scenario unfolds, it may be up to the rep to weigh the relative value of accepting the line under such circumstances vs. just walking away. Or, better yet, why not write a “memo of understanding” between the rep and the principal that spells out the terms of the relationship.

But let’s assume that establishing the relationship with the manufacturer — even in the absence of a contract — is worth the effort. There are some things to keep in mind, not the least of which is that a contract establishes the ground rules for the relationship. It draws the parameters within which each party will operate. MANA has written a good deal about this subject, and the association leadership will be glad to provide anything needed for interested parties.

Major Attributes to Look for in an Agent in the Field

A manufacturer who was waffling between employing a direct sales force vs. a network of manufacturers’ representatives asked what major attributes her people in the field should possess. She followed that question with another: Who generally possesses more of those attributes, the direct salesperson or the independent agent?

Answers to those questions are naturally influenced by any bias you may have, but we did our best to let her know how effective agents can be in the field and we attempted to communicate the kinds of attributes she should be looking for in her sales force. Finally, we let her know that representatives generally have just what she’s looking for in a field sales force.

In no particular order, we recommended the manufacturer seek agents who:

• Exhibit a talent for consultative selling. Because the typical manufacturers’ rep represents a number of different product lines and knows the needs of their customers, they should be able to show that they are at the top of their game by suggesting what is needed to solve a given problem.
• Offers alternative solutions. Here’s where the rep’s synergistic selling skills come into play. If one solution to a problem doesn’t work, they’ll be able to suggest another.
• Have a history of developing and nurturing relationships with the buying influence. This talent is related to one of the rep’s key strengths — tenure in the territory. They’ve been there long enough to know who the decision-makers are and to develop those important person-to-person relationships.

Measuring Weaknesses

Some interesting information developed when a panel of purchasing agents was queried about what the major weaknesses were in the sales reps that knocked on their doors. The result of their comments, while not totally surprising, could serve as a primer for what to look for in a rep. By the way, it would be advisable to take each of the weaknesses detailed below and turn them into the kind of positives manufacturers should be looking for in their manufacturers’ reps. Among the weaknesses mentioned were:

• “Not enough of them schedule properly. They’ve got to get better at making appointments, creating and communicating their agenda, and then following up after the meeting.”
• “Too many of them have a barter mentality. They focus too much on price, and not enough on the total cost and the value they and the product or service they represent can provide us.”
• “Salespeople don’t know the strengths and weaknesses of the products that they represent. If that isn’t bad enough, at the same time they don’t understand our needs.”
• “There has to be more follow-up on commitments. When they tell us something, it had better be true. We need the kind of information they provide us in order to run our organizations more efficiently. We’re not looking for the typical sales job. We want to know what you can do, when you can do it, and how much it’s going to cost us.”

The key message to take away from this is that the professional manufacturers’ rep possesses the ability to make all those concerns go away. As a result, the rep and customer can better concentrate on and complete the business at hand.

Dealing With Split Commissions

As mergers and consolidations continue and the world shrinks even more than it has already, manufacturers and reps can find themselves asking the question “Who gets paid what commission on which part of this order?” The point was never better made than with the following from a manufacturer who has recently gone “global”: “Our patented product has become a global opportunity for our business to expand. With it a few obstacles have been raised that perhaps others have encountered and found creative ways to make everyone satisfied and keep the sales reps motivated.

“We are finding that many projects are designed and developed in one part of the world and then manufactured in another part. This creates a problem with sales commissions. The sales rep in New York, for instance, works long and diligently gathering test data and component information, making suggestions and assisting with product design. Then the program moves overseas where it will be manufactured and sold. The sales rep there will service the account by working with the manufacturer for quality products to be competitively priced with delivery dates to meet the customer’s build schedule and other demands.

“This scenario is even more prevalent in the United States. It used to be more cut and dried by giving a sales rep a designated territory, but we are now finding that many times programs cross over the territorial boundaries. Of course, we are all only interested in ‘selling the product’ not confining its expansion by maintaining it within a given territory.

“That’s all well and good, but here’s the real-world problem: Who gets the commission? How can it be split to keep all sales reps compensated, satisfied, and motivated to continue with other projects that may end up in a similar type of situation?”

If it’s any consolation, this manufacturer is hardly alone with this predicament. They key to addressing the concern here is in determining what is fair compensation for the service rendered. And that’s a question that always surfaces in discussions between reps and their manufacturers. All manufacturers must be aware of this growing concern and have sensitivity to it. To head off any problems, they must take a more active role in making sure their reps are motivated and properly compensated depending upon the service dictated for specific customers. Here’s what two manufacturers have to offer on this subject:

• “Commission ‘splits’ are quite common in engineered products especially. There are many different ways to fairly compensate all parties involved. The main consideration to remember is that the compensation needs to be paid on how much influence each agency has in the overall completion of the sale and the agency responsible for effort at the point of ‘start-up.’ Other efforts that may deserve a portion of the commission would be the agency involved in the engineering of the projects, training of personnel, etc.”
• “We also have experienced situations similar to that outlined above. Normally, we see commissions split into a one-third, one-third, one-third scenario. One-third at point of origin, such as engineering; one-third at point of purchasing, potentially in the same location as engineering; one-third at ship to location. However, admittedly, this is not always the best scenario for retaining salespersons and maintaining motivation.”

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