The following article is reprinted with permission from MAFSI Matters Newsletter.

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Reps are cheap. There…we said it! But we weren’t the only ones.

The Manufacturers’ Agents for the Foodservice Industry (MAFSI) reached out to its manufacturer associate members asking, “Why Do You Hire Reps for Your Sales and Marketing Strategy?” The manufacturers have spoken and a resounding theme appeared. It’s simple! Outsourced reps save costs for foodservice manufacturers allowing them to go to market at the best price for the consumer. Simply put, reps are cheap.

The responses were consistently on target with this premise and are composed of various types of costs. First and foremost is the obvious absence of salaries. As Mike Shanahan, president of Cadco said, “From a profitability standpoint the use of reps is obvious, they are a variable expense and paid only when they create sales. This situation protects you in down economic times such as the recession of 2008 and 2009, but it also works to help you take advantage of an upturn in the economy.” No compensation is given if no sale is created. Ultimately, this results in a sales team that is motivated to sell, sell, sell. It is often said that a rep sales force “eats what they kill” referencing the primal urge to hunt more “game.” More “game” equals more production of goods. More production of goods equals reduced overhead costs associated with manufacturing. Reduced overhead costs associated with manufacturing equals better consumer prices and so the natural economic cycle continues.

Besides the absence of a salary, other types of cost savings were mentioned in the responses to the question. Additional tangible costs were cited, such as health insurance (a rather relevant current events topic), travel and expenses. These are straightforward, direct, and hefty expenses that are visible on a balance sheet and should come as no surprise to you.

But in addition, the manufacturers mentioned several intangible and slightly more surprising cost savings. These include:

• The efficiency of internal communications.
• Speed to market of new products.
• Heightened territory coverage.
• Less time consumed in the interviewing/hiring process for a nationwide sales team.
• Eliminating the need to employ human resource departments for a nationwide sales team.
• Reduced costs in conducting sales meetings.
• Reduced travel time of the manufacturer’s personnel in multiple localities.

All of these points are tied directly to time, labor and employment expenses that are immeasurable cost savings to the manufacturer who hires an outsourced sales force. We reps like to think of it as “priceless.”

So, why is all of this cost savings for the manufacturer so important? Because everybody wins and it allows a manufacturer to go to market at the very best price for the consumer. Take some advice from the MAFSI manufacturers. The next time you are asked to circumvent your rep’s commissions (Oh, come on! We all know this happens.), reiterate to the customer that their costs are based on a sales force that is paid only on performance and the overhead to hire a direct sales force will result in increased costs to them.

After polling MAFSI manufacturer associate members, we offered the number-one reason why a manufacturer hires an outsourced sales force to go to market and simply put, it was because “Reps are Cheap.” We followed up this question by asking what the other benefits of using outsourced sales reps are for them. The answers pointed to all of the unique advantages that a manufacturer gains by hiring an outsourced sales agency that makes their go-to-market strategy easier. These can be summarized this way:

• Increased customer accessibility.
• More feet on the street.
• Local expertise and consistency in the marketplace.
• Personal stake in the game.
• Enhanced speed to market.
• Overall industry perspective.

Increased Customer Accessibility

Once again, the results were consistent, and leading the pack as the top answer can best be summed up as accessibility with the customer base. It was clear that this includes the dealer/distribution network, local end-user community, national accounts, service agents and consultants. Let’s face it. In multi-line selling, reps have a never-ending bag of reasons to reach out to customers — and they do! There is always a new product, or new catalog, or new program, or even a problem that gives the rep an opportunity to make contact. These repeated “touch-points” grow the relationship between the rep and the customer, which intrinsically benefits all of the manufacturers on that rep’s line card by putting them in front of the customer when they would otherwise not be part of the conversation. This results in more frequent access to customers, faster response times to customer needs, stronger customer relationships, and better leverage for the manufacturers in the course of business.

More Feet on the Street

This topic was referenced repeatedly in our responses and it ties directly to the benefits of cost savings and accessibility. When a rep firm covers a territory they generally employ more outside sales reps than a factory that hires a direct sales force in the same geography. Armed with a sales force that is paid only on performance, the rep principal is incentivized to employ several sales representatives to grow business in his or her market whereby a factory using a direct sales force is keeping a close eye on the bottom line by avoiding added employee-related overhead costs. Also, since they are deriving income from more than one manufacturer, the rep can spread day-to-day business costs across multiple sources. It allows for an increased amount of personnel in the marketplace. The increased exposure gives the independent rep’s manufacturers even better access with the customer base (see above). Having more feet on the street grows sales, saves costs and gets a manufacturer in front of the customer more often, making their method of doing business easier.

Local Expertise and Consistency in the Marketplace

Because the manufacturers’ representative has more feet on the street, they also have inherently more localized knowledge of the marketplaces within their territory. As several responses noted, “They know where the bones are buried.” This could pertain to both local culture or custom and one-on-one relationships in the market. Many rep firms span decades of local market-place knowledge, as opposed to the more frequent turnover of direct factory sales personnel. Who better to understand the market place and maintain consistency for the brand with the customer base than a rep agency who is ever-present in the market? This provides the manufacturer honest, knowledgeable, accurate, and prompt market feedback regarding the specific locality. This also leads the manufacturer to better quality access to the right contacts in the market eliminating time-wasting calls during territory visits. The rep can get the manufacturer in front of the right audiences to impact business. Finally, local expertise refers to the rep firm’s knowledge of how to best “man the territory,” by focusing on having reps in key cities and avoiding non-fruitful geography, which can also be considered a result of consistent market presence and understanding. All of these reasons point to the enhancements of doing business with an independent rep agency that make it easier for the manufacturer to sell more product.

Personal Stake in the Game

The rep has personal stake in the game of growing a manufacturer’s sales and profitability since this directly relates to the success of his or her business. Their success is symbiotic to the success of the manufacturers they represent and occurs by the mere nature of the relationship. There is a higher level of ownership and accountability present from an independent rep firm. The responses that tied to this premise included selling the top-tier products rather than commodity offerings by resisting the old vortex of “selling on price,” implementing a consultative selling technique that gets to the core of the solution for the customer (thereby building trust), unlocking new opportunities and product applications, the desire to stay ahead of trends that result in new product development, and providing honest and accurate information regarding the territory. The rep and the manufacturer’s goals to grow and succeed are in line because they have a stake in the game. This is so inherent in the independent rep-manufacturer relationship that it makes doing business easier with an outside sales force because it is a naturally-shared desire to succeed.

Enhanced Speed to Market

For a manufacturer who is just starting out, hiring an outside rep firm vastly increases their speed to market. Again, due to accessibility and cost-effectiveness, a new company using experienced reps will find their product is presented to the right audience without the hurdles of knocking on the door with no prior relationship. It puts some credibility on the product automatically, by association with the rep, and gives the manufacturer added leverage with the customer. This same credibility can be applied to a manufacturer that is launching a new product. Whether or not the company is new, the manufacturers’ representative provides better speed to market in getting the latest product some valuable “air time” with the right customers. The speedier and more successful the market launch, the easier it is for a manufacturer to grow sales and impact the marketplace.

Overall Industry Perspective

Let’s not forget that the rep is on the frontline for the industry, acting as the eyes and ears for the sales process and closing the loop on all of the sales channels from manufacturer to dealer to end user to service agent. This means the rep is privy to ideas, trends, rumors, and economic indicators that might otherwise go unnoticed. The rep is someone who has information about a way in which a customer does business with one manufacturer that yields clues as to how they would like to do business with another. The rep can provide broadened perspectives and be an informed counselor to their manufacturers as different strategies are pursued. For example, when considering a price increase or new marketing program, a resourceful manufacturer will reach out to the rep community asking what their competitors have chosen to pursue or what methods had been successful for the other brands represented by the agency. The rep functions as a limitless source of advice for the manufacturer. Also, the rep is closely linked to the industry rumor mills that give foresight into acquisitions, personnel changes (customer, competitor, and other), and competitor miscues that might result in opportunities. The rep provides an overall industry insight that might be considered the “hidden gem” of reasons to go to market using an agency sales force. When a manufacturer leverages this insight, it makes their overall strategies easier to implement and attain.

Summary

Foodservice equipment and supply manufacturers go to market with different sales strategies. Some hire a direct sales force and some use outside rep agencies. The purpose of this article is to convey the message from MAFSI manufacturers that they choose to hire outside rep firms because it’s just plain easier to do business with an independent rep agency. As David Ciampoli, vice president sales and marketing at Meiko said, “Successful reps mean more boxes out the back of the building.” To take it one step further, more boxes out of the back of the building means that hiring reps makes growing sales and increasing profitability easier for the manufacturer.