The advantages and disadvantages of outsourcing sales to manufacturers representatives are well established and are typically summarized by the opposing forces of need for control versus desire for variable cost. An internal, or “direct”, sales force is under the manufacturer’s control and when properly led, should be capable of delivering upon a company’s clearly stated objectives. Less control is available from an “indirect” sales agent, and frustration may result from the lack of proper training, the quality of the representation, the clarity of brand messaging, and the proportion of the representative’s time spent on the represented product. On the other hand, the manufacturers representative offers a variable cost model, typically working on commissions only, thus avoiding the full-time fixed costs associated with a direct sales force. This advantage alone is often the reason for choosing to use a manufacturers representative agency.
Once the decision is reached to utilize manufacturers representatives, effort should be devoted to ensuring proper selection. The reps you select will be your company’s face to the customer, so it worthwhile to develop a clear selection process. Begin with a clearly stated position description, similar in many ways to what you would write for any new job. It should outline what you expect from an agency, being careful not to take anything for granted. It should also profile your manufacturing firm, including values and positions that are vital to maintaining the company’s culture and reputation. Areas of current and future growth and other priorities should be included. Finally, it should provide details about the customer base and how the agency is expected to interact with them.
To evaluate and select a rep firm, the following steps may form an outline for your consideration:
Questions to ask
- Ask questions that will help you understanding the rep agency (principal, succession plan, governance model, support resources, growth objectives, technology, product lines, territory, etc.)
- Gain an understanding of what they know about you, your business and your customers (mutual expectations, reasons for anticipated success, concerns, order to remittance processes, customer service needs, reporting tools, etc.)
- Finally, understand their sales philosophy (prospecting, lead management, methodologies utilized such as Miller Heiman or Spin Selling, forecasting, CRM, and so on.)
Measures of success
Gain agreement on how success will be measured in the relationship. Consider:
- Guidelines that form the basis for the contract
- Major business objectives
- Key performance indicators
Be certain plenty of focus is applied to how such data will be gathered, the sources of the information, and how reporting will be conducted.
Capacity to represent your product
Fitness is key to a principal/rep relationship. The rep firm may be well qualified, but your product line may not be able to compete with the rep’s existing portfolio of products. Resources must be dedicated to ensuring that this additional product or product line will translate smoothly into the rep’s selling approach.
Setting realistic expectations
Partnership is vital to a successful relationship. Frequent and highly transparent business reviews with senior leadership from each company will be required. These should be considered as an opportunity to truly understand the needs of each company, what is working, and what must be improved upon. Agreeing to a contract is an early and important first step, but many adjustments will be required along the way to a successful partnership between the principal and the manufacturers rep firm.
High quality representation on a variable cost basis is available through the use of qualified manufacturers reps. Establishing a highly successful partnership that results in solid sales growth is difficult, however, and requires discipline and consistency from both the manufacturer and the rep firm. Committing to such a partnership means planning carefully, mutual respect and must be a win for each party.
Could your manufacturers rep relationships use a fresh perspective? Contact Performance CXO for a complimentary meeting to discuss your situation. We would be delighted to lend our expertise to your pressing needs.