February 7, 2012

Do you need to cut costs and want to potentially improve your sales process? Using an outside sales force could be the answer. While many companies hire and train their own sales people, there are benefits to relinquishing a little bit of control, and bringing in manufacturer’s representatives to do the sales work for you.

Manufacturer’s reps are independent contractors who develop long-term relationships with their client companies to sell that company’s products. It’s a business to business relationship that can eliminate some costs for the manufacturer, and open up new possibilities when it comes to territories and prospects.

Who benefits most?
  • The use of reps is particularly beneficial for start-ups where production, engineering, and finance are the typical backgrounds; not sales and marketing.
  • Manufacturers with narrow product lines can get better access to the market through rep firms because they are likely connected to a wider array of prospects and customers.
Cost effectiveness

A manufacturer’s rep firm may be run by one person, or could include numerous sales people, each covering certain territories. Those reps generally handle sales for several different companies that offer compatible, but not competing products. Multiple- line selling is cost effective because the rep’s cost is essentially spread over the different products presented to customers in one visit.

Manufacturer’s reps are paid by commission only, so the manufacturer incurs no cost until the sale is made. Commission rates for reps are typically set at about 5%. With rep sales averaging $2 million, the commission- only based pay makes reps more aggressive – they sell to live.

Other benefits

While cost efficiency is a strong driving force behind the choice to utilize outside sales people, there a few other items to mark in the pro column:

  • Reps typically have better tools for sales forecasting.
  • They know where to advertise, provide insight into the competition, and provide estimates of a given territory’s potential.
  • Experience – the typical factory direct sales person is on the job for 2 years. Sales rep agencies have far more time invested in the territory, providing them with greater insight and stronger customer relationships.
  • Many reps have broad experience and have served in many industries.
Extending beyond sales

In some cases, rep firms not only perform field sales duties, many provide services such as warehousing, installation, and maintenance activities. They may also consult on client needs and problems, and efficiency solutions.

A couple of things to consider; because reps work with several manufacturers, it’s not possible to have full time attention given to one manufacturer. Weigh the importance of direct control with cost savings.

Also, direct, in-house sales personnel are better for highly technical products because they have background in the areas in which they specialize.

Be watching for our next blog where we’ll be discussing how to best manage manufacturer’s reps.

For more on Sales Process Improvement, contact us now.