What Is A Manufacturers’ Representative?

Manufacturers’ representatives are independent professional providers of field sales and marketing services to manufacturers or suppliers. They typically handle a portfolio of related but non-competitive product lines, working under a contractual arrangement within a defined geographic territory on an exclusive basis within their assigned field of responsibility. In the food industry, these businesses and their people have been known as brokers, although they now prefer the more descriptive term, prevalent in some other fields, agent, which accurately expresses the legal relationship with the manufacturers for whom they sell.

The multiple-line sales professional can afford to call on customers too small to be profitable for a single line. The new entry into the cutting tool business gets in the door and on the floor faster because the company’s representatives have already established a relationship with the customer for their abrasives and their grinders. The ability to leverage the entree created by the other lines in the portfolio gets a vendor into more places, and quicker, than could likely be achieved by a single-line sales force, no matter how aggressive and proficient. Basic economics may drive most manufacturing start-ups to go the rep route, but demonstrated sucscesse keep 50% of all manufacturing companies using reps at least in some territories or market segments – a figure that rises above 80% in the electrical and food service industries.

WHAT A MANUFACTURERS’ REPRESENTATIVE IS NOT

Unlike distributors, who take title and add cost to the goods they sell, reps are not an additional channel, nor are they middlemen, channel intermediaries. They are the manufacturers’ sales personnel in the territory, simply paid on a different basis – commissions, rather than salary plus incentive plus expenses. In fact, reaching the channel in the most cost-effective manner is probably the most prevalent reason for choosing the rep route – although manufacturers report that their reps bring them many additional marketplace advantages, besides the clear economic benefit of no sales expense until there is a sale.

UNDERSTANDING THE DIFFERENCE BETWEEN A REP AND DISTRIBUTOR

  • Manufacturer’s Representative
  • Distributor
  • Sell Only in a defined territory
  • May Sell Anywhere
  • Do Not Handle Competing Lines
  • Frequently Handle Competing Lines
  • Sell as an agent, do not take procession
  • Buy for resale, assume ownership
  • Compensated by Commission on sales
  • Compensated by margin of a sale price over cost
  • Typically Handle 15-18 Lines
  • Often Handle several hundred lines
  • Typically entrepreneurial, owner – operated
  • Large Firms often publically traded
  • Interface with distributors
  • Rely heavily on rep for referrals/training/engineering
  • May warehouse (For a Fee)
  • Maintain Inventory
  • Focus on customer
  • Focus on selling what’s on shelf
  • Add value through application engineering/
    Product Synergy/Design - In
  • Add value through time place utility

MORE THAN A SOURCE, A RESOURCE

The ability of manufacturers’ representatives to outperform direct employee sales forces starts with the inherent benefits of product line synergy, and continues with the caliber of rep sales personnel. Rep success is directly tied to productivity, so the profession attracts and retains the top talent in each industry, the entrepreneurial, the competitive, the goal-oriented. Moreover, their success is linked to their contacts with customers and distributors in the territory, not with their friends in the corporate hierarchy. The factory-direct salesperson who produces is likely to be promoted, whether to another location or to the home office. Recent Dartnell figures indicate the average stay of a company salesperson in a given territory is only 22 months. For manufacturers’ representatives, a figure of 22 years would be more likely! Being rooted geographically leads to stability of relationships, an important added value in a world where the customer is king. Another, possibly the most simplistic: the multiple-line sales call is simply more cost-effective. The buyer saves time discussing several needs during a single meeting. Putting together a power transmission system? The rep knows which control will interface most efficiently with the specified motor and power supply.

Because of their multiple-line perspective, reps are more likely to look at the forest, not just the trees. Their job is to add value, satisfying the customer’s need and facilitating the flow of goods to the customer, in the way that the customer wants to buy. Astute manufacturers recognize this, and develop compensation programs that compensate the representative on all orders from the territory, whether placed through distribution or direct.

Independent contractor sales representatives are not only a source, but a resource. They supply in-depth multi-level interdepartmental coverage, helping to bridge the frequently encountered communications gap between purchasing and engineering. Their advice is cogent because of the familiarity achieved over the years not only with the customer’s needs, but also with the customer’s total corporate culture. Their greater market exposure gives them access to a broader range of information, which they can analyze with objectivity and added perspective.

Win-Win-Win – The Customer Benefits Too

  • Stable relationship with someone who knows the total corporate culture
  • Long-term commitment to the territory
  • Serves the customer as a multi-faceted resource
  • More efficient sales calls – cover several products in a single meeting
  • Consultative selling
  • Bridges the communications gap among departments
  • Advocacy, ability to secure exceptions to supplier policy
  • Help in order strategy, through distribution or direct
  • Perspective on market conditions and trends
  • Solutions approach – looking at the forest, not just the trees

ADVOCACY – THE CUSTOMER’S MOST IMPORTANT RESOURCE

The objectivity and perspective that the multiple-line sales professional brings to the table is never more important than when the customer’s need diverges from the manufacturer’s standard operating procedures. Whether it’s a product modification or an expedited delivery, the representative can, and will, fight harder for the customer. The rep has more at stake, with all the other products being sold into that company, as well as more freedom than the direct salesperson to carry his clout on the customer’s behalf all the way to the top.

This commitment of the representative to the customer’s interest is inherent in the territorial basis on which reps operate. Nothing is more shortsighted than the efforts that keep surfacing from time to time by “power buyers” to force out the rep and deal direct with the manufacturer. The vendor who succumbs to the pressure must now perform the field sales function in house, and thus must bear the increased costs. If quality, service and functionality are degraded for short-term numbers improvement, customers will go elsewhere; so the vendor protects today’s sale at the price of tomorrow’s profit. It makes no sense to force suppliers to use second-best sales methods, limit choices by squeezing out small and start-up companies, and stifle open competition and free markets in the process.

The representative’s role in advocacy goes hand in hand with that in consulting. Because they’re in the territory for the long term, representatives look beyond the sale to the total relationship. Territory knowledge combined with multiple-line exposure and entrepreneurial personality adds up to a wide-ranging perspective on who’s doing what, how it’s working, and where it leads. The market intelligence gleaned from reps goes far beyond sophisticated forecasting. Good representatives provide immediate feedback that is invaluable to the manufacturers they represent and to the customers they call on. The economics of outsourcing field sales.

MYTHS AND MISCONCEPTIONS

Despite the many economic benefits manufacturers accrue by outsourcing field sales, three persistent myths continue to create resistance in some quarters to using manufacturers’ representatives. One is the myth that surfaces from time to time, in relationship to commodity products, that distributors can handle the entire field sales process. Its subset is that electronic data interchange and eCommerce render personal contact superfluous.

Aside from the difference in selling function (problem solving or design-in vs. time-place utility), a distributor is hard put to be the advocate for your brand, when he is also stocking and selling the products of your direct competitors, and often a private brand as well. Reps are part of the manufacturer’s support system for distributors, working with them cooperatively, not competitively… sometimes even employing personnel assigned full time to create demand among a specific distributor’s customers.

The advent of the Internet, EDI and eCommerce has automated some of the customer service functions that may previously have been part of the rep’s purview, but not the value-adding counsel and human interfaces that are so central to the field sales function.

A second myth is that reps don’t take a long-term perspective. While it would not be surprising if they thought short-term, given that they often live with contracts with a 90-day termination clause, successful reps have to be invested in their territories, and in their clientele. They view their manufacturer commitments as long-term relationships that must be mutually profitable, but they especially nurture their longstanding customer relationships. They recognize that some sales are a long time in developing, and that even when they materialize, shipments and payments may also be staggered over a long time. In the interval, the field sales organization, not the manufacturer, has financed the visits, the hand holding, and the negotiating process.

Perhaps the most damaging myths that reps have to overcome are those that connect to the control factor. How much control the manufacturer wants is probably more the issue than how much control the manufacturer needs. The sales manager who believes that the sales force needs to be led every step of the way creates a self-fulfilling prophecy!

Unfortunately, reps add fuel to this fire when they refer to themselves and their organizations as independent businesses. Interdependent is a better term, suggests one of the profession’s sage-practitioners, urging colleagues to think of independence as a legal term, designed to protect manufacturers. Only the representative, not the distributor or the customer, has a vested interest in the manufacturer’s continued success and profitability.

Reps do need to be managed, directed, and to some extent motivated. In fact, positive motivation is probably the best way for a sales manager to “control” his outsourced sale force! Establishing a partnering relationship, paying commissions on time, communicating the rep’s value to all the departments with whom the rep interfaces, and consistent bilateral decision-making lead to getting a greater share of the rep firm’s time than the commission income alone would warrant.

Professional Certifications

CPMR Candidate Certified Sales Professional

Member Associations

Alabama Automotive Association (AAMA) The Georgia Automotive Manufacturers Association, Inc. Tennessee Automotive Manufacturers Association Wake Forest Area Chamber of Commerce Internationally United Commercial Agents & Brokers
MANA Certification