Why Reps ...

Why Reps ...Why Reps ...

VsVs DirectDirectA Discussion of Sales Force A Discussion of Sales Force Philosophies & EconomicsPhilosophies & EconomicsA Discussion of Sales Force A Discussion of Sales Force Philosophies & EconomicsPhilosophies & Economics

What is a Manufacturers’ Representative ???What is a Manufacturers’ Representative ???

A commissioned agent (in our case, sales engineers)A commissioned agent (in our case, sales engineers) Represent non-competing companiesRepresent non-competing companies Assigned an exclusive territory … under contractAssigned an exclusive territory … under contract Legally independent yet very Legally independent yet very “interdependent”“interdependent” Responsible for own expenses / personnel / actionsResponsible for own expenses / personnel / actions Reps take no ownership of products / no credit riskReps take no ownership of products / no credit risk Paid directly proportionate to Paid directly proportionate to performanceperformance

““A perfect example of entrepeneurshipA perfect example of entrepeneurship””

““I’ve never heard of one !” “What do they eat ?”I’ve never heard of one !” “What do they eat ?”

Customary methods of selling in the electronic component industryCustomary methods of selling in the electronic component industry

Direct Sales organizationDirect Sales organization Employees of companyEmployees of company Total control by companyTotal control by company

Manufacturers’ RepresentativesManufacturers’ Representatives An independent organizationAn independent organization A technically competent sales organizationA technically competent sales organization Outsourcing the sales functionOutsourcing the sales function Representing other non competing, synergistic products Representing other non competing, synergistic products

(companies)(companies) A “hybrid” sales organizationA “hybrid” sales organization

A combination of bothA combination of both

Discussion Points ...Discussion Points ...

Exploding some myths … about manufacturers’ Exploding some myths … about manufacturers’ representativesrepresentatives

Adding valueAdding value Economics of the rep functionEconomics of the rep function Advantages of a manufacturers’ representative Advantages of a manufacturers’ representative

firm Vs a direct selling organizationfirm Vs a direct selling organization My crystal ball … some future trendsMy crystal ball … some future trends

Good Reps come in ...Good Reps come in ...

Many sizesMany sizes Differing capabilitiesDiffering capabilities With many different business philosophiesWith many different business philosophies With many different (company) personalities & With many different (company) personalities &

stylesstyles It’s impossible to have 2 identical rep firmsIt’s impossible to have 2 identical rep firms

Each has their own unique “DNA”Each has their own unique “DNA” Personality and style of management / ownersPersonality and style of management / owners Different make up of principalsDifferent make up of principals Assortment of staff personalitiesAssortment of staff personalities Geographical differencesGeographical differences Customer types, sizes, etc...Customer types, sizes, etc...

As do manufacturers, distributors, lawyers, etc..As do manufacturers, distributors, lawyers, etc....

Two Kinds of Rep FirmsTwo Kinds of Rep Firms

Salesmen in BusinessSalesmen in Business IndividualisticIndividualistic Conflicting goalsConflicting goals Not well organizedNot well organized InflexibleInflexible Short term orientedShort term oriented

Businessmen in SalesBusinessmen in Sales Organized & managedOrganized & managed Promote team conceptsPromote team concepts Company goal orientedCompany goal oriented Financial stabilityFinancial stability Long term relationshipsLong term relationships

A major differential !!!A major differential !!!

Exploding Some MythsExploding Some Myths

Myth # 1Myth # 1

(This reference to (This reference to channel intermediarychannel intermediary was a was a term used in older texts, yet still taught by some term used in older texts, yet still taught by some educators. Regrettably, some are still teaching educators. Regrettably, some are still teaching this out-dated thinking to our future managers )this out-dated thinking to our future managers )

Reps are an alternative (or substitute) to direct Reps are an alternative (or substitute) to direct sales and not an sales and not an intermediary.intermediary.

Reps are aReps are a “channel intermediary !” (adds cost)“channel intermediary !” (adds cost)Wrong !!!


Newer texts reflect this understanding. (Wharton Newer texts reflect this understanding. (Wharton School, Stanford U., Indiana U., ASU & others have School, Stanford U., Indiana U., ASU & others have revised their teachingrevised their teaching

A rep firm is a form of outsourcing the sales function A rep firm is a form of outsourcing the sales function

Reps are Reps are not an additional channelnot an additional channel … nor are they … nor are they middle-men which implies added costmiddle-men which implies added cost

For example, distributors, contract manufacturers For example, distributors, contract manufacturers are channel intermediaries.are channel intermediaries.

Myth # 1 (cont’d)Myth # 1 (cont’d)Reps are aReps are a “channel intermediary !” (adds cost)“channel intermediary !” (adds cost)

Wrong !!!


Control is a bad word …Control is a bad word … Autocratic management is ancient & indicates poor abilitiesAutocratic management is ancient & indicates poor abilities Sounds too much like bullying / manipulatingSounds too much like bullying / manipulating In the 21In the 21stst Century, no one likes to be Century, no one likes to be “controlled”“controlled” … …

including direct sales peopleincluding direct sales people But, .. directed ? But, .. directed ? You betchaYou betcha ! Led ? Absolutely ! ! Led ? Absolutely !

Influenced ? Everyday !Influenced ? Everyday ! Even smaller principals can become an Even smaller principals can become an emotional emotional

favoritefavorite and exert and exert strongstrong influence over any rep firm. influence over any rep firm.

Myth # 2Myth # 2 WRONG again…!

“Reps can’t be controlled”!


““Reps are (too) Reps are (too) independentindependent ... ... businessmen !”businessmen !”

A legal term only … for lawyers, IRS, etc.A legal term only … for lawyers, IRS, etc. It eliminates mfr.'s liabilityIt eliminates mfr.'s liability It makes Corp. attorneys feel good about It makes Corp. attorneys feel good about

protecting the company … contract talk onlyprotecting the company … contract talk only Reps who use this terminology should think twice Reps who use this terminology should think twice

about what they’re saying and then clean up their about what they’re saying and then clean up their vocabularyvocabulary

In reality, reps are totally In reality, reps are totally interdependentinterdependent with with their principalstheir principals

Myth # 3Myth # 3


““Reps have a short term mentality”!Reps have a short term mentality”! This implies that reps look for This implies that reps look for quickquick financial return financial return

and will not invest in long term efforts.and will not invest in long term efforts. Most start up manufacturers utilize reps … hardly Most start up manufacturers utilize reps … hardly

sounds like “short term”.sounds like “short term”. Reps actually finance the long term sale for othersReps actually finance the long term sale for others

Many sales programs take months or years to Many sales programs take months or years to developdevelop

Reps hang in there despite 30 day contractsReps hang in there despite 30 day contracts No guarantee of future incomeNo guarantee of future income

Myth # 4Myth # 4

Everybody’s talking about Everybody’s talking about

““Adding Value”Adding Value”““Adding Value”Adding Value”

Adding Value … ?Adding Value … ?

A serious thoughtA serious thought

““Everything a company does Everything a company does should start with the idea of should start with the idea of adding adding valuevalue to the customer, to the customer, through better products, lower through better products, lower costs, greater speed, and costs, greater speed, and superior service.”superior service.”

Michael Hammer, Author, “Reengineering the Michael Hammer, Author, “Reengineering the Corporation”Corporation”

Everyone is Re-engineeringEveryone is Re-engineering

Need to add valueNeed to add value Need to reduce costs and / or add valueNeed to reduce costs and / or add value Become more effective / efficientBecome more effective / efficient Get closer to the customerGet closer to the customer Offer more services at less costOffer more services at less cost More R&DMore R&D Increase profits / earningsIncrease profits / earnings Competitive pressuresCompetitive pressures Stockholder demandsStockholder demands

Even if they don’t realize it !Even if they don’t realize it !

Or they won’t survive !Or they won’t survive !

Do Reps need to “add value” ?Do Reps need to “add value” ?

Are these just spiffy new “buzz words” that Are these just spiffy new “buzz words” that have little meaning for reps?have little meaning for reps? Absolutely not ! Any company or any of it’s Absolutely not ! Any company or any of it’s

employees who do not employees who do not add valueadd value to their function to their function will be replaced and their successors will will be replaced and their successors will add valueadd value or they will be replaced. And if the function they or they will be replaced. And if the function they serve offers no added value, it will be eliminatedserve offers no added value, it will be eliminated

A few questions from some reps pals… and my responseA few questions from some reps pals… and my response


We’re in the selling business; it’s up to our We’re in the selling business; it’s up to our principals to add the value … we just sell it !principals to add the value … we just sell it ! Wrong ! We are doing more than selling products, or at Wrong ! We are doing more than selling products, or at

least we should be. Our function should add to the value least we should be. Our function should add to the value of our principal’s product and enhance our customer’s of our principal’s product and enhance our customer’s relationship with both our principal and our firmrelationship with both our principal and our firm

A few questions from some reps pals… and my responseA few questions from some reps pals… and my response


What do reps do that can be considered What do reps do that can be considered “adding value” ?“adding value” ? Lots ! That’s the next part of this presentation.Lots ! That’s the next part of this presentation.

A few questions from some reps … and my responseA few questions from some reps … and my response

How can Reps add value …?

How can Reps add value …?

To Principals and CustomersTo Principals and Customers


A serious thoughtA serious thought

““Everything a Everything a (Rep)(Rep) company company does should start with the idea of does should start with the idea of adding adding valuevalue to the customer to the customer (& (& principal),principal), through better through better products, lower costs, greater products, lower costs, greater speed, and superior service.”speed, and superior service.”

Michael Hammer, Author, “Reengineering the Michael Hammer, Author, “Reengineering the Corporation”Corporation”


A representative’s only A representative’s only reason for existence is to reason for existence is to contribute to the success contribute to the success of its principals and its of its principals and its customers.customers.

A Rep firm is ...A Rep firm is ...

A service businessA service business service is the rent we pay for the space we occupyservice is the rent we pay for the space we occupy the customer expects us to offer solutions and not sell him anythingthe customer expects us to offer solutions and not sell him anything

In a performance business !!!In a performance business !!! we only get paid when we performwe only get paid when we perform we perform for we perform for bothboth the principal and the customer. the principal and the customer.

The principal’s sales forceThe principal’s sales force we are his eyes and ears in the market placewe are his eyes and ears in the market place we are an extension of his image in the market placewe are an extension of his image in the market place

The customer’s resourceThe customer’s resource we must offer the customer an added valuewe must offer the customer an added value when he calls, he needs help and expects itwhen he calls, he needs help and expects it

Reps are an Added Value to “The Customer”

Reps are an Added Value to “The Customer”

Reps serve as their advocateReps serve as their advocate They know that the rep must work toward equitable They know that the rep must work toward equitable

solutions to their problemssolutions to their problems Reps are geographically permanent Reps are geographically permanent

Their success is tied to the local marketTheir success is tied to the local market They will not be "promoted out of the territory"They will not be "promoted out of the territory" Their entire reputation is locally basedTheir entire reputation is locally based

They must be ethical or they are doomedThey must be ethical or they are doomed Offer more territorial knowledge & assistanceOffer more territorial knowledge & assistance Can be used a local resourceCan be used a local resource

A Few FactsA Few Facts

Some Dollars and SenseSome Dollars and Sense

Average Cost of an Outside Rep Salesperson ...Average Cost of an Outside Rep Salesperson ...

Looking at real numbersLooking at real numbers

ExpensesExpenses ShipmentsShipments

1985 1985 $127,680$127,680 $2,596,000$2,596,000

1990 1990 $170,860$170,860 $3,856,500$3,856,500

1995 1995 $220,514$220,514 $5,218,030$5,218,030

No stocking No warehousingNo stocking No warehousing

Pure Rep sales functionsPure Rep sales functions

Where the Commissions go ...Where the Commissions go ...

66%

5%

3%0%

3%

4%

3%

1%

5%

4%

1%

3%0%

2%Salaries

T&E

Auto

Adv

Comm

Occup.

Grp. Med.

Other Ins

Taxes

Office

Prof. Fees

Retiremnt

Emp. Rel.

Misc.

SalariesSalariesT&

ET&

EAuto

AutoComm

CommOccupOccup

OfficeOffice

TaxesTaxes

The Economics of the Rep Function … None of which apply to direct sales


Purest form of free enterprisePurest form of free enterprise Finance own growthFinance own growth Pay for own set backs / mistakes / experimentsPay for own set backs / mistakes / experiments Paid only after they performPaid only after they perform Reps finance the sale for othersReps finance the sale for others

Design-in may take months or yearsDesign-in may take months or years Purchases will probably take several monthsPurchases will probably take several months Payment … add min. of 30 day after shipmentPayment … add min. of 30 day after shipment Returns, reworks, rejects are deductedReturns, reworks, rejects are deducted Non-payment by customer or Disty is deductedNon-payment by customer or Disty is deducted



Reps reduce the mfrs. admin. costReps reduce the mfrs. admin. cost Manage their own staffManage their own staff Buy their own equipmentBuy their own equipment

incl.. computers, autos, cell phones, etc..incl.. computers, autos, cell phones, etc.. Handle all personnel expenses & human resources Handle all personnel expenses & human resources

responsibilities for staffresponsibilities for staff incl. selection, training & replacement, legal issues, incl. selection, training & replacement, legal issues,

etc.etc. Train their own staffTrain their own staff

incl. computer software, selling skillsincl. computer software, selling skills Reps are a form of "out sourcing"Reps are a form of "out sourcing"



No legal expense

No legal expense

Reps eliminate the Reps eliminate the “soft costs”“soft costs” of people and of people and wipe wipe outout a manufacturer’s legal exposures a manufacturer’s legal exposures Reps pay the costsReps pay the costs to select, train, compensate, to select, train, compensate,

discipline and terminate their own employeesdiscipline and terminate their own employees No age, sex or racial discrimination suitsNo age, sex or racial discrimination suits No sexual harassment suitsNo sexual harassment suits No workman comp issuesNo workman comp issues No benefit issues with which to contend No benefit issues with which to contend No state or local laws with which to contendNo state or local laws with which to contend

On a national basis, this can eliminate hundreds On a national basis, this can eliminate hundreds of risky & costly exposures for a manufacturer !of risky & costly exposures for a manufacturer !



Reps are a fixed percentage cost of salesReps are a fixed percentage cost of sales Reps are paid on performance not efforts Large customer comm. rates can be reduced

to keep sales cost in line Allows manufacturers to use capital in other

areas for investment Keeps costs in line with results

Another added value ... Geographic Competence !Another added value ... Geographic Competence !

Years of customer identificationYears of customer identification Other lines take you to more placesOther lines take you to more places

New customers & more opportunitiesNew customers & more opportunities Customer status...who's winning / who's losingCustomer status...who's winning / who's losing In-depth relationshipsIn-depth relationships

More market data...where “stuff” is soldMore market data...where “stuff” is sold Which markets are growing / shrinkingWhich markets are growing / shrinking How people buyHow people buy

More awareness of all distribution in territoryMore awareness of all distribution in territory Know strengths and weaknessKnow strengths and weakness Know more personnelKnow more personnel

Synergy & LeverageSynergy & Leverage

Synergy makes the "fit"Synergy makes the "fit"

Leverage "makes it happen"Leverage "makes it happen"

Good Reps know how to Good Reps know how to use both synergy use both synergy and and leverage. It separates the leverage. It separates the pro’s from the amateurs!pro’s from the amateurs!

1 1 3

Management Skills of a Rep FirmManagement Skills of a Rep Firm

Should be used as your district managerShould be used as your district manager Tap the experiences of many other manufacturersTap the experiences of many other manufacturers Managing the programs, product offerings, Managing the programs, product offerings,

policies and personalities of multiple policies and personalities of multiple manufacturers requires some skill. Why not manufacturers requires some skill. Why not utilize it ?utilize it ?

Managing an organization whose only success Managing an organization whose only success depends exclusively on performance. That’s a depends exclusively on performance. That’s a Rep firm by definition !Rep firm by definition !

An added resource An added resource andand an an Added ValueAdded Value

Reps are Risk Takers … !Reps are Risk Takers … !

Look at the awful contracts that they sign !Look at the awful contracts that they sign ! They experiment with their own money.They experiment with their own money. They live with 30 day contracts that are changed They live with 30 day contracts that are changed

continuously.continuously. They must They must survivesurvive in a world of continuous change of in a world of continuous change of

sales / regional management …sales / regional management … Reps are used to train many untrained bossesReps are used to train many untrained bosses They adapt to different performance standards with each They adapt to different performance standards with each

change of managementchange of management

Good Reps are survivorsGood Reps are survivors … they learn ways to survive … they learn ways to survive

despite all forms of turmoildespite all forms of turmoil..

Rep CouncilsRep Councils

Free, informed suggestionsFree, informed suggestions Minimal cost to manufacturers to receive valuable Minimal cost to manufacturers to receive valuable

inputsinputs Can save lots of money from failed programs / Can save lots of money from failed programs /

policiespolicies Can relate the successes or failures of other Can relate the successes or failures of other

ventures / policiesventures / policies Can serve as your advocates to network with Can serve as your advocates to network with

other reps … nationwideother reps … nationwide..

A valuable resourceA valuable resource

What Should a Manufacturer Expect From it's Rep Sales Force ?

What Should a Manufacturer Expect From it's Rep Sales Force ?

A thoroughly professional, small business enterpriseA thoroughly professional, small business enterprise Entrepreneurial "spirit"... committed to the long termEntrepreneurial "spirit"... committed to the long term Long term stability & relationships...Long term stability & relationships... A unique resource for marketplace "G-2"A unique resource for marketplace "G-2" Loyalty, confidence, integrity and respectLoyalty, confidence, integrity and respect Proven ability to design & sell leading edge productsProven ability to design & sell leading edge products Make the manufacturer's problems transparent to the Make the manufacturer's problems transparent to the

customercustomer Constant cultivation of new customersConstant cultivation of new customers Quality performance in sales as well as the "day to day" Quality performance in sales as well as the "day to day"

representation of the manufacturer's total interestsrepresentation of the manufacturer's total interests

Good Reps are ...Good Reps are ... Good communicatorsGood communicators Good team playersGood team players Ethical & honest in their dealings with Ethical & honest in their dealings with

everyoneeveryone Committed to excellenceCommitted to excellence Able to accept change and new challengesAble to accept change and new challenges Their own toughest criticTheir own toughest critic Students & teachers of their craftStudents & teachers of their craft

Some Future TrendsSome Future Trends

ForFor

TheTheSurvivorsSurvivors

This wayThis way

That wayThat way

Other wayOther way

Some Future TrendsSome Future TrendsSome Future TrendsSome Future Trends

Sophisticated “opportunity tracking” systems Sophisticated “opportunity tracking” systems need to be developed and usedneed to be developed and used

Sophisticated electronic communications Sophisticated electronic communications requiredrequired

Increased technical competenceIncreased technical competence Improved internal training programs & Improved internal training programs &

methodsmethods Even more emphasis on distributionEven more emphasis on distribution


Professionalism and relationships becoming Professionalism and relationships becoming more paramount with key customers / Distymore paramount with key customers / Disty

Customer downsizing makes getting to see “key Customer downsizing makes getting to see “key people” more difficult. Only those sales people people” more difficult. Only those sales people who “add value” get past the lobby.who “add value” get past the lobby.

More split commission issues & some will be More split commission issues & some will be settled by settled by fee arrangementsfee arrangements

Reps will have to develop and reveal succession Reps will have to develop and reveal succession plans in advance of actual needplans in advance of actual need


Selling & presenting to groups at customer Selling & presenting to groups at customer locationlocation

More & more customer service functions More & more customer service functions being moved to rep’s officesbeing moved to rep’s offices

Performance evaluation (benchmarking) Performance evaluation (benchmarking) methods will be changed … not just sales $$$methods will be changed … not just sales $$$

More territories will become More territories will become design centersdesign centers more so than more so than sales centerssales centers

Manufacturers becoming more tolerant of Manufacturers becoming more tolerant of sharing the shelf in distributionsharing the shelf in distribution


Fewer company presidents are sales oriented.Fewer company presidents are sales oriented. Distributor mergers & acquisitions have created Distributor mergers & acquisitions have created

chaos for small to mid sized manufacturers ... chaos for small to mid sized manufacturers ... reducing the manufacturer’s identification & reducing the manufacturer’s identification & influence with the end customer.influence with the end customer.

Fewer manufacturers are of Fewer manufacturers are of realreal importance to importance to distributorsdistributors

I/S to O/S ratio is closing fastI/S to O/S ratio is closing fast Reps need more advanced skills in management, Reps need more advanced skills in management,

finance, communications, info retrieval, etc..finance, communications, info retrieval, etc..

Some “Points To Ponder” for ManufacturersSome “Points To Ponder” for Manufacturers

Don’t let thy ego rise up and smite thee …Don’t let thy ego rise up and smite thee … when it comes when it comes to selecting reps. to selecting reps. Being #1 on the line card isn’t what’s Being #1 on the line card isn’t what’s important. Making it happen is what’s important. important. Making it happen is what’s important. “Mind share” means little … “Mind share” means little … “market share” means “market share” means everything.everything. Zero in on performance … not buzz words! Zero in on performance … not buzz words!

Train your people on how to handle the interview Train your people on how to handle the interview process. Most do a poor job & don’t know what to look process. Most do a poor job & don’t know what to look for.for.

Don’t make the selection process a popularity contest.Don’t make the selection process a popularity contest. Check other principals … that’s where the track record Check other principals … that’s where the track record

lies.lies.

Some “Points To Ponder” for ManufacturersSome “Points To Ponder” for Manufacturers

Ask other reps (whose opinions you Ask other reps (whose opinions you respect) for inputs & recommendations.respect) for inputs & recommendations.

Check out your own regional & district Check out your own regional & district managers … as you do your reps & managers … as you do your reps & distributors.distributors.

For high level managersFor high level managers … please stay … please stay involved in the sales department. Keep ainvolved in the sales department. Keep a passion for the businesspassion for the business & let it show! & let it show!

The Advantage of Reps Vs DirectThe Advantage of Reps Vs Direct

Economics … strongly favor the rep systemEconomics … strongly favor the rep system Augments the manufacturers management pool Augments the manufacturers management pool

without adding cost.without adding cost. Enhances the manufacturer’s Enhances the manufacturer’s geographic competence geographic competence

& exposes them to more customers & distributors& exposes them to more customers & distributors Personnel permanence … married to the territoryPersonnel permanence … married to the territory Stronger identification with local customers & DistyStronger identification with local customers & Disty Leverage of the multiple line selling processLeverage of the multiple line selling process Rep councils ... serve as advocates & counselorsRep councils ... serve as advocates & counselors

To Sum it Up ...To Sum it Up ...

PeoplePeople

Salespeople are the spark that ignite the engines of industry !

Manufacturers’ RepresentativesManufacturers’ Representatives

The Blue Ribbon Way to go to Market

The Blue Ribbon Way to go to Market 11stst

Why Reps ...

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