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How Manufacturer’s Reps Can Help You Increase Profits

"Don't bother hiring a rep to cover this territory. Instead, credit us back the rep's commission and we'll sell more of your dedicated home theater interiors and theater seating..."

“Don’t bother hiring a rep to cover this territory. Instead, credit us back the rep’s commission and we’ll sell more of your dedicated home theater interiors and theater seating…”

This quote from an anonymous dealer seems to be widely held by a significant number of custom installation firms as I interview accounts and ask them about the manufacturer reps that call on their companies. During the time that I’m writing this article, in fact, I’m also interviewing for manufacturer representatives in several major marketplaces.

As one might expect, I’ve heard a lot of comments about the value of rep firms, and many of them are quite predictable: “Useless”…” “Reptiles”…

They show up the last couple of days of the month looking for orders, as if I were purposely hiding any business I could give them”…”I have a rep in my territory?” And then, of course, there are the negative comments from the dealers.

All kidding aside, once upon a time I counted myself as one of the many that questioned the value of using manufacturer representatives.

They handle too many lines. They don’t know enough about the products and/or programs. They don’t have enough technical expertise. They can be hard to get a hold of when you really need them. Their motivation (to maximize the rep firm’s income from each account) may be contradictory at times to a manufacturer’s vision and strategy. And yet, here I am traveling all over North America looking for the reps that are the best match with my company. With all the negative comments about sales reps, why bother?

One answer comes to mind, and only one: with the right sales rep firm matched up with the right manufacturer, when it works, it works really well. “Really well” from a manufacturer’s standpoint normally means sales increase and the dealers remain happy. But from the perspective of a custom installation firm, the phrase should mean only one thing: your company’s profits increase. By the end of this article you will better understand the role of a manufacturer’s representative and, more importantly, how you can profit handsomely from the efforts and activities of the better manufacturer sales reps in your marketplace.

There are only two main reasons why manufacturers hire reps. First, a rep acts as a buffer by handling marketplace decisions (a.k.a. “conflicts”). This way, as a dealer, you are never sure if the manufacturer or the local rep who handles the marketplace is responsible for bonehead decisions. Secondly, manufacturers hire reps to increase sales. In general, whenever there is a conflict between the first and second reason, the second reason wins. In other words, given a choice between increasing sales or decreasing conflicts, increasing sales tends to win. Not all the time, but most of the time, with most manufacturers.

Being a rep is like riding a gravy train, right? You don’t have to work hard and the money keeps on coming in. Well, not exactly. Let’s start with the part where I said, “the money keeps on coming in.” For a moment, let’s pretend that the institution of marriage in North America was modified such that at the end of each month your marriage expired, but automatically was renewed providing that both partners were happy with the previous month’s relationship. One might suspect that over the course of a few years there would be more than one occasion where one or both partners might say “Forget this!” and throw in the towel, thus in turn driving up the divorce rate even higher than it already is.

Such is the dilemma of the typical manufacturer’s rep. Their “contract” (if you can call it that) is normally for 30 days, automatically renewable unless terminated. This is somewhat of an antiquated, fiefdom model but has proven over the years to be highly effective in keeping a rep focused on the prime objective-keeping the manufacturer’s line, thus ensuring increasing sales in the coming years (the order of the words is correct).

So, you don’t think your rep knows enough about a particular new product or program to your satisfaction? Maybe you should put yourself in their shoes. How much time would you put into keeping a client happy if that client also insisted on having the flexibility to substitute their own equipment just moments before you were getting ready to order it, with no requirement to pay you for anything other than your time you had already expended creating the equipment list? It would even be worse if they got to keep the wiring diagram-the document that showed how everything fit together. Until more manufacturers move to multi-year, self-renewing, performance-based contracts that encourage substantial commitment on the part of a rep, you must be realistic in your expectations of what your reps can be expected to know.

Most reps run the risk of being made, as they say in Australia, “redundant” with no recourse other than to collect commissions for maybe one more month, depending on the circumstances under which they were terminated.

They find the right dealers; they get them signed upon all the right programs, and in general create a roadmap to success for the manufacturer, but with no guarantee that they will get to reap the benefits. Would you voluntarily agree to a similar relationship with your clients?

As far as not having to work hard goes, the typical rep principle actually has a lot to do. Every manufacturer wants more time and better results. No two manufacturer’s programs are the same, similar to back in the days when every

CRT projector manufacturer had different ways to converge their products. Manufacturers add and delete accounts, often without the knowledge or input of the rep in the territory. There are the obligatory sales calls with the national or regional sales managers (the look on a rep’s face when all your employees pretend they have never seen the rep before and have no idea which lines s/he represents is precious). Commission statements are often very late and unintelligible, similar to when your clients sign checks with red ink and the amounts are indecipherable. There are trans-shipping “rat bastards,” employees who leave and steal lines and the conflicts caused by mergers and acquisitions of competing or similar companies. In conclusion then, maybe it isn’t so easy being a manufacturer’s rep.

Let’s get right to the point. How does all of this knowledge help your company increase sales and ultimately profits? Like it or not, your company helps pay for every manufacturer rep that handles a company whose products you sell. In a way, each and every rep is a salesperson that you are paying for to the tune of 2 to 14-plus percent of the purchase price of the product.

Now that you know it isn’t as easy at it looks, your goal then needs to be a simple one: how can you make sure that your company is getting the equivalent value for which you are really paying? Stop complaining about how much commission a rep makes and start figuring out how you can get the equivalent value instead. Here are my top five suggestions for getting your money’s worth from your manufacturer reps:

1. Insist on getting more than your fair share of training. Your manufacturer’s rep doesn’t have to be the one doing the training, but s/he can set up the arrangements and lobby for the best trainers that each manufacturer has to offer. Say yes all offers -sales, programming and installation. Remember that the more time a rep spends with your company, the less time they can spend with your competitors. Training is knowledge, knowledge is power, and you know how the rest goes.

2. Most reps cover a wide geography, well beyond your immediate market area. They come in contact with other companies like yours, firms that are similar in size and philosophy and vision. Ask your reps to put you in contact with one or two other companies that are not immediate competitors but instead might be willing to share ideas that have worked for them in their marketplace. If you are a valuable account, your representative will go the extra mile in gathering information and contacts you can use.

3. Ask for “pass-along” leads. Some manufacturers share their leads generated by advertising, the Internet, etc. with their reps. Providing these leads is not a conflict of interest. Leads given to a rep that calls on you by a manufacturer whose products you don’t sell yourself can be turned into potential new business (but only if you ask).

4. A good rep talks to everyone within an organization -the receptionist, project managers, outside sales, installers and purchasing. Ask your reps to help you keep the pulse of your organization.
Don’t ask them to share information shared in confidence, but you can ask them what the other employees are thinking and feeling about themselves and their jobs. Remember that the people who make up your company are the company, and any information that helps make your firm a better place to call home isvery valuable indeed.

5. I’ve saved the best one for last. Remember the movie City Slickers with Billy Crystal and Jack Palance? Want to know what’s the “one thing,” per Jack Palance? Just ask. Ask each of your reps what it is that they are doing or will be doing in the near future for your company that is worth the commissions they receive. After all, you are helping to pay their salary. If they’re one of my reps, they’ll be able to answer that question, at least for my company.

A good rep is a tremendous asset to the marketplace.

You can help make the reps that call on you better by following through on your promises, advertising and merchandising more and in innovative ways to help generate demand, and executing the manufacturers’ programs. Likewise, if your rep is doing a poor job for you, you and the manufacturer are more at fault than the rep firm. Take some responsibility to help make the situation better.

Remember that good accounts help make good reps.

Rick Schuett ([email protected]) is VP of sales & marketing for Acoustic Innovations, and now believes he might have been a manufacturer’s rep in a previous life.