Outsourcing Field SalesOutsourcing Field Sales
A Better-Than-Ever ResponseA Better-Than-Ever Response
to the Competitive Pressuresto the Competitive Pressures
Facing Today’s Top ExecutivesFacing Today’s Top Executives
Presented by thePresented by theManufacturers RepresentativesManufacturers Representatives
Educational Research Foundation Educational Research Foundation
Corporate pressures and Corporate pressures and responsesresponses
Greater profitsGreater profits Faster buildup of shareholder equityFaster buildup of shareholder equity Focus on core competenciesFocus on core competencies Outsource - security, maintenance, payroll, human Outsource - security, maintenance, payroll, human
resources, purchasing - and now resources, purchasing - and now field salesfield sales
Roots of the trend to outsource Roots of the trend to outsource field salesfield sales
Performance-based compensationPerformance-based compensation Practical approach to downsizingPractical approach to downsizing Diversification into multiple markets and specialized Diversification into multiple markets and specialized
distribution channelsdistribution channels Explore new opportunities with minimal investment in Explore new opportunities with minimal investment in
sales infrastructuresales infrastructure Lower overhead, standardized sales costsLower overhead, standardized sales costs
Benefits of Benefits of outsourcing field salesoutsourcing field sales
1. Increased sales1. Increased sales 2. Predictable sales costs that go up and down with 2. Predictable sales costs that go up and down with
salessales 3. Standardized sales costs3. Standardized sales costs 4. Lower sales costs4. Lower sales costs 5. Immediate market access5. Immediate market access 6. Broader market penetration6. Broader market penetration 7. More experienced sales force7. More experienced sales force
Benefits of Benefits of outsourcing field salesoutsourcing field sales
8. Multifaceted, multi-skilled sales team8. Multifaceted, multi-skilled sales team 9. Wider, deeper coverage9. Wider, deeper coverage 10. Stronger local relationships10. Stronger local relationships 11. Reduced sales force turnover11. Reduced sales force turnover 12. Training required only on product12. Training required only on product 13. Closer-to-the-customer forecasting13. Closer-to-the-customer forecasting 14. Better market intelligence14. Better market intelligence
More benefits ofMore benefits ofoutsourcing field salesoutsourcing field sales
15. Knowledgeable advice and information - hear it15. Knowledgeable advice and information - hear it
like it is!like it is! 16. Risk-free exploration of new market niches16. Risk-free exploration of new market niches 17. Problem-solving approach outperforms product17. Problem-solving approach outperforms product
sellingselling 18. Vested partner in manufacturer’s success18. Vested partner in manufacturer’s success
What is a What is a manufacturers’ representative?manufacturers’ representative?
Independent professional provider of field sales and Independent professional provider of field sales and marketing services to manufacturers or suppliersmarketing services to manufacturers or suppliers
Typically handle a portfolio of related but non-Typically handle a portfolio of related but non-competitive linescompetitive lines
Work under contract in a defined territory on an Work under contract in a defined territory on an exclusive basisexclusive basis
Income directly tied to productivityIncome directly tied to productivity
The traits of today’s The traits of today’s manufacturers’ representativemanufacturers’ representative
ProfessionalProfessional MultifacetedMultifaceted Technologically adeptTechnologically adept UbiquitousUbiquitous Come in all shapes and sizes, from small defined-Come in all shapes and sizes, from small defined-
focus firms to multiple-office firms handling all facets focus firms to multiple-office firms handling all facets of marketingof marketing
Bringing value to Bringing value to buyers and sellersbuyers and sellers
Portfolio synergiesPortfolio synergies Broad-based solutionsBroad-based solutions Consultative approachConsultative approach Partnering relationship with customerPartnering relationship with customer Greater speed of market penetrationGreater speed of market penetration Entrée through portfolio leverageEntrée through portfolio leverage Basic economics of sales before sales costsBasic economics of sales before sales costs
What manufacturers’ What manufacturers’ representatives are notrepresentatives are not
Not an additional channel - they are the Not an additional channel - they are the manufacturer’s sales force paid differentlymanufacturer’s sales force paid differently
Not middlemen - they neither take title nor mark up Not middlemen - they neither take title nor mark up costscosts
Not distributors - and very different from distributorsNot distributors - and very different from distributors
DifferencesDifferences
REPS DISTRIBUTORS REPS DISTRIBUTORS Sell only in a defined territorySell only in a defined territory Do not handle competitive Do not handle competitive
lineslines Sell as agents; do not take Sell as agents; do not take
possessionpossession Compensated largely by Compensated largely by
commission on salescommission on sales
May sell anywhereMay sell anywhere Often handle competitive Often handle competitive
lineslines Buy for resale; take Buy for resale; take
ownershipownership Compensated by margin of Compensated by margin of
sale price over costsale price over cost
More differencesMore differences
REPS DISTRIBUTORSREPS DISTRIBUTORS Typically handle 12 to 14 Typically handle 12 to 14
lineslines Typically entrepreneurial, Typically entrepreneurial,
owner-operatedowner-operated Add value through design-in, Add value through design-in,
application engineering, application engineering, product synergyproduct synergy
Often handle several Often handle several hundred lineshundred lines
Large firms often publicly Large firms often publicly tradedtraded
Add value through time-Add value through time-place utilityplace utility
More differencesMore differences
REPS DISTRIBUTORSREPS DISTRIBUTORS Interface with Interface with
distributors, refer orders distributors, refer orders to distributors, receive to distributors, receive commission on sales commission on sales through distributorsthrough distributors
May warehouse (for a May warehouse (for a fee), but do not fee), but do not maintain inventorymaintain inventory
Rely heavily on rep for Rely heavily on rep for referrals, training, referrals, training, engineering supportengineering support
Maintain inventoryMaintain inventory
The big differenceThe big difference
REPS DISTRIBUTORSREPS DISTRIBUTORS Focus on customer Focus on customer
needsneeds
Focus on selling what’s Focus on selling what’s on the shelfon the shelf
More than a source, a resourceMore than a source, a resource
High caliber personnel - entrepreneurial, competitive, High caliber personnel - entrepreneurial, competitive, goal-orientedgoal-oriented
Success tied to contacts in the territory rather than Success tied to contacts in the territory rather than the corporate hierarchythe corporate hierarchy
Rooted geographically, creating stable relationshipsRooted geographically, creating stable relationships Saves time for the buyer by presenting multiple lines Saves time for the buyer by presenting multiple lines
in a single callin a single call
Win - Win - WinWin - Win - Win
The Customer Benefits TooThe Customer Benefits Too
Bringing value to the customerBringing value to the customer
Stable relationship with someone who knows the Stable relationship with someone who knows the corporate culturecorporate culture
Long-term commitment to the territoryLong-term commitment to the territory Multifaceted resourceMultifaceted resource More efficient (multiple line) sales callsMore efficient (multiple line) sales calls Consultative sellingConsultative selling Bridges intra-company communications gapBridges intra-company communications gap
More customer benefitsMore customer benefits
Advocacy, ability to secure exceptions to supplier Advocacy, ability to secure exceptions to supplier policypolicy
Help in order strategy, distribution or directHelp in order strategy, distribution or direct Perspective on market conditions and trendsPerspective on market conditions and trends Solutions approach -- looking at the forest, not the Solutions approach -- looking at the forest, not the
treestrees
What happens when buyer needs What happens when buyer needs diverge from seller’s SOP?diverge from seller’s SOP?
Rep has more at stake with other products sold to the Rep has more at stake with other products sold to the company, and thus will fight harder for needed company, and thus will fight harder for needed accommodationsaccommodations
Rep has more freedom than direct salesperson to Rep has more freedom than direct salesperson to carry the fight to the topcarry the fight to the top
The EconomicsThe Economics
Comparing commissions with the cost of hiring some-Comparing commissions with the cost of hiring some-one full time is misleadingone full time is misleading
1. It ignores costs borne by representatives that 1. It ignores costs borne by representatives that would transfer to the manufacturerswould transfer to the manufacturers
2. It ignores administrative and facilities costs in the 2. It ignores administrative and facilities costs in the territory and the home officeterritory and the home office
3. It overlooks the likely faster growth a team can 3. It overlooks the likely faster growth a team can bring compared to one personbring compared to one person
What costs does the rep cover?What costs does the rep cover?
Finances the sale, usually receiving commission only Finances the sale, usually receiving commission only after goods are shippedafter goods are shipped
Pays for recruiting, training, employee benefits, Pays for recruiting, training, employee benefits, travel, client entertainment, automation, order entry, travel, client entertainment, automation, order entry, and moreand more
Handles extra roles in expediting, returns, trade Handles extra roles in expediting, returns, trade shows, administrationshows, administration
Eliminates manufacturer’s legal exposuresEliminates manufacturer’s legal exposures
Myths and misconceptionsMyths and misconceptions
Myth: The distributor can handle the whole field Myth: The distributor can handle the whole field sales processsales process
Truth: Distributor function is different, logistical Truth: Distributor function is different, logistical instead of problem-solvinginstead of problem-solving
Truth: Distributors, stocking competitive brands, Truth: Distributors, stocking competitive brands, cannot be one manufacturer’s advocatecannot be one manufacturer’s advocate
Truth: Reps and distributors work as teamsTruth: Reps and distributors work as teams
Myths and misconceptionsMyths and misconceptions
Myth: The Internet, EDI and eCommerce render Myth: The Internet, EDI and eCommerce render personal contact superfluouspersonal contact superfluous
Truth: they support sales by delivering and gathering Truth: they support sales by delivering and gathering information, so “face time” is more productiveinformation, so “face time” is more productive
Truth: High tech can’t replace high touch in creating Truth: High tech can’t replace high touch in creating demand, negotiating contacts, analyzing solutions, demand, negotiating contacts, analyzing solutions, dealing with exceptionsdealing with exceptions
Myths and misconceptionsMyths and misconceptions
Myth: Reps don’t take a long-term perspectiveMyth: Reps don’t take a long-term perspective Truth: It would be reasonable not to, given the reality Truth: It would be reasonable not to, given the reality
of 30 day termination clausesof 30 day termination clauses Truth: Reps invest in their territories and clientele, Truth: Reps invest in their territories and clientele,
and in sales that develop slowlyand in sales that develop slowly Truth: Reps Truth: Reps needsneeds long-term mutually profitable long-term mutually profitable
relationships with principalsrelationships with principals
Myths and misconceptionsMyths and misconceptions
Myth: Reps are independent and difficult to Myth: Reps are independent and difficult to controlcontrol
Truth: Independent is a legal term that protects Truth: Independent is a legal term that protects manufacturersmanufacturers
Truth: The best control is from directing, motivating, Truth: The best control is from directing, motivating, and partnering with repsand partnering with reps
Truth: Reps and manufacturers need to feel inter-Truth: Reps and manufacturers need to feel inter-dependentdependent
Advancing the professionAdvancing the profession
Enhancing management skills for reps and Enhancing management skills for reps and manufacturer personnel who manage repsmanufacturer personnel who manage reps
Disseminating information and advancing public Disseminating information and advancing public understanding of the rep systemunderstanding of the rep system
Three-year Certification program shows commitment Three-year Certification program shows commitment and demonstrates achievement and demonstrates achievement
Reps offering new services, participating in new Reps offering new services, participating in new selling paradigmsselling paradigms
Leading indicators of skilled rep Leading indicators of skilled rep firmsfirms
Have strategic plansHave strategic plans Strong territory relationshipsStrong territory relationships Able to share intimate market knowledgeAble to share intimate market knowledge Technologically currentTechnologically current Active in industry associationsActive in industry associations Network for best practicesNetwork for best practices CPMR certified management CPMR certified management
Information sources about repsInformation sources about reps
Manufacturers Representatives Educational Manufacturers Representatives Educational Research Foundation Research Foundation www.mrerf.orgwww.mrerf.org
Agency SalesAgency Sales Magazine (MANA) Magazine (MANA) www.manaonline.orgwww.manaonline.org
Industry-specific rep organizations, such as Industry-specific rep organizations, such as (person using (person using presentation should put in the appropriate association name)presentation should put in the appropriate association name)
Reps -- More than a sourceReps -- More than a source
Synergy of multiple linesSynergy of multiple lines Economy of shared costsEconomy of shared costs Permanence of shared costsPermanence of shared costs Intimate knowledge of customersIntimate knowledge of customers Solutions orientationSolutions orientation Perspectives they bring to principalsPerspectives they bring to principals Prosper only by creating prosperity!Prosper only by creating prosperity!
