A BETTER-THAN-EVER RESPONSE TO THE COMPETITIVE PRESSURES FACING TODAY’S TOP EXECUTIVES
As the leaders of corporate America react to the constant pressure for greater profits and faster buildup of shareholder equity, an old solution has quietly been taking on new relevance. To better focus on their core competencies, more companies are recognizing outsourcing as a more effective and economical way to perform many functions—not just security, plant maintenance, payroll, and human resources, but even such complex activities as purchasing and field sales. The trend is visible today in mega-billion dollar worldwide companies like IBM, Maytag, or 3M, as well as in startups and companies with more limited resources. Professional field salespeople who are not on the company payroll, and who don’t get paid until they actually sell something, are now more than ever the choice of companies that had not previously chosen the independent manufacturers’ representative route.
The surge toward outsourcing field sales to professionals probably has as many roots as there are manufacturers moving in this direction. Performancebased compensation may be a buzzword today in the executive suite, but it’s been an ongoing reality in the world of sales for decades, if not centuries.
Companies with adequate resources to fund captive sales organizations are newly stimulated to recruit manufacturers’ representatives as a practical approach to downsizing. Diversification into multiple markets and specialized distribution channels leads others to outsource their field sales. They thus explore new opportunities without the major financial commitment involved in building, training, and maintaining their own niche market sales forces. The opportunity to lower overhead and to standardize sales costs has convinced many manufacturers to utilize representatives even when sales volume would cover the expense of a dedicated sales force. With outsourcing, a company can cost-effectively deploy a multifaceted team instead of a single individual, and gain greater results for fewer dollars.
Today’s sophisticated manufacturers’ representative is professional, multifaceted, technologically adept, and everywhere. Today he may be traveling around the territory to call on customers, tomorrow, around the world to meet with principals. And as the rep will be quick to remind the sales managers he reports to (and their CFOs), he buys his own tickets and pays his own expenses.
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18 Benefits of Outsourcing Field Sales
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| 1 |
Predictable sales costs that go up and down with sales |
| 2 |
Standardized sales costs |
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Lower sales costs |
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Immediate market access |
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Broader market penetration |
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More experienced sales force |
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Multifaceted, multiskilled sales team |
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Wider, deeper coverage |
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Stronger local relationships |
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Reduced sales force turnover |
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Training required only on product |
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Closer-to-the-customer forecasting |
| 13 |
Better market intelligence |
| 14 |
Increased sales |
| 15 |
Knowledgeable advice and information—hear it like it is! |
| 16 |
Risk-free exploration of new market niches |
| 17 |
Problem-solving approach outperforms product selling |
| 18 |
Vested partner in manufacturer's success |
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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 noncompetitive 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. Manufacturers’ representative firms come in all shapes and sizes, from small defined-focus firms to organizations handling all facets of marketing for their principals, with multiple-staffed offices and 500 or more on staff. Big or small, these firms never forget that their income is directly tied to personal productivity. They have been quick to adopt the efficiencies afforded by e-commerce and field sales automation—often ahead of their principals—providing sophisticated opportunity tracking as well as instant access to all customer and factory data—inventory status, order status, customer history, etc. The value that manufacturers’ representatives bring—both to those they sell to and those they sell for—
THE VALUE THAT MANUFACTURERS’ REPRESENTATIVES BRING–BOTH TO THOSE THEY SELL TO AND THOSE THEY SELL FOR– EMERGES IN GREAT MEASURE FROMTHE SYNERGY CREATED THROUGH THE REPRESENTATION OF MULTIPLE LINES.
Their product portfolios allow manufacturers’ representatives to present broad-based solutions to customer problems, rather than the price-and-delivery responses typical of single-product selling. Their consultative approach not only opens the door for other lines, but also adds value and stimulates a partnering relationship with the buyer, as the purchase progresses through an entire project.
There’s even more benefit to synergy: the added market potential it offers, the greater market share it creates, and the greater speed of market penetration it facilitates. 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 entrée 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 successes 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.