The advantages of using an Independent Manufacturer’s Representative over a direct sales force in a competitive ProAV market.

By Rick Williams
President, Central Marketing, Inc.

As a ProAV integrator you have heard it many times when you answer the phone, “Hi, I am John Smith with ABC Marketing, and I want to make an appointment to see you and your sales staff.” Did you ever stop to ask, “Gee, this guy doesn’t work directly for a manufacturer, why do I want to waste my valuable time with him?”

No, in fact, it is the same familiar voice you have been hearing for many years for several product lines you sell. It is the Independent Manufacturer’s Representative.

You know who these reps are. They have company names that end with words like “Associates,” “Marketing” and “Representatives.” Did you ever stop to think just what they actually do besides call on you for meetings? The answer is simple: Multi-line manufacturers representatives help your business grow.

The role of the independent manufacturer’s representative is an important part of any successful industry, especially the ever changing ProAV Market. With margins getting tighter, more dealers entering the ProAV business and the influx of new Asian manufacturers, the “Reps” have become the most cost-effective and comprehensive way to do business.

Let’s take a look at the two models that a manufacturer has for field representation; the direct sales force and the independent representative:

A direct sales force is usually comprised of four regional managers (or more) typically handling up to 12 states each. They have an Atlantic, Eastern U.S., Western U.S. and a Pacific Regional Manager position. These managers have a base salary, commissions, health benefits, a company car and travel expenses, 401K, profit sharing, paid vacations and bonuses. If you add up these costs and include annual raises, this can conservatively total more than $250,000 per year in each region, an expensive proposition for any company. A direct sales person does have some obvious advantages; excellent training, great product knowledge and is focused on sales in their region. But the downside is that a direct salesperson only averages about 22 months on the job before either getting promoted, taking a position with a competitor or getting downsized out. Finding and training a replacement can also be very costly, and the down time in that region can give the competition time to take over market share.

The Independent Representative’s Firm handles about 13 to 15 states, with each territory manager responsible for 3 to 4 states (some firms even fewer). The rep firm is paid a fixed cost of gross sales in the territory that ranges from 4 to 8 percent and the rep firm pays all of its own expenses. In fact, the rep firm usually doesn’t get paid until the manufacturer receives payment first. If this isn’t enough good news for the manufacturer here is some more:

1.) Immediate Market Access: Independent Reps get the products to a mature market and an established dealer network literally overnight. Because of the constant traveling to see dealers, it is easy to get the product line in front of the dealers, sometimes during meetings for other product lines.

2.) Experienced Sales Force: Most rep firms have been in the business for many years, are well trained and pay attention to the dealers needs. They have watched the dealership grow and understand the way the dealer does business. The rep will customize his approach to meet each dealer’s needs.

3.) Multi-skilled Sales Team: They can work with consultants, engineers, sales people and purchasing agents to help the entire process from specification to after-sales support.

4.) More Territory Coverage: With more “feet-on-the-street,” the rep firm can visit dealers more often. In fact, with several territory managers on the job, they can cover several local and dealer trade shows simultaneously. The rep also provides demo gear and goes on-site with the dealer to help close the sale.

5.) Longer, Stronger Relationships: Most rep firms have been around for many years doing business with the dealers and have a long trusting, mutual business relationship. The dealers know that the rep has a vested interest in the long term relationship and brings good quality lines that the dealer can make money on, lines that might otherwise be overlooked.

6.) Reduced Sales Turnover: The reps live in the states they do business in. They tend to stay employed longer. The dealer likes to know that the same person will be there to answer the call for support.

7.) Better Market Intelligence: Since the reps all live in the same communities with the dealers, they have a better understanding of local economics, they know what schools are buying and what new businesses are moving in and growing.

8.) Better Competitor Intelligence: Dealers tend to share information with reps about competing manufacturers. This comes with years of working along side the dealer. The reps work closely with consultants to get the products specified and refer them to the dealers that sell the products.

9.) Risk-free Exploration of New Markets for the Manufacturer: With a fixed cost to the manufacturer, the rep can easily hit new markets with no added cost to the vendor.

10.) Vested in Success of the Manufacturer: The independent rep wants the vendor to succeed as it is his livelihood. The rep firm will do many types of marketing campaigns to the dealers all at the cost of the rep.

11.) Synergy With Other Lines: A multi-line rep usually sells many lines that complement one another, offering a complete solution to the dealer. This helps push the door open to new lines, and gives the dealer a single source of support from a trusted colleague.

12.) 30-Day Rep Agreements: A rep agreement with a manufacturer gives either party a 30-day escape route. This attractive feature allows the flexibility for the vendor to seek new representation, or to hire a direct sales force anytime, all without any severance pay! There is also a non-compete clause in the agreement that prohibits the rep from carrying two similar lines.

New manufacturers entering a market will find that the independent representative is a quick way to get “instant relationships” for their product lines. These rep organizations understand that sometimes they are hired just long enough to “blaze a trail” for them and sign up dealers. Other manufacturers, however, like the comprehensive support of the rep firm so much they will keep them on for 20 years or more as their permanent national sales force. I have many stories of manufacturers starting off using reps, terminating them to hire a direct sales force, only to turn back to reps because of huge sales and market share declines with the direct salespeople.

Independent rep firms usually have inside support people as well. These people process POs to make sure they are correct before sending them on. They keep a database of all the dealers and help the manufacturer recognize potential credit issues and help collect payments when necessary. They watch all orders from receipt to delivery and help the dealer and the manufacturer solve shipping problems. The dealer that buys several lines from one independent firm can count on instant support from one person, instead of multiple contacts.

The role of the independent Representative has changed over time. They wear the logo shirts of the manufacturers when doing trade shows and make appointments with the dealers to take them around the trade show floor to introduce them to new products. They train the dealer’s sales team on how to better sell the product line. They offer to help write bid specs, design a system and get bid pricing for them. They become an important part of the dealer’s business model.

The use of independent manufacturer’s representatives is growing. In fact there are nearly 30 associations in the U.S. alone that provide ongoing resources for reps and manufacturers to find each other. But the rep is not relegated to just the ProAV market. Food companies, pharmaceutical companies, auto parts manufacturers, clothing companies and many others too numerous to list here all use Independent Representatives as the most cost effective way to get to market.

So the next time John Smith from ABC Marketing calls you to make an appointment, know that he really is a part of your business, for many years to come.

Rick Williams is Principle and President of mid western based Central Marketing; a 15-state Multi-Line Manufacturers Rep Firm established in 1974.

E-Mail: rick@audiovisualreps.com

Web Site: http://www.audiovisualreps.com

and finally,

The Underappreciated Manufacturers’ Rep
by Phil Zarrow
(From Circuit Assembly Magazine, posted by permission from author)

Be kind to the reps. They are vital to the chain.

While I usually discuss SMT processes, equipment and materials in this space, every now and then it is important to take note of the human aspect. One of the most overlooked and, in many cases, underappreciated personnel is the manufacturers’ representative.

If you’ve ever been in a position where you were responsible for procuring equipment, tools or materials for a process line, you have no doubt dealt with one or several manufacturers’ representatives.

A manufacturer may elect one of several ways to sell their product in a particular region. Larger companies, for instance, may employ a direct sales force, in which their employee calls on buyers. More common in our niche, however, is the manufacturers’ rep. Within this approach, the principal may have national and regional (and sometimes, district) sales managers, but the actual “street feet” are part of a third-party sales organization, aka a “rep.” The rep is the person with whom you communicate through most of the sale.

In most arrangements in North America, the manufacturers’ rep does not take possession of the equipment being sold and is therefore, not a legal agent of the manufacturer. Also, in North America, service typically is provided directly by the factory’s organization, seldom through the rep. Outside North America, manufacturers’ reps typically take possession of the equipment and re-sell it to the end-user and also provide most of the service in their territories.

As mentioned, some equipment and materials manufacturers have their own direct sales forces. Their salesmen are employees of the respective company, responsible for selling only the products manufactured by their division. Other companies you may have worked with, including ACE, AIM, Autosplice, Cookson/Alpha Metals, DEK, ECD, Europlacer, Fuji, Heller, Indium, Juki, Kester, KIC, Mydata, Panasonic, RMD, Siemens, Speedline Technologies, Vitronics-Soltec and many others rely on third-party rep organizations to handle customers in the field. These rep firms are independent organizations that carry a number of lines. For each manufacturer represented, they report up to a regional sales manager of that supplier. The firms earn commissions from the sale of equipment and materials.

Manufacturers’ reps themselves may once have worked in sales or marketing at a manufacturer, perhaps in a management position. Others may have come from manufacturing or process engineering positions in our industry. Others may be starting their careers in sales, while some reps I know seem to have spent a lifetime in their roles.