United Association Manufacturers’ Reps

[Pages:22]United Association Manufacturers' Reps

(949) 240-4966 Fax: (949) 240-7001 Address: 34071 La Plaza Ste 220, POB 986, Dana Point, CA 92629

Connecting Manufacturers & Reps Since 1965

Marketing Through Manufacturers' Representatives

I.

Definition of Manufacturers' Representatives

II. Choosing to Use Sales Reps A. Are Independent Sales Reps For You? B. AdvantageBsuoilfdiSnegllMinagteTriharlsou&gPhroIndducetpsendent Reps

C. Disadvantages of Using Independent Reps

III. Developing A Strong Rep Sales Force A. Selecting The Ideal Rep B. Guidelines for Rep Selection/ Questions to Ask C. Code of Ethics D. Determining Territories

IV. Manufacturer - Rep Relationships A. What Reps Expect Of Manufacturers C. What Manufacturers Expect of Reps

V. Commissions A. Establishing A Commission Rate B. When & How To Pay A Rep

VI. Contracts A. Creating a Contract B. Termination

VII. Motivating Your Reps A. Sales Tools B. National Advertising C. Communication D. Pay on Time

VIII. Foreign Manufacturers Working With US Reps

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I. Definition of A Manufacturers' Representative:

First let me explain what is a manufacturers' rep? ( To facilitate my speaking, "he" will be used to mean either "he" or "she".

A manufacturers' rep is quite different from a regular company sales person. Manufacturers' reps provide in-the-field representation for small to medium-sized companies.

A representative is a self-employed business person, who works strickly on a commission basis and gets paid only when sales are made. A rep firm can be 1 person (generally referred to as "independents") or multi-person agency (up to 50 or more reps involved) with showrooms in major trade centers.

A representative represents more than one line. Usually 5 to 25 and sometimes many more. They do not buy products and then resell them- that is the job of a distributor. Reps function as middlemen who promote a manufacturer's products to companies or retailers and, when successful, receive a commission paid by the manufacturer. If reps don't sell, they receive no money.

A representative differs from an in-house sales person in that the rep does not work for you as an employee and you are not their boss. He just represents you.

A representative usually gets paid by his manufacturers (principals) on about the 10th or 15th of the month covering all goods shipped into his territory the previous month. (more about this later)

A representative usually tries to specialize in one general field; however, this can vary with representatives and situations.

A representative covers a definite territory, and/ or has well defined accounts.

A representative usually has his lines on an exclusive basis. He is the only representative with the line for his type of accounts and his prescribed territory.

A representative is a free and independent agent, and as such can make his own plans as to when and where he wants to work at any given time.

A representative may expand and have other salespersons working with him, called either associates, or sub-reps.

To summarize: a manufacturers' representataive is a self-employed business person - representing more than 1manufacturer strictly on a commission basis.

II. Selecting A Rep Sales Force

Business owners who market their products or services via salespeople have two basic choices: 1) hire their own direct sales force (typically an expensive proposition) 2) choose independent salespeople to sell on their behalf. For many smaller operations, using sales reps makes the most economic sense)

Manufacturers' reps, just by the nature of who they are and how they operate, are ENTREPENUERS! They are creative, self-motivators, achievement/ goal oriented, and they excell in their field of selling. BUT you have to make the decision whether independent manufacturers' reps are for you or do you feel a direct employeed sales person is the best way to go. Hopefully, I will be able to help you make that decision

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Whether it is better to use your own sales people (direct, full time people) or Manufacturers' Representatives, will depend primarily on the follow factors:

Cost.... Degree of Control Required... and Need for Speed and Depth of Penetration of your market.

A. COST: When you hire or add salespeople, an important consideration is cost. A considerable amount of money goes into training a company salesperson; plus cost of sales meetings & direct selling expenses and salaries. You also have to consider social security taxes, hospitalization and other insurances, vacations, retirement, profit sharing, as well as other benefits. In addition, your sales support cost for managing and directing the sales force.

His pay, if you want to hold him, has to be a living wage regardless of results. In an established territory, as sales go up, the results should more than pay his salary and travel expenses. However, the cost of maintaining a direct sales person may sometimes mean increasing his territory - with diminishing penetration and loss of sales because of less frequent calls on customers.

Sales rep: His pay is a percentage of sales. He only gets paid when he sells. He pays his own travel expenses. Either in opening up new territories or in maintaining sales coverage in territories with a limited yield, you pay for results at a fixed percentage. Territory coverage is concentrated in a given geographic area.

B. CONTROL: With a direct sale person, you have complete control and direction of your own sales person. The rep is free to operate according to the terms of your agreement with him. If you exert too much control, then it could go over that line to "employee/ employer" relationship. When an independent sales rep represents you, he controls the approach to customers. In effect, they are his customers as much as they are yours, if not more. In many cases, his representation may prove to be as good as using your own salespeople - or better - because the rep can open doors for you by trading on his established relationships. He has already developed the rapport with buyers and developed a relationship.

C. SPEED OF ENTRY & DEPTH OF PENETRATION: How fast do you want to establish yourself in the market and how extensive do you want your coverage to be? The following questions may help you determine which approach is best for you.

1) Do You Know The Market? How well do you know the market you are trying to penetrate? Do you know it well enough to guide your sales personnel? Or will you be relying on them because you lack knowledge of certain territories? How often must the trade be seen? Can one salesperson handle all the calls at the proper frequency? Will several sales persons be needed because the area or the number of accounts is too big for one person to cover regularly? How quickly do you want to penetrate the market? (Someone with a knowledge of the field and personal contact with buyers will, of course, obtain this pentration more quickly than a new sales person).

2) What is the Selling Job Required? For example, in a given geographic area, does your company lag behind competition? How near are you to your estimatead share of the potential sales volume? What is your goal for that specific territory? If you had the best salesperson money could buy, could your goal be achieved?

3) Territory Potential: What is your present dollar volume in that territory? What does it cost to bring in that volume? What would your cost of sales be for achieving the desired sales volume?

4) Your Investment: How many dollars do you have to invest in building up a specific territory? Does this investment (for salaries, traveling expenses, and supervisery expenses) provide for a long enough period to enable even a mediocre salesperson to reach your objective? Do you have the funds to sell in the US with your own factory sales people?

To get a better perspective, let's look at some pros and cons of both approaches - the direct sales person vs manufacturers' reps.

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The advantages of using independent sales reps:

1 )They can give you immediate entry into a territory...often providing entry into major accounts which cannot be penetrated with a direct sales person. Manufacturers' Reps know the territory. They know the competition. The rep, with his experience, knows what is selling and what is not. A rep has contacts in the field and can often get product placement because he has the needed rapport with the buyers and previously worked with them. Good reps can be a "shortcut" into a market. They know who might buy your products and hopefully, have relationships with these buyers. A large candle manufacturer, called Nirvana Candles, Santa Cruz, CA, uses 13 independent sales organizations that collectively cover enough markets to represent 90 percent of the buying power of the United States. It took slightly more than a year to attain this level of market penetration, which would not have been possible with a direct sales force. 2) He can make regular calls on customers and prospects. 3) Reps can cover a wide geographic area much more economically than an in-house sales force. That's because they represent a number of manufacturers so their expenses are, in effect, spread over multiple vendors and not borne by just one, as is the case when a manufacturer has its own sales force. Your commissions go to cover just part of a rep's expenses and overhead. 4) He can provide quality salesmanship. 5) His cost is a predetermined selling expense - a percentage of his sales. 6) Reps are not paid unless they produce: Reps don't work on salary, only commission. With an in-house nonperforming salesperson, you pay salary until the employee quits or is fired; with an independent rep, you pay based entirely on performance. This lowers your financial risk. 7) Sales reps have their own reputations. If your rep has a good one, that helps you in the marketplace. 8) Reps are your eyes and ears in the marketplace. They will tell you about competitors' products, relate customer complaints and even provide insight into the market that might convince you to change your strategy. 9) Reps provide synergy. If a rep carries other products that complement yours, the rep can "package" both products together and make a sale, versus an in-house salesperson who has only your products to show a prospective customer. 10) Because reps carry more than one product line, they can economically call on small or out-of-the way customers.

The Disadvantage of Using Independent Reps

High on the list of negatives is the fact that:

1) Reps are not your employees and therefore you really cannot control them. You can't tell them what to do, who to visit, how much time to spend on your product line, what other products to carry or not carry, or even what sales pitch to use. 2) If and when you cancel the agent's contract, he may take many of your customers to a new client. 3) It's hard to motivate reps to push your product lines. The reasons so many product lines fall by the wayside include laziness on the rep's part, poor support of the rep by the manufacturer, and the fact that reps typically focus on the easiest sales or the most lucrative ones.

Some additional reasons given for choosing independent sales reps over salaried reps: Because your company.... 1) ...has only one product. Too expensive for you to market it on your own. 2) ...is bringing out a new product. 3) ...needs distribution on underpopulated,distant areas - doesn't make sense having a full time salesperson needs accessibility to prospective buyers in specific, narrow market areas. 4) ...wants to expand into new areas. 5) ... wants to maintain continuous representation in a given market.

Of course, above all these reasons to use independent reps...the single positive value reps have to offer at any time or place ......aggressive selling!

The bottom line: for any small to medium sized manufacturers, using independent reps is the fastest and most economical way to penetrate the US market!

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III. Developing A Strong Rep Sales Force

A. Finding and Choosing A Rep is the next big step! Here are some good sources for reaching reps...

1. Recommendations: from your customers. If you already know your customers or potential customers, they can often help you locate good rep agencies.

2. Word of mouth is an excellent way to find reps. Ask your reps about reps in other territories.

3. Trade Shows. If you participate in trade shows, this is another way to come in contact with reps. Reps visit trade shows not only to enhance their knowledge but to find other lines. Keep a record of these reps. We suggest not committing to a rep when they approach you for the first time. They obviously are selling you on themselves at this particular time. Do your homework. Don't rely so heavily on picking up reps at trade shows that you are disappointed with the experience of trade shows. Participation in US trade shows is a must, though. Either with your own booth or having reps represent your products in their own booths that they rent for the shows.

4.Trade Associations - such as ours. You get more reputable reps with recommendations of their performance. We work with you on a one to one basis. Personal consultation and selection of reps for a complete sales force throughout the United States. UAMR helps select the right reps for you and your products.

5. Newspapers/ Trade Publications: Giftware News, Gift & Decorative Accessories. Advertise under Reps Wanted Section

6. Internet- usually too much to figure out . Too difficult to dicipher

7. Consultants: usually charge up in the several thousand of dollars.

There are many things to consider when choosing a rep: 1) What product lines they represent? 2) What relationships they have with retailers? 3) Who their key accounts are ( chain stores, major accounts, small accounts, Hallmark Card stores? etc? 4) The longevity of the reps in the sales organizations. (manufacturers want long-term relationships with retailers so look for reps who are veterans in the market) 5) References. Call manufacturers represented by the rep.

B. Guidelines For Rep Selections/ Questions to Ask (list of questions you should get answers to..)

SUGGESTED MANUFACTURER'S CHECKLIST FOR SELECTING REPS

Important Points to Cover With A Prospective Manufacturer's Rep

I. Rep Firm Size

a. How many reps does your firm have?

b. Do you work with sub-reps?

c. Is the owner actively involved as a salesperson?

d. Do you have a showroom? How many showroom personnel? Do you have office personnel? How many?

e. Describe any long-range expansion plans.

f. Would you be willing to expand in order to accommodate a new account?

g. Is so, how would you go about it?

h. Is the rep firm a corporation, partnership or sole proprietorship?

i. How many offices do you have?

j. Do you have any plans for opening new offices?

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II. Growth Patterns a. How long has the firm been established? b. Describe your sales growth pattern during this time. c. What is your present sales volume? d. What is your sales volume per outside salesperson? e. What are your sales objectives for next year?

III. Territory a. Describe the territory covered by your firm. b. Are you willing to expand the territory? c. If so, how would you go about such an expansion?

IV. Product Line a. How many lines do you represent? b. Are your present lines compatible with ours? c. Do you feel there would be any conflict or competition? d. How many of your reps will actually be selling our products? e.. Would you be willing to change from your present product market? f. If so, how would you handle the new product line? g. What do you consider the minimum sales you need to justify handling our line?VII. Principals

V. Company Policies a. Describe your firm's program for sales staff compensation, benefit programs, and training. b. Do you have any special incentive or motivation programs? c. How do you monitor sales performance?

1. Sales volume 2. Effectiveness 3. Morale 4. Reputation 5. Reports d. Do you participate in trade shows? e. If so, what expenses would you expect the manufacturer to pay? d. Do you have a showroom? If so, what expenses would you expect the manufacturer to pay?

VI. Customers a. Describe the kinds of customers you currently are contacting. b. Are you compatible to our product line? c. Who are your key accounts?

VII. Principals a. How many principals are your currently representing? b. Do you have a line card? c. Who are your key accounts?

VIII. Marketing and Sales Promotion a. What media do you use to promote your principals' products? b. If you use direct mail, how many customers are on your mailing list? c. What type of brochure do youuse to describe your agency?

VIX. Special Services

a. Can you rep firm offer services such as writing quotes, making proposals and helping with customer education?

b. Do you have a sales reporting system?

c. If so, are present records available?

d. Do you consider your firm a sales and service organization?

e. What do you consider your rep firm's major strengths? 6 UAMR

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IX. References: Banks, Principals, Customers

As you interview, ask yourself... "How does this rep feel about my line? Is he/ she enthusiastic about it? As you talk more with this potential rep for your product, what is your "gut" feeling? Is there chemistry between you and the prospective rep?

C. Code of Ethics: It is important for reps and manufactures to follow a strict code of ethics in ordr to maintain a

strong relationship. The following is the UAMR Code Of Ethics., which was established in 1965 and is currently recommended for all UAMR members.

UAMR Code of Ethics

Be proud of your profession and conduct yourself like a real professional

Representative Responsibilities

? Accept only lines you feel you can do justice to. ? Give each manufacturer, principal, your fair share of time. ? Do not accept conflicting lines. ? Resign a line when you feel you can no longer do justice to it.

Manufacturer, Principal Responsibilities

? Give your representative a fair contract. ? Honor your contract and sale agreements to the letter. ? Give your representative all the sales tools necessary to do an effective selling job. Do not make constant,

unreasonable requests of your representative. They have other principals to satisfy, and their income comes only from selling. ? If you receive a letter of solicitation for your line, send a copy of the letter, and your reply, to your current representative involved. ? Don't turn over your line to a salesperson who has resigned from an agency now representing you.

Representative to Representative Relationship

? Don't go after another representatives line. The maximum you should do is advise the prospective principal that if and when the line is available you would like to be considered.

? Cooperate with each other. Friendly cooperation can only you in the long run.Ahelping hand to a struggling representative will give you a personal satisfaction and will also pay dividends.

? Join with and recognized association dedicated to helping you and your profession. Be as active as possible. ? Never "run down" another representative. If you have nothing good to say about a fellow representative, say

nothing.

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D. Determining Territories

There are different way to divide up territories in the United States ( look at map on overhead). No way is set in stone. Manufacturers have different viewpoints as to which way is best; however, in the end, the reps themselves will determine the territories which they are created and developed over the years.

A new manufacturer to using manufacturers' reps once asked: " How many reps should I have?" What he really needed to know was how many territorie he should have. And before he could ask that question, he needed to define the kind of reps that would be appropriate for his line and conditions in each territory. In other words, he was working backwards.

Some manufacturers suggest that the size of the territory should be determined before looking at the specific reps. One manufacturer explains:

" The United States is a big country. And customer density varies. If you plan territories to cover large parts of geography, you will want to seek reps with the capability of covering the territory. Or, you may want to re-think your plans and have more, but smaller territories. It's always tempting to set up larger territories and to have fewer rather than more agencies. The management problems are less than those you might have if you had smaller territories and more reps. But this often turns out to be a false economy. A territory should be covered relative to what you feel it should produce, rather than on the basis of ease of management. We made this mistake when we set up our territories many years ago. As a result, two or four territories now support some very strong competitors because we were looking at the ease-of-management factors. If we had made the territories somewhat smaller so the reps could cover the customers more effectively, we probably wouldn't have the competitive problems we now have in these territories."

At our trade association, UAMR, we suggest you start by doing your homework. Decide where your product will sell best geographically and begin with those territories.

* Weigh smaller rep groups and larger rep groups equally. For example, there is an excellent rep in North Florida who is a one-person agency. She is extremely professional, has connections with a department store chain that has 190 stores. Because of her strong relationship with the buyers of this chain, she has the major connections to get products into these stores. Although she is only 1 person, she makes things happen, is extremely professsional and well respected.

* Trade Marts: You may want reps with showrooms in major trade centers; Atlanta, New York, Los Angeles, San Francisco, Chicago, Texas, Kansas City, etc; plus regional showrooms, as well. But, sometimes bigger rep groups with showrooms are not always better. Many times these reps groups have so many lines, that your product may not get the attention it deserves from these reps. Twenty years ago, when I entered into this business, most manufacturers came to UAMR and wanted large, showroom reps. Now I see a complete reversal...manufacturers want the smaller rep groups (without showrooms) because they realize that smaller rep groups with fewer lines, have more time and may pay closer attention to their lines.

Reps require exclusive territories and should get a commission on everything that is shipped and sold in their territories. If you have reps who call on gift stores in their territory, but not on department stores; then you can divide the territory up to reflect that you have different reps calling on different accounts in the same territory. As long as this is outlined in a contract so that both reps and you agree on the territory; then this is acceptable.

Sometimes, manufacturers will keep some accounts to themselves and not give these to reps. These are called "house accounts". If possible, it is best not to have house accounts, or not alot of them. Give as much to the rep as you can; as an incentive.Make it worthwhile for a rep to take on your line and want to work the territory for you. (More will be discussed later in the contract section)

IV. Manufacturer-Rep Relationship

A. What Reps Expect of Manufacturers

The relationship between rep and manufacturer is one of interdependence. Each party needs to recognize the responsibili-

ties they have to the other party. The following are a number of primary responsibilities that a manufacturer has to their

r8eprUesAenMtaRtives in order to achieve this long-term, win-win relationship.

May 2003

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