Outsourcing Field Sales

1. Outsourcing Field Sales A Better-Than-Ever Response to the Competitive Pressures Facing Today’s Top Executives

2. Presented by theManufacturers RepresentativesEducational Research Foundation

3. Corporate pressures and responses • Greater profits • Faster buildup of shareholder equity • Focus on core competencies • Outsource - security, maintenance, payroll, human resources, purchasing - and now field sales

4. Roots of the trend to outsource field sales • Performance-based compensation • Practical approach to downsizing • Diversification into multiple markets and specialized distribution channels • Explore new opportunities with minimal investment in sales infrastructure • Lower overhead, standardized sales costs

5. Benefits of outsourcing field sales • 1. Increased sales • 2. Predictable sales costs that go up and down with sales • 3. Standardized sales costs • 4. Lower sales costs • 5. Immediate market access • 6. Broader market penetration • 7. More experienced sales force

6. Benefits of outsourcing field sales • 8. Multifaceted, multi-skilled sales team • 9. Wider, deeper coverage • 10. Stronger local relationships • 11. Reduced sales force turnover • 12. Training required only on product • 13. Closer-to-the-customer forecasting • 14. Better market intelligence

7. More benefits ofoutsourcing field 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

8. What is a manufacturers’ representative? • Independent professional provider of field sales and marketing services to manufacturers or suppliers • Typically handle a portfolio of related but non-competitive lines • Work under contract in a defined territory on an exclusive basis • Income directly tied to productivity

9. The traits of today’s manufacturers’ representative • Professional • Multifaceted • Technologically adept • Ubiquitous • Come in all shapes and sizes, from small defined-focus firms to multiple-office firms handling all facets of marketing

10. Bringing value to buyers and sellers • Portfolio synergies • Broad-based solutions • Consultative approach • Partnering relationship with customer • Greater speed of market penetration • Entrée through portfolio leverage • Basic economics of sales before sales costs

11. What manufacturers’ representatives are not • Not an additional channel - they are the manufacturer’s sales force paid differently • Not middlemen - they neither take title nor mark up costs • Not distributors - and very different from distributors

12. Sell only in a defined territory Do not handle competitive lines Sell as agents; do not take possession Compensated largely by commission on sales May sell anywhere Often handle competitive lines Buy for resale; take ownership Compensated by margin of sale price over cost Differences REPS DISTRIBUTORS

13. Typically handle 12 to 14 lines Typically entrepreneurial, owner-operated Add value through design-in, application engineering, product synergy Often handle several hundred lines Large firms often publicly traded Add value through time-place utility More differencesREPS DISTRIBUTORS

14. Interface with distributors, refer orders to distributors, receive commission on sales through distributors May warehouse (for a fee), but do not maintain inventory Rely heavily on rep for referrals, training, engineering support Maintain inventory More differencesREPS DISTRIBUTORS

15. Focus on customer needs Focus on selling what’s on the shelf The big differenceREPS DISTRIBUTORS

16. More than a source, a resource • High caliber personnel - entrepreneurial, competitive, goal-oriented • Success tied to contacts in the territory rather than the corporate hierarchy • Rooted geographically, creating stable relationships • Saves time for the buyer by presenting multiple lines in a single call

17. Win - Win - Win The Customer Benefits Too

18. Bringing value to the customer • Stable relationship with someone who knows the corporate culture • Long-term commitment to the territory • Multifaceted resource • More efficient (multiple line) sales calls • Consultative selling • Bridges intra-company communications gap

19. More customer benefits • Advocacy, ability to secure exceptions to supplier policy • Help in order strategy, distribution or direct • Perspective on market conditions and trends • Solutions approach -- looking at the forest, not the trees

20. What happens when buyer needs diverge from seller’s SOP? • Rep has more at stake with other products sold to the company, and thus will fight harder for needed accommodations • Rep has more freedom than direct salesperson to carry the fight to the top

21. The Economics • Comparing commissions with the cost of hiring some-one full time is misleading • 1. It ignores costs borne by representatives that would transfer to the manufacturers • 2. It ignores administrative and facilities costs in the territory and the home office • 3. It overlooks the likely faster growth a team can bring compared to one person

22. What costs does the rep cover? • Finances the sale, usually receiving commission only after goods are shipped • Pays for recruiting, training, employee benefits, travel, client entertainment, automation, order entry, and more • Handles extra roles in expediting, returns, trade shows, administration • Eliminates manufacturer’s legal exposures

23. Myths and misconceptions • Myth: The distributor can handle the whole field sales process • Truth: Distributor function is different, logistical instead of problem-solving • Truth: Distributors, stocking competitive brands, cannot be one manufacturer’s advocate • Truth: Reps and distributors work as teams

24. Myths and misconceptions • Myth: The Internet, EDI and eCommerce render personal contact superfluous • Truth: they support sales by delivering and gathering information, so “face time” is more productive • Truth: High tech can’t replace high touch in creating demand, negotiating contacts, analyzing solutions, dealing with exceptions

25. Myths and misconceptions • Myth: Reps don’t take a long-term perspective • Truth: It would be reasonable not to, given the reality of 30 day termination clauses • Truth: Reps invest in their territories and clientele, and in sales that develop slowly • Truth: Reps needs long-term mutually profitable relationships with principals

26. Myths and misconceptions • Myth: Reps are independent and difficult to control • Truth: Independent is a legal term that protects manufacturers • Truth: The best control is from directing, motivating, and partnering with reps • Truth: Reps and manufacturers need to feel inter-dependent

27. Advancing the profession • Enhancing management skills for reps and manufacturer personnel who manage reps • Disseminating information and advancing public understanding of the rep system • Three-year Certification program shows commitment and demonstrates achievement • Reps offering new services, participating in new selling paradigms

28. Leading indicators of skilled rep firms • Have strategic plans • Strong territory relationships • Able to share intimate market knowledge • Technologically current • Active in industry associations • Network for best practices • CPMR certified management

29. Information sources about reps • Manufacturers Representatives Educational Research Foundation www.mrerf.org • Agency Sales Magazine (MANA) www.manaonline.org • Industry-specific rep organizations, such as (person using presentation should put in the appropriate association name)

30. Reps -- More than a source • Synergy of multiple lines • Economy of shared costs • Permanence of shared costs • Intimate knowledge of customers • Solutions orientation • Perspectives they bring to principals • Prosper only by creating prosperity!