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Manufacturers' Frequently Asked Questions

Is there a difference in selling styles between Factory-Direct people and Manufacturer Agents?

According to the sales manager of a major American manufacturer that sells through a team of independent agents, there is a difference between agents and those who sell direct.  Both can be effective if they work hard,  but, he added, we feel that reps often work harder.  The difference, he said, is planning.  "Agents tend to plan more carefully, concentrating not only on their initial calls, but on their follow-up calls.  They tend to have rehearsed, even mentally, for their customer meetings.  Direct people plan less mainly because they are under direct supervision of a sales manager.  They tend to do what is asked of them, often well, but they seem to be less self-reliant than most agents."  This manufacturer felt that for him this was a significant benefit.  He explained: "The typical rep is more comfortable thinking on his feet.  The typical direct salesperson often prefers to back off when questions arise until he can check things out with his boss."  Remember, this is just an opinion of one person,  but, obviously we tend to agree.  We also feel that a lot of time and money can be lost when a salesperson hesitates to take the initiative in a complex situation.  Agency Sales Magazine, June 1998.

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Are there any other reasons to sell through Manufacturer Agents?

A manufacturer who has sold through agents for quite a while told us that he made the switch a number of years ago mainly because he felt that people bought from people they were comfortable with.  Because agents sell related products to targeted markets and customers, those customers were already comfortable with them.  He said that his assumption has proven right, but you already knew that, didn't you!  Agency Sales Magazine, June 1998.

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How long does it take to find the right Sales Agency?

It seems that this question pops up regularly at M.A.N.A. seminars.   Manufacturers being careful planners, want to know how much time to allocate to their search.  What we can say with absolute confidence is that the better you do your homework and planning, the less time it will take to find the right agents.  If you're going to make a few phone calls from an airport phone booth, it could take forever and it could be over in minutes.  Either way, though, you're likely to suffer.  Agency Sales Magazine, March 1990.

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How high should sales be before I replace a Manufacturer Agent with a factory Factory-Direct person?

A newly-appointed sales manager asked this question at a recent M.A.N.A. seminar.  Apparently the man either had no sales or management experience, or he was totally naive about the agent/manufacturer relationship.  The answer supplied by one of the panel was this: "It would seem from the way you have stated your question that your agent has done his job.  You seem to be asking about replacing an agent for doing a good job - not for doing a poor one.  Why break up a winning team?  After all, agents aren't used to build a territory for factory people.  They are used because they are an effective selling force.  You should also remember that if the agent has done a good job in the territory for you, he can do the same thing for your competitor if you cut him loose."  Agency Sales Magazine, March 1990.

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How many Reps should I have?

A manufacturer who had just switched to reps asked this question at a recent M.A.N.A. seminar.  When one of the panel members explained that it was best to determine major markets and fill them first, it became apparent that hidden in the question was the economics of the issue.   The manufacturer was small and was concerned with appointing more reps than his budget might accommodate.  It was quickly pointed out that no fixed costs were involved, only variable costs needed to support the rep to the extent needed to bring in the business.  The manufacturer quickly responded that, if that was the case, he could afford dozens of reps.   Agency Sales Magazine, April 1997.

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What is the process for establishing commission rates for Sales Agents?

Setting a commission rate is a much more complex project than just checking out the competition.  In fact, if you use competitive numbers alone, you're off in the wrong direction altogether.  Remember that you are not competing with other manufacturers in terms of products, you are competing for the attention your line needs to meet the product competition.  A manufacturer with a long and solid history of selling through agents said, "You need to know, first of all, exactly where your product stands in terms of its marketing position.  If you're in a pioneering position, your commission rate is going to have to be higher than if your product is the hands-down leader in its field.  If your agents are expected to do allot of after-sale servicing, your rate is going to be different than that paid for little or no follow-up servicing.   In general, different rates in different territories should be avoided, but there are times when different rates are appropriate and needed.  Make absolutely sure that you can justify a higher rate in some territories to those who are getting the lower rate.  Your commission rate planning should include long-term factors that level the rate when the extraordinary circumstances that called for the higher rate no longer exist.   Above all, you should be sure that your agent can make a reasonable profit from his effort on behalf of your line.  It may give you satisfaction to negotiate a low rate with an agent, but this can be self-defeating behavior if the agent pulls your line out of his case after he's pitched all his other lines."  Agency Sales Magazine, March 1999.

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Are commission rates defined by set "industry standards"?

Too many manufacturers feel that "industry standards" should prevail when they establish a commission rate.  First of all, there is no such thing as an industry standard.  Just looking at the range of highs and lows in the M.A.N.A. Survey of Sales Commissions should be enough to convince you that there is no such thing as a standard.  A manufacturer addressing the panel at a M.A.N.A. seminar recently said, "Commission rates must be determined by considering everything that the agent is expected to do.  Will the agent have to train distributor sales people?   Will the agent have to service products in the field?  Is the agent expected to pioneer the line?  These are just a few of the questions you have to ask."   For the current figures, and a practical guide to establishing commission rates, contact M.A.N.A. for a Survey of Sales Commissions.  Agency Sales Magazine, November 1992.

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How do I switch from Factory-Direct people to Manufacturer Agents?

Switching from direct sales to the use of a team of agents takes some careful planning.   Those who have done it told us that the two mistakes they made were not allowing enough time to implement the transition, and not explaining the transition carefully to customers.

  •  "Don't make the switch until everyone in your company is fully prepared to implement the (agent) strategy.  Your people have to learn to think of agents as business partners, not as fellow employees."
  • "Make sure that your employees and your customers know exactly why you are switching from direct to agency selling.  Be sure they know what you plan to accomplish by making the switch.  If any employees or customers seem concerned about the switch, take the time to clear up their apprehensions."
  • "Customers who were close to your field sales people may be concerned that they are not going to have as close contact with agent in place.  Assure them that they will.   And make sure that your agents understand that customers can still talk directly to factory people when they want to."
  • "Your customers will want to know what's in it for them.  Make sure they know that the switch is not just for your benefit alone.  Assure them (your customers) that the switch will be in their best interest, too."
  • "As with any major change, there will be problems.  Don't sweep them under the rug.  Resolve them quickly or they will fester and haunt you . . . and your new agents . . . and your customers."
  • "Get as much publicity out as you can on the shift.  This means press releases in the magazines that serve your field.  When you go public with the shift, you are, in effect, saying that you have nothing to hide.  People always wonder if you have a hidden agenda when you make the shift.  A good publicity program will put those fears to rest."
  • "One reason we took so long (two years) switching to agents was that we had a commitment to our sales force.  We wanted to make sure that no one was hurt in the process.  Two of our salespeople became regional managers.  One moved to sales management, and we helped the other three find sales jobs with other companies."

Switching from direct sales to agency selling can be a very good move for most companies.  But the switch should be carefully planned, and all involved should be aware of your plans.  Agency Sales Magazine, July 1992.

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What if my sales manager doesn't understand Agency selling?

A marketing man with considerable professional experience, but little exposure to agency selling, suddenly discovered that ". . . agents and salaried salespeople are not the same . . . at all!"  This man told us that when he moved to a new company he almost destroyed a team of agents that his predecessor had patiently built up over the years by thinking that ". . . there is no difference between agents and staff.  They both respond to the same things."

We hear of this problem frequently - people accustomed to dealing with salaried staff trying to deal with agents in the same manner.  The person who talked with us recently was smart enough to realize that he had a lot to learn about working with agents and he set out to do it.  His comments on how he got his education and how he perceives the difference are worth passing along.

  • "When I realized that my many years of managing a salaried sales force hadn't prepared me for the task of managing an agency sales team, I knew I had to get an education quickly.   The first thing I did was attend a M.A.N.A. seminar.  I have to say that I got as much out of the presentations as I did from the comments from the floor.   The open forums of these programs are real learning experiences."
  • "Once I realized that dealing with independent business people meant dealing with 'partners,' I knew I was headed in the right direction.  I got most of what I needed to know about the relationship by talking with sales managers who had considerable experience selling through agents, and in visiting with two of my company's most productive agencies.  Both were very patient with me and guided me carefully."
  • "I think the fact that I was totally open with everyone was the key.  I didn't try to snow anyone.  They knew that I knew how to sell and how to market products.   But they also knew I had a lot to learn about agent/manufacturer relationships.   With all the cards on the table, we proceeded to do what had to be done."

These are the highlights of the comments.  However, we want to point out that throughout our conversations, we got the strong impression from this man that he was fair and honest.  We're sure that the agents who helped him get up to speed also sensed this and realized that they all had a lot to gain by being as helpful as they could.   This is the "partnership" notion we keep talking about.  Agency Sales Magazine, November 1992.

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Contact Info.

Bill Kramer Marketing
PO Box 317
Brighton, MI 48116
Tel. 810-229-0003
bill@bkmkt.com

Territory
Michigan
Fort Wayne, IN
Toledo, OH

Customers Types
Mass Merchandisers
Home Centers
Hardline Distributors
Independent Stores
Garden Centers
Lumber Retailers
Convenience Distributors
Catalogs

Customers
ACO Hardware
Amway
The Andersons
Bostwick-Braun
Commerce Corporation
Do It Best Hardware
Dunham's Sports
English Gardens
Family Farm & Home
HT Hackney
Meijer
S Abraham & Sons
Spartan Stores

 

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Most Recent Update August 15, 2011
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