HOW TO SELECT MANUFACTURERS’ AGENTS
Manufacturers’ agents or representatives are independent contractors who work on a commission to sell products for more than one manufacturer. They are not under the immediate supervision of the manufacturers, (typically called principals), that they sell for, so their relationship in generally falls into client/customer patterns. Manufacturers’ agent firms range from businesses operated by a sole entrepreneur to considerably more extensive organizations armed with numerous salespeople covering specific territories.
Manufacturers’ agents generally represent several different companies that offer compatible, but not competing, products to the same industry. This method reduces the cost of sales by spreading the agent’s costs over the different products that he or she pitches. Consequently, manufacturers’ agents view themselves as a cost effective alternative to fulltime salaried sales forces, and this is an evaluation that is shared by thousands of small and medium sized manufacturers.
Indeed, manufacturers’ agents are particularly popular among companies that do not have the financial resources to launch their own sales team. In addition, since manufacturers’ agents are generally paid by commission, the small manufacturer incurs no cost until a sale is made.
Businesses and Manufacturers’ Agents
Advantages
In addition to the abovementioned financial benefits that manufacturers’ agents offer to business owners, they also provide relocating or startup firms with immediate frontline information or marketplace trends and demographics. By contracting with a manufacturers’ agent, a company gains instant access to industry expertise or knowledge of a particular country or region.
There are other distinct advantages as well. For manufacturers with a narrow product line, agencies offer one of the best ways to access the market. Because they normally sell compatible products to a single market, the manufacturers’ agent firms usually are well-connected with the manufacturers’ principal market targets. This offers manufacturers immediate entry to markets that may be hard to reach with a direct sales force.
In addition, rep firms can provide new businesses with ideas about where to advertise, comment on what the competition is doing, and give estimates of a given territory’s potential.
Disadvantages
While using manufacturers’ agents may make a lot of sense to the company that needs to allocate its financial resources carefully and learn about the marketplace quickly, there are drawbacks associated with the practice as well. Lack of control over the agent is easily the most frequently mentioned complaint that business owners site when discussing rep firms. Since the manufacturers’ agent is not an employee of the company, the company’s ownership cannot dictate how he or she goes about business. Certainly, the business owner can negotiate for certain things in his or her business dealings with the agent, just as any client can do with any vendor. But in the final analysis, the agent has far greater freedom to operate as he or she feels fit than do salespeople that are actual employees of the company.
Some critics also claim that since manufacturers’ agents conduct business on behalf of more than one manufacturer, they are not always able to devote the necessary time to one single product line. Finally, some agents also may be reluctant or unable to provide service beyond the point of sale. Fundamental elements of customer service, such as startup assistance and follow-up service often must be supplied by the manufacturer even if the goods were sold through a manufacturers’ agent.
Another concern often raised about manufacturers’ agents is that they add to the cost of sales by acting as a middleman in the process. However, it has been argued by sales professionals that reps are an alternative (or substitute) to direct sales. They should be looked upon as a form of outsourcing of the sales function. Therefore, hiring a manufacturers’ agent should eliminate the need to maintain an in-house sales staff for a particular region or product line. In this way, the agent can actually help a business reduce its administrative costs.
Selecting a Manufacturing Agent
Manufacturers have many factors to consider when they begin the process of selecting a manufacturers’ representative. Business owners should look for someone who shows an ability and willingness to become knowledgeable about their products and applications, as well as someone who will respond quickly to calls and present the product in terms of how it will meet customer needs. A good agent will also represent the various product lines he or she markets in a just fashion, giving each line the attention it deserves, regardless of how much income it accounts for (this latter concern is especially acute for small and startup businesses).
The best rule of thumb for manufacturers is to be patient and do plenty of preliminary research. After all, the choice is going to be the primary link between the company and its target audience. A poor selection can ruin a company; conversely, a good choice can help launch a new manufacturer to long-term financial stability.
Given the stakes involved in this choice, business owners should consider doing the following when weighing their choices.
Create a profile of the ideal agency: Make the profile clear, but also be flexile and realistic. Perfect agencies are nonexistent, but there are many that will do a good job if given the opportunity.
Create a profile of the manufacturing firm: Manufacturers are encouraged to compile a profile of their target customers, a rundown of business needs, and a summary of the governing philosophy of the business. Many agencies can be selective in terms of who they will add to their client list, so it makes sense to inform them about the business and its goals and prospects. The profile should be honest and touch on growth plans, real advantages of the product(s) it manufactures, and previous history.
Secure referrals from other agencies: Manufacturers’ representatives are a close-knit fraternity in most countries, and many can provide the names of several agencies that would be a good fit for the line.
Get referrals from other agencies: Companies in the same area that sell similar but uncompetitive products can be a good source of information in locating potential representatives. Some may even recommend their own agencies, although others may be reluctant to have their agents take additional product lines and responsibilities.
Be patient: While manufacturers do not have the history of waiting forever when filling rep openings, doing preliminary research usually is a good idea. Many manufacturers who have been burned in this regard later admit that they did not devote sufficient time to exploring their options and learning about the agent they select. It is better to take that needed time to select the right prospect than to rush into a bad situation and have to rectify it later.
Be flexible in setting up territories: Agents must have exclusive rights within a territory, but rather than assign arbitrary territories based on geography, it is often preferable to select the agents that best fit your line and let their coverage determine the territories..
Manufacturers should always recognize that independent reps choose independence because they want to do what they want to do, not what one manufacturer wants them to do. Therefore, the key to success with independent reps is finding that one high-performance rep that comes closest to doing what you want done in the marketplace now.
Recruiting a rep with even one key characteristics missing may substantially reduce your market share possibilities in that territory. Finding the right rep creates a high probability for a true win/win situation, as both “partners” have common objectives.
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