Outsourcing Field
Sales
A Better-Than-Ever Response
to the Competitive Pressures
Facing Today’s Top Executives
Presented by the
Manufacturers Representatives
Educational Research Foundation
Corporate pressures and
responses
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Greater profits
Faster buildup of shareholder equity
Focus on core competencies
Outsource - security, maintenance, payroll, human
resources, purchasing - and now field sales
Roots of the trend to
outsource field sales
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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
Benefits of
outsourcing field sales
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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
Benefits of
outsourcing field sales
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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
More benefits of
outsourcing field sales
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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
What is a
manufacturers’ representative?
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Independent professional provider of field sales and
marketing services to manufacturers or suppliers
Typically handle a portfolio of related but noncompetitive lines
Work under contract in a defined territory on an
exclusive basis
Income directly tied to productivity
The traits of today’s
manufacturers’
representative
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Professional
Multifaceted
Technologically adept
Ubiquitous
Come in all shapes and sizes, from small definedfocus firms to multiple-office firms handling all facets
of marketing
Bringing value to
buyers and sellers
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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
What manufacturers’
representatives are not
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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
Differences
REPS
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Sell only in a defined territory
Do not handle competitive
lines
Sell as agents; do not take
possession
Compensated largely by
commission on sales
DISTRIBUTORS
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May sell anywhere
Often handle competitive
lines
Buy for resale; take
ownership
Compensated by margin of
sale price over cost
More differences
REPS
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Typically handle 12 to 14
lines
Typically entrepreneurial,
owner-operated
Add value through design-in,
application engineering,
product synergy
DISTRIBUTORS
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Often handle several
hundred lines
Large firms often publicly
traded
Add value through timeplace utility
More differences
REPS
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Interface with
distributors, refer orders
to distributors, receive
commission on sales
through distributors
May warehouse (for a
fee), but do not
maintain inventory
DISTRIBUTORS
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Rely heavily on rep for
referrals, training,
engineering support
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Maintain inventory
The big difference
REPS
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Focus on customer
needs
DISTRIBUTORS
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Focus on selling what’s
on the shelf
More than a source, a
resource
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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
Win - Win - Win
The Customer Benefits Too
Bringing value to the
customer
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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
More customer benefits
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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
What happens when buyer needs
diverge from seller’s SOP?
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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
The Economics
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Comparing commissions with the cost of hiring someone 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
What costs does the rep
cover?
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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
Myths and misconceptions
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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
Myths and misconceptions
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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
Myths and misconceptions
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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
Myths and misconceptions
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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 interdependent
Advancing the profession
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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
Leading indicators of skilled
rep firms
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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
Information sources about
reps
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Manufacturers Representatives Educational
Research Foundation www.mrerf.org
Agency Sales Magazine (MANA)
www.manaonline.org
Industry-specific rep organizations, such as
using presentation should put in the appropriate association name)
(person
Reps -- More than a source
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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!