What is a manufacturers' representative?
A manufacturers' representative is a professional outsourced
field sales organization working in a defined territory, who
sells related but non-competing products for more than one
manufacturer. The rep generates income from commissions on
sales. A representative does not take legal title or physical
possession of the merchandise to be sold, which generally is
shipped directly to the distributor or to the customer from the
manufacturer.
Where can I obtain more information on
specific representatives?
PTRA
maintains three useful resources for manufacturers seeking
representation:
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Find a Member, a
territory-by-territory directory of manufacturers'
representatives, which identifies areas covered,
branches, and special services performed. |
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Lines Available a
service for Principal members, which publishes
information from manufacturers outlining their product
lines and territories they have open, allowing reps to
find them. |
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Interview
Sessions, held during the PTRA Annual Conference, bring
manufacturer and representative members face-to-face for
a brief exchange of information to determine
compatibility. (For information, see
Upcoming Events). |
Other sources of information regarding representatives within
individual market segments and territories include your reps in
other territories, your distributors and customers, trade
associations, trade periodicals and directories; other
compatible manufacturers; and specialized recruitment firms.
To what extent do manufacturers
currently use representatives?
According to
the Research Institute of America, more than 50% of all U.S.
manufacturers (and up to 80% in such fields as the electrical
industry) use representatives, exclusively or in combination
with direct sales forces. While small companies may go the rep
route out of economic necessity, even mega-corporations find it
productive to utilize reps to cover particular market segments
or specialized niches.
How do reps achieve more sales?
Because they
sell multiple lines, representatives are exposed to more
customers within the territory than factory sales people.
Multiple line selling thus creates a synergistic effect, with a
broader, better defined customer base, and with more complete
coverage, resulting in deeper market penetration and increased
sales.
What advantages does the rep bring
to the manufacturer?
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Representatives already know your
customers. They cultivate long-term relationships with
buyers in their territories. They know who is likely to
need your product, and their recommendations have the
credibility that comes from a longstanding relationship.
|
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They can help you enter new markets
quickly and effectively, because they've already
penetrated the territory. |
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You don't have to hire and train sales
people. Representatives are already highly trained and
knowledgeable about their markets. |
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They give you access to a broader, more
stable source of market feedback. Because
representatives sell a number of lines, in territories
and to customers they know well, they provide a more
reliable source for market intelligence. Their customers
feel confident in discussing changes and opportunities
in the marketplace with them, as well as airing
criticisms, praise, and suggestions they'd be reluctant
to share with factory personnel. |
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They're motivated. Representatives work
on a straight commission basis. They don't earn a penny
from you unless they sell your product. |
How will they save me money?
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You don't have to maintain an internal
sales force. The representative bears the cost of
maintaining a staff, an office, and possibly a
warehouse. They hire and train their own sales people.
They pay their own taxes, insurance and retirement
benefits, travel, entertainment, trade show, and
administrative expenses. |
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Your selling costs become predictable.
You don't pay a commission until after an order is
shipped. |
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You get value-added benefits at no
extra cost, such as regional sales management and sales
analysis; product detailing; application engineering;
and promotion and merchandising. In addition, reps can
often provide local warehousing and stocking service, if
required, at a much lower cost than a factory warehouse. |
Why don't all manufacturers sell through
manufacturers' representatives?
Many
manufacturers who do not yet sell through representatives
generally have misconceptions about the representative system,
about direct factory sales forces, or both. In general, they
trade off the many advantages accruing from using manufacturers'
representatives for the "security blanket" of 100% control of
sales force time.
How many lines should a representative
handle?
Representatives carry the number of lines necessary to provide a
solid product portfolio for their particular market and to
assure a profitable business. The synergistic effect of multiple
line selling by representatives is what benefits manufacturers
most. It helps the customers buy related products from a single
sales organization. While a representative is selling one line,
contact and rapport are being established with each customer for
other lines.
Will my rep create business for me or
just collect orders?
The more they
sell, the more they make, so naturally reps are motivated to
generate new business. If advertising and promotion efforts
could, by themselves, create all the necessary sales effort,
then neither manufacturers' representatives nor direct factory
sales forces would be needed. They must, and do, create their
own marketing programs, designed specifically for their regions
and the customers within them. The customer who might be too
small for your "direct" salesperson to cultivate is a profitable
add-on sale when the rep is already calling there to sell other
lines!
How much of my commission dollar
does the rep actually keep?
Approximately
60% of every commission dollar a representative firm receives is
paid out in direct salaries and compensation. The employment of
personnel is the manufacturers' representative's primary
overhead investment. In addition, overhead in today's rep firm
also includes all the extra administrative services now being
performed for manufacturers, as well as the expense of
communication equipment, travel, and participation in sales
meetings, trade shows and conventions.
Is it true that reps make too much money?
Since reps
work on a straight commission basis, they can't be successful
without making you successful in the process.
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