None of us needs to be reminded of the rapid pace of change that has taken place in the past 20 years. With business humming along at a profitable, 20th century pace in a peacetime economy, the challenges presented by everything from electronic commerce to strained relations with principals were being managed reasonably well by most independent rep companies. Then the unexpected was followed by the unthinkable. The terrorist attack of 9/11, two wars, the worst recession since the Great Depression, political gridlock and the ascendancy of China all combined to leave manufacturers and their reps with 21st century challenges that were unimaginable just a few short years ago. How were manufacturers and their reps to chart a course in such uncertain times?
Much like the age-old slogan of scouting, MANA has long preached the mantra of “Be Prepared.” But prepared for what? An important part of being prepared is being armed with a wealth of strategies for success to employ in the face of perceived threats and opportunities to our businesses. MANA is the association for professional reps and those who aspire to be professional! We will continue to help members thrive in the 21st century, but you will have to be attuned to the key “Strategies for Success” and practice them.
Before we suggest what those strategies are, let’s first look at possible opportunities and threats faced by small businesses today. And to do that, we need to succinctly identify 21st century trends that are affecting our rep businesses.
The Customer Is King
Not even counting what has happened to us recently, just think for a moment how the selling environment has changed drastically over the past two decades. The refrain of “The customer is king” has gained new meaning. Today, the landscape is replete with new sources — including the Internet, foreign companies and technological innovation — for the customer to explore and choose from. As a direct result of such an expansion in the buying channel, it’s only normal that price competition on the part of sellers has become especially brutal, particularly on commodity products. And the beneficiary is naturally the buyer.
Today good quality, on-time delivery and competitive price are all table stakes, and customers and principals now place a tremendous amount of weight on the value of service that you, the manufacturers’ representative, can offer them. This includes the unique, problem solving solutions that you bring to them. If you’re just like everyone else and fail to distinguish yourself in terms of service, you’re not going to succeed. At the same time the customer is demanding this “value add,” so too is the principal. And let’s face it; the principal is also a “customer” for the rep! As a matter of fact, from the outset, when the principal and the rep are still in the courting process, the savvy principal wants to know what makes this rep stand apart from all the others in the marketplace.
At the same time customers and principals place all this emphasis on service and value add, the ways we used to conduct business have gone by the wayside. Few customers, principals or reps for that matter, have time for the traditional golf game or lengthy lunch. Instead, when participants in the channel get together face-to-face, the aim is to maximize the benefits of that “face time.” It seems that a rep who can demonstrate ways to help the customer increase his business or improve the customer’s productivity is now the supplier that gets the most access to the customer!
These changes in the business environment have also combined with a number of developments that are perceived by many as threats to the rep method of going to market. The intelligent rep also sees these threats as opportunities to differentiate her firm from that of the competition!
Keeping an Eye on Threats
It takes only a few phone calls to MANA members or attendance at a handful of MANA networking chapter meetings to hear:
- The price squeeze that so often crops up when a rep is working hard to land an order for his principal all too often becomes a “commission squeeze” when the customer demands lower prices. But cutting prices and/or commissions is a strategy for ultimate failure — not success.
- Efforts by some customers to move reps out of the picture are mistaken attempts to have the rep’s commission for their own. Some customers figure if the rep is eliminated from the equation, then the money saved by not paying his commission can logically go to them in the form of lower prices. What they’ve forgotten of course is the rep’s service and “value add” still has to be provided by someone, and if that is the case, is the manufacturer willing and able to provide the same level of service that the professional, independent manufacturers’ representative did? One MANA member manufacturer recently told a customer that he would be happy to comply with the customer’s request to take the rep off the account, but he would have to raise his price if he did so!
- Some reps bemoan the fact that technological advancement and the change it begets will threaten their long-term relationships with principals and customers. Others refer to this as “high- tech replacing high- touch.”
- With the propensity of many customers to downsize their organizations, more and more responsibilities have been placed on the shoulders of those who remain. As a result, it’s becoming increasingly difficult for the rep to get that valuable “face time” with his customer’s buying influence. Many call this the “Voice Mail Blues.”
- As principals request and/or require more and more services from their reps, the rep is finding that his selling time is being affected. The more time he spends complying with his principals’ requests for market data, customer data and other information, the less time he can devote to his job — selling.
- Then there’s the ever present concern of the impact mergers and consolidations among rep firms and foreign competition will have on business.
Considering Threats as Opportunities
How can these threats also be opportunities?
- The same price squeeze that threatens to force down margins also forces manufacturers to move toward outsourcing their sales. Many good lines become available in these times.
- Most of the few customers who go through the “ban the reps” phase learn to value the services that the professional reps provided and revoke their policy in time, or the threat of a tortuous interference with a contract lawsuit gives the customer pause.
- The same high-tech innovations that seemed to threaten the existence of field salespeople until recently have contributed vastly to improvements in sales productivity too. But these developments also tend to make existing products price sensitive commodities by creating better informed buyers. The appropriate response has been to drive manufacturers and their reps to develop new products and services. New products are the life-blood of all vendors today!
- If voice mail makes it difficult for you to get in to see your customers with a basket of eight to ten complementary products, pity your poor direct sales competitor, who has only one line to sell. Reps have an inherent advantage now.
- While it’s true that some principals have tried to shift activity from headquarters to the field, the really smart professional reps have negotiated payment for these extra activities and have made themselves even more valuable (and more difficult to terminate). In addition, this trend has forced reps to invest in productivity improvements of their own and to show the customer that their firms are an indispensable component of the supply chain.
- For every rep who loses a line due to a merger of two companies who now have two agents in the territory and need only one, there’s one who picks up the combined line. If you’re the most professional and productive rep in the territory, you win!
- And, the threat of foreign competition can be counterbalanced by the old saying “If you can’t beat them, join them!” If you are representing a high-labor content commodity product today, your only salvation may be to go to work for the low-cost producer of the product who is likely to be in a low-wage country. And international principals sometimes do not understand or simply choose not to embrace North American business practices, so don’t assume that representing those principals will be just like representing principals closer to home.
If just some of these challenges can be construed as presenting a threat to the manufacturers’ rep, the practice of considering a threat as an opportunity becomes even more important! But, it’s important to remember that the exercise of turning lemons into lemonade cannot and will not be achieved unless the independent manufacturers’ representative has equipped himself with success strategies. A discussion of those strategies follows.
Become the Complete Businessperson
Continuing education is the key to this strategy and it’s one that goes beyond the traditional academic environs. Even with degree in hand, the manufacturers’ representative is still not necessarily the businessman he should be. What must be accumulated is a working knowledge of many customers’ business systems. These skills cannot be acquired and mastered without effort. Thankfully, there are many options available to the rep including seminars and other training programs available from MANA and some of its partners. While these are geared specifically to the needs of the rep, the individual should also consider executive MBA programs, industry- specific resources, trade association resources and courses available from local community colleges. Then there’s the need to be educated about your customers and their needs. Your most valuable asset is the information in your database about your customers and your knowledge of the territory. This requires staying current with evolving software and hardware and the discipline of continual data entry and analysis.
Consultative selling is exactly what it says — the manufacturers’ rep must serve as a consultant to his customers. That’s his value add, and to provide that value add, it’s vital that he understand the customer’s entire business system. It is only then that he can be sure to meet the needs of the customer. But how does he go about it? The first step is for the rep to be sure he knows more about the customer than the purchasing agent does. All too often, the company’s buyer possesses only his own perspective gleaned from the needs of his own department. The rep, on the other hand, has to understand the entire concept of the customer and be able to work across departmental lines in order to meet their needs. In reality, when he does his job properly the rep can find himself drawing together people from different departments. He can even find himself serving as the customer’s coordinator or ombudsman. This can only be done, however, by possessing the necessary skills. Consultative selling should also be practiced with one’s principals too, a concept that will be developed below.
The end results of successful consultative selling efforts can be seen in the reps’ ability to:
- Take a problem off the customer’s desk.
- Assist customers in booking business.
- Provide suggestions that will help them reduce operating costs.
- Take steps to train and educate customers’ personnel.
- Help the principal to improve his productivity or reduce costs.
A major benefit that the manufacturers’ representative provides his customers and his principals is the “basket of goods” he offers vs. the single line of products that the direct salesman has at his disposal. When reps are seeking additional lines, of prime interest to them is the fact that any new products should add to, or complement, what he already has. Reps understand customers’ systems, and it’s in line with their business plan that they sell systems in addition to components. As a result, it’s the synergistic line of products that he offers customers that gets the attention. Today, too many reps have reduced productivity by taking on marginally synergistic lines and failing to do a rigorous line-card analysis regularly. Here the objective should be to replace marginal, commodity lines or those whose objectives differ from yours.
While MANA continues to stress the desire to work with principals who have long-term commitments to outsourcing their field sales effort, the definition of “long-term” is rapidly changing. In today’s dynamic environment, a ten-year marriage between a rep firm and a principal would probably meet that definition. In the past, many members have represented companies for decades, but the incidence of these kinds of relationships will be unusual in the future. Rep firm owners need to be aware of this trend and plan for it in order to maintain synergistic and competitive lines.
As mentioned above, perhaps no skill is more important today than that of being technologically up- to- date. The rep that enters the fray technologically unarmed is an anachronism. When we speak of technology, more often than not we’re referring to smart phones, laptops, contact management and accounting packages, tablets and other digital appliances. But there’s more. He must also exhibit an understanding of the customer’s management information system (MIS). The absence of this skill can preclude the rep from being able to provide the customer with an integrated solution mentioned in the paragraph about consultative selling.
Because half of the rep’s selling effort is expended on his principal, it’s imperative that the rep establish the best possible relationship with all key players at his critical principals. The only way to achieve that goal is to treat the principal as you would a customer. Principals are your clients and client relations should be the rep’s number-one priority. The rep should serve as their eyes and ears and offer himself as the principal’s consultant/partner. Many reps have management or technical skills superior to their counterparts in the small- or medium- sized companies they represent. How can you help your principal improve his systems or develop new products? And how can you do so without seeming to be a chronic complainer? It’s important to blow your own horn when your consultative approach contributes to the principal’s bottom line because others in his organization may take credit for your ideas.
In the past few years, the pages of Agency Sales have been replete with the efforts of domestic rep firms looking to impact European, Asian and other markets. Foreign companies can be the source for the commodity or niche products the rep is looking for. Technological communication tools allow reps to conduct business for anyone, anywhere in the world. And this includes selling to offshore clients as well as representing foreign principals in North America. There are unique opportunities and problems associated with this strategy, but many MANA members are making it work for them.
Use Your Associations
MANA preaches the value of association membership to its members. Furthermore, the list of MANA members includes many who see the value of their membership in more than one association. But the fact remains that maintaining membership is not enough. The member of an association should use the information, knowledge, educational and networking opportunities that abound in these non-profit organizations. Associations like MANA have access to the collective wisdom of tens of thousands of members over more than half a century. Why try to redesign the wheel yourself if the design already exists in association archives?
There’s an oft-repeated refrain that “you only get back what you put in.” Those words are never truer than when considering your association membership. The more a member contributes to the organization, the more benefits she gains in return.
The kind of time management we are talking about here has nothing to do with laying out your call schedule on a geographic basis or checking your e mail only four times each work day. These concepts are often discussed in elementary time management courses for salespeople who call on customers in geographically dense territories. To be successful today one has to balance spiritual, work, family, exercise/health and a variety of other important areas of life. How much time do you spend watching television sitcoms? Playing games on your iPad? Doing things twice because you hurried through the first time? These are the kinds of time-killers we all are guilty of. Managing or eliminating them can increase the focus on the truly important things and lower your level of stress. We suggest you make a list of your own time-killers and then journal the amount of time you spend on them for a month. Then tell yourself you don’t have time to go to the PTA meeting or go the extra mile for a good customer or principal!
Manage Growth From A Realistic Perspective
When writing our first business plan most of us underestimate expenses and overestimate revenue. It’s a salesperson’s nature to be optimistic, but optimism needs to be tempered with reality when putting a long-term plan together for your business. “Hockey stick” growth curves are usually not realistic and can actually be responsible for small business failure. How can one plan realistically?
Put together a board of advisors for your rep firm even if you’ve been in business for 10 years and been quite successful. None of us can know everything there is to know about financial planning, insurance, banking, accounting, business law and strategic and tactical planning! Trusted advisors can be secured in each of these areas at very little or no cost until their services are actually required and many may be more than willing to serve on your “board of directors” without pay out of a desire to establish a business relationship with you. Others, like low or no-cost mentors may be willing to serve because “giving back” is a part of their spiritual or moral compass. These professionals do not all have to meet together in one room twice a year like an old-fashioned board, but having them on call is critical. A good example might be a thorough vetting and opinion on the one or two new principal contracts you’ll be asked to sign in a typical year. Here, association resources can kick in again as MANA, for instance, maintains a relationship with a number of attorneys with excellent reputations in rep/principal law.
You don’t have to “go it alone” anymore, even if you are a startup rep firm.
Success Is Attainable
It is still possible to come from a modest beginning and build a thriving small business today, but it is clearly available only to those who come at the market with a unique and well-planned approach. The strategies we suggest in this report will not apply to all rep firms, but many of them will be critical to the success of yours. Remember, you have to differentiate yourself from the competition. A former giant in the rep business, George Hayward of United Sales Associates in Cincinnati, Ohio, used to say “It’s not one thing. It’s 100 things, and you have to do them all well” when someone asked him the secret of building a rep firm like his. Unless you are one in a million, you may not be able to do 100 things well, but you can certainly do 15-20 of the most important things well if you follow these strategies for success and continue to participate in MANA, because MANA will continue to develop resources for professional reps and those who aspire to become professional!