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How to Sell by Independent
Sales Agent
The independent sales agent may be
the answer for owner-managers who have problems with selling. In some
cases, the problem may be that there are not enough prospects to justify
putting a full-time sales force on the factory's payroll. In other cases,
because of heavy schedules, the sales staff may be missing opportunities
to cultivate new accounts.
This guide provides guidelines that should help the owner-manager of a
small company to determine whether or not a sales agent is needed.
Pointers are also given on how to choose an agent and how to work
profitably with him or her.
If selling your product requires a salesman's or saleswoman's call,
using an agent may be more efficient than having sales personnel on your
payroll. Which is better depends on your situation.
Selling for others is the business of independent sales agents. They
make their money by representing several clients on a commission basis.
They solicit orders for clients in territories upon which they have
agreed. Some agents have employees who help them cover a wide area.
The manufacturers, as a rule, ship and bill the customer directly. They
set prices, terms, and other conditions of sale.
Sales agents go by various names. A few examples are manufacturer's
agent, manufacturer's representative and "reps." The labels vary according
to industry. Also, the marketing functions which agents perform vary from
one industry to another.
Cost and Control
Whether it is better to use your own sales force (direct selling) or a
sales agent depends mainly on cost and control. Which method is more
economical for you? Which method gives you the control of your, marketing
that you need?
When you add sales personnel, what do they cost? In considering this
cost, you should include items such as the paperwork necessary to keep
them on the road; fringe benefits, such as vacations, hospital and other
insurance, which you provide.
On control, the question is: What degree of control do you need to
achieve your sales objectives? When an agent represents you, the agent
controls the approach to customers. In effect, they are your agent's
customers rather than yours.
In many cases, such a relationship may be as good as, or better than,
using your own sales force. For example, if your products are attractive
to distributors and retailers, it may make little or no difference whether
they buy from a factory salesperson or an independent sales agent. When it
makes no difference, the owner/manager who insists on maintaining a sales
force for the sake of ego may be kidding himself or herself. You may be
paying too great a price for the satisfaction of saying, "I have my own
sales force. They are my employees."
On the other hand, when products require a special personal touch or
service, the owner-manager may need to control the entire selling job. You
may need to build an image by training and coaching your own technical
sales staff rather than by offering your products through a manufacturer's
agent who cannot usually be expected to do this type of work.
The Selling Job
In considering whether a direct sales staff or an independent agent is
better, examine your company's selling job. the questions that follow are
designed to help you think about the various aspects of that job.
Territories
In a given geographic area, does your company dominate, or does it lag
way behind, competition? How near are you to your estimated potential
sales volume?
What is your goal for that specific territory? If you had the best
sales force money could buy, could your goal be achieved? If you could get
only mediocre employees, what maximum dollar volume would you set for
their quota?
What is your present dollar volume in the territory? What does it cost
to bring in that volume? Based on these cost figures list of car insurance companies in new York cheapest, what would your cost
of sales be for achieving your ultimate sales quota?
How many dollars do you have to invest to build up a, specific
territory? Does this investment (for salaries, traveling expenses, and
supervisory expenses) run over a long enough time period to enable even a
mediocre sales staff to reach your objectives?
Selling
Is your selling mostly service selling? (Service selling often requires
technicians who can explain equipment and processes to middle management.)
Is your selling nontechnical? (This type of selling does not require
detailed knowledge of equipment and processes.)
What are the selling practices in your industry? Is there a good reason
why the industry leans a particular way? Or is it just a custom which no
one has thought of changing?
Market Penetration
How well do you know the market you are trying to penetrate? Do you
know it well enough to guide your sales personnel? Or will you be relying
on them because of your lack of knowledge of certain territories?
How often must the trade be seen? Can one employee handle all the
calls? Or will several employees be needed because the area or number of
accounts are too big for one person to cover regularly?
How quickly do you want to penetrate the market? (Someone with a
knowledge of the field and personal contact with buyers will, of course,
obtain this penetration more quickly than new employees.)
Cost
What is your cost for executive and clerical personnel to manage a
direct sales staff in all your territories? (Break this cost down by
territories.) What will it cost for executives and clerical people to
manage an agent?
If you maintain a training program for your sales force, what does it
cost? Does it pay off in increased sales?
Compare the Two
The statements that follow are designed to help you consider the
advantages and disadvantages of direct sales staff and independent agents.
Training
Direct Sales. Finding and training new sales personnel can be
time-consuming. Moreover, the cost can be high when employees quit shortly
after they have received their training.
Sales Agents. With agents you can put them in the field quickly, and
the training cost is nominal.
Type of Selling
Direct Sales. The sales person is, or becomes, a specialist in selling
your line. It is easier to choose a person for a specific type of selling,
such as service selling.
Sales Agents. They are specialists in selling only. They can seldom
afford to offer service selling. Usually, they sell in a given territory
and in a given product line and know their customers' needs. Often
customers heed their advise because of the other items the agent sells
them.
Experience
Direct Sales. You can hire a direct sales staff with any degree of
experience. The degree depends on how much you are willing to spend and on
what your situation calls for. The staff may not have the depth of
knowledge of the territory and industry that you can draw upon.
Sales Agents. Normally, they will be experienced. Most agents are
experienced professionals. Agents must have a depth knowledge of their
territory and industry to exist, and it is there for your use.
Selling Time
Direct Sales. More time is devoted to selling your products.
Sales Agents. They devote only part of their time to your products
because they handle a number of lines. But, in many cases, an agent has
several people working so that you are buying their talents and time also.
Opening New Territories
Direct Sales. It often takes a direct sales staff a good deal of time
to develop a following in a new territory. Even an experienced person
needs time to accumulate detailed knowledge about a new territory.
Investment can be high in starting a new territory or walking up an old
one. Cash must be spent for the employees'‘ salaries and travel, sometimes
for months, in order to build a profitable sales volume.
Sales Agents. Established agents offer a built-in following in given
territories. They and their assistants have depth knowledge of the
territory and the customers they serve. Moreover, an agent only gets paid
on results.
Cost
Direct Sales. Employees' pay, if you want to hold them, has to be a
living wage regardless of results. In an established territory, as sales
go up, the results should more than pay for salaries and travel expenses.
However, the cost of maintaining a direct sales staff may sometimes mean
increasing their territory with diminishing penetration-loss of sales
because of less frequent calls on customers.
Sales Agents. Their pay is a percent of sales. They pay their own
travel expenses. In opening up new territories and maintaining sales
coverage in territories with a limited yield, you pay for results.
Coverage is concentrated in a given geographic area.
Paper Work
Direct Sales. Payroll and other clerical work is necessary to maintain
direct sales staff.
Sales Agents. Only commission statements need be issued. The agents
handle their own expenses, taxes, and have their own clerical staff.
Control
Direct Sales. You have complete control and direction of your own
employees.
Sales Agents. The agent is free to operate according to the terms of
your agreement with him or her.
To Summarize
Advantages of using a sales agent:
- They can give you immediate entry into a territory. They can make
regular calls on customers and prospects.
- They can provide quality salesmanship.
- Their cost is a predetermined selling expense a percent of sales as
their commission.
Disadvantages of using a sales agent:
- Your control over their selling techniques is more limited than when
you train and use your own employees.
- On a large volume of sales, the selling expense may be
excessive-greater than it would be with your own employees.
- Agents' allegiance to your company and its products is not total
because they serve other clients also. They have to have extra financial
incentives to push your products.
- If, and when, you cancel a contract, the agent may take many of your
customers.
Selecting an Agent
If you decide that you need an independent sales agent in a specific
territory, how do you select one who is right for your company? Every
agent, no matter how good, is not right for every manufacturer. Selecting
the one that can be an extension of your firm to the trade is not easy. To
the customer, the agent is your company.
Here are some points to consider in matching an agent to your company's
character and image.
- What sort of selling skills are necessary for selling my products?
Does the agent need technical knowledge and experience in addition to
personal selling ability?
- What marketing functions, if any, do I need in addition to selling?
- Must the agent service my products as well as sell it? Do I need a
one-man or one-woman agency or an organization? If the latter, how large
an organization?
- What is the agent's record of success in products and territories
similar to mine?
- How long has the agent been in business? What is the agent's
reputation? How well can I trade on it?
- Are the other lines carried by the agent compatible with mine? Will
the agent's contacts for existing lines help gain entry for my line?
- Is the trade the agent specializes is the one I want to reach?
- Does the agent cover the geographic area I need covered and in what
depth?
- Do the character, personality, values, and integrity of our two
organizations correspond?
- Can the "reps", who are employees of the sales agent, sales-manage
their own territories or will they need management and guidance from the
agent? Or from me?
- Is the agent the type that merely follows instructions? Or does the
agent have a reputation for offering constructive suggestions? Which
type do I need?
- Is the "chemistry" right? Will we enjoy working together?
Sources of Agents
Once you know the kind of agent you are looking for, it becomes
relatively easy to target in on the right one. You know what questions to
ask the prospective agent. You know what qualities will satisfy your need.
It is a matter of getting prospects from several sources. Those sources
are:
Classified ads in trade papers whose readership is geared toward the
type of manufacturer's representative you seek.
Recommendations from customers and sales managers or owners of
non-competing companies in your industry. Also, editors or salesmen and
saleswomen from trade magazines can often offer recommendations.
You will probably come up with several choices. Agents are not hard to
find. However, selecting the right one for you requires careful study on
your part. Don't rush into a relationship. Getting the right partner is
vital. Once the agent and manufacturer become associated, they are truly
"married," so to speak. Their common goal is to get maximum sales from the
territory.
Working With an Agent
A written contract is the start of harmonious relations with an agent.
It should spell out what each of you is to do.
But don't stop after you've signed on an independent sales agent. Look
for ways to get the most out of your relationship.
How do you motivate your agent to peak results? Unfortunately, here is
where many manufacturers fail. They don't know how to work with a good
agent. Often they blame the agent for their own shortcomings.
Actually, the formula for working harmoniously with an agent is fairly
simple. Companies that work successfully with an independent sales agent
accept the agent as a professional arm of their organization. Their
owner-managers respect the talents of their agents.
Involve the independent sales agent in various phases of your
marketing. For example, the agent may have constructive suggestions on
packaging, sales promotion, and advertising. Many sales agents have strong
ego drives and thrive on involvement. When other clients lean heavily on
the agent, you may have to fight to capture the agent's interest and get
constructive advice. Hold your agent by making the agent part of your
team.
Your communications must be clear and concise. The agent depends on you
for information about your products, processes, and other matters that
bear on selling for you.
The agent's interest, challenge, and profit - as does your profit-comes
from making sales. Don't burden your agent with detail. Rather help cut
through to the heart of what you expect your rep to accomplish sales.
Food For Thought
You cannot ever have what you
want, unless you learn to want what you have. When you're thankful and
appreciative for the things you have, you begin to live abundantly.
Life isn't about getting, it is about being. Nothing you get will make
you happy. Happiness comes from you. Only you can make yourself happy.
When you constantly focus on getting more, then you are acknowledging
and fostering a mindset of lack and limitation. By contrast,
appreciating what you have will keep you focused on abundance, and
that will bring you all the good things you truly desire.
There's nothing wrong with ambition, but it won't get you anywhere
unless it has a context and a purpose. Being frustrated and resentful
about the things you don't have, won't get you very far. Enjoying
every moment, without qualification, will give you the positive focus
you need to achieve your goals.
Appreciate what you have by nurturing and building on it. Take good
care of your body, your home, your family, your relationships, your
environment, your skills, your mind, your values, of life itself.
Like a doting relative, life will give you more when you show
appreciation for what you've already received.
Here's a paradox: those people and businesses that are the most
competitive are the ones that don't compete.
Real winners set their own standards, instead of focusing on the
competition. They don't care about winning a victory over someone
else. Rather, their concern is with doing their absolute best.
When you're winning a race, and you look back, you begin to lose. When
you start comparing yourself to your competition, the you allow
someone else to set your standards for you. You drop back to their
pace. Comparing yourself and your performance to others will only
limit you. Don't do it.
In every industry there is a leader. In every group of humans there is
a leader. The leaders don't worry about what everyone else is doing.
The leaders have their own vision, and because of that they have no
competition.
The best way to eliminate your competition is to stop competing. Do
your best and stop worrying about the rest.
We all have a tendency to get into routines, doing things the same way
over and over, just because that's how we've always done them.
Routines can be a trap that prevent us from seeing opportunities and
experiencing life.
Have you ever been stuck on a problem, then left if for a few days,
and when you come back to it, the solution is immediately obvious?
Often we get so wrapped up in something, so closely involved, that we
need to step back for a while just to regain a realistic perspective.
Here's a sobering thought -- what if you're so intimately involved in
your LIFE that you have lost perspective? Like a frustrating problem
that you can't walk away from.
The way out of that trap is to get out of your routine. Make an effort
to experience something new, really new and different, every day. Read
a magazine that you know you'll disagree with, eat lunch at a
different time, try something you know you're no good at. Make it a
point to take alternate routes to familiar places: the office, the
grocery store, the health club. Try a new kind of food. Make friends
with someone new. Wake up an hour earlier. Adjust the lighting in your
office differently. Re-arrange your furniture.
What habits or routines do you have that rob you of your perspective?
Step back, look at the things you do every day, and ask yourself
"why?" Then look at the things you've never thought you could do, or
never considered doing, and ask "why not?"
The only way you can take control of your life is to switch off the
auto-pilot. |
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