Corporate America Discovers Independent Reps

One-forth of the Fortune 500 corporations are now using independent sales reps, according to a recent survey by Lavin Assoc. These major corporations are even marketing independent reps to their customers as part of their new "value-added services."

New Roles for Reps

Traditionally, small, independent manufacturers relied upon independent sales reps simply because they cost less than a salaried sales force. But today, corporate America is finding several key benefits from working with independent sales reps beyond basic sales.

Independent reps act as the corporation's local sales and marketing directors. They know their customers, local markets and territories. National - and international - manufacturers are now utilizing local independent reps for:

• Product inservices both for customers and end-users;
• Order processing via laptops or hand-held technology;
• Local promotions involving their respective customer base;
• Local customer service to field and resolve issues; and
• Regional warehousing and fulfillment.

Inside salespeople are often motivated by the possibility of promotion up the corporate management ladder or to another corporate location. Other sales employees rest comfortably on their base pay and are not incentivized by additional commissions. But corporations are learning that independent reps are more productive because they have different motivational drives than these employees. Independent reps are entrepreneurs who understand that their success is dependent upon knowing and satisfying their own customer's needs.

New Management Focus

A corporation's attention to communication and compensation when working with independent sales reps appears to determine the long-term success or failure of these relationships.

Many major corporations are giving independent reps communication tools such as free email, voice mail and customer relationship management (CRM) software programs. Weekly conference calls or online sales meetings work to incorporate the independent reps as part of the company sales and marketing team. Online newsletters and discussion groups help outside reps feel "inside."

Some corporate sales and marketing departments have also included one or two independent reps on their management committees, bringing them in for periodic meetings. But in general, independent reps are being removed from the field less often in response to demand appearances at corporate for new product introductions, training or regular corporate meetings. More and more corporations are sending their sales and marketing teams out into the rep's domain, not only for product training but to learn more about their own customers and niche markets.

One crucial management issue is for corporations to act proactively and include independent sales reps in their product, pricing and marketing changes. Independent reps that hear this news from their customers do not feel secure or supported by their respective manufacturer. Manufacturers can include independent reps in their sales and marketing efforts through several simple actions:

1. Present educational training programs that make independent reps knowledgeable about newly introduced products, programs and promotions.
2. Disseminate new product literature to reps before their customers learn about the products from other sources such as trade ads or invoice stuffers.
3. Use email, faxes or newsletters to announce new product roll-outs before they take place.
4. Sample independent reps on the new products and enable them to sell more effectively.
5. Connect independent reps electronically with in-house customer service, fulfillment and credit departments so that they can inform their customers about order status at each step in the sales process.

Commission Beyond Sales

The issue with commissions is no longer the percentage paid but what is included in addition to sales. Cold calls? Telemarketing? Prospective customer presentations? Customer product inservices? End-user product training? Social time with customers?

Some Fortune 500 corporations are even rewarding independent reps for cost efficiencies, best practices and customer relations. And others are creating commission structures that are based upon profit margins instead of gross sales.
The bottom line is that manufacturers that pay commission on all of the activities necessary for sales and customer retention - instead of sales only - are enjoying higher sales and profitability from their independent sales reps.

Short-term incentives have been reported to be more effective than year-end rewards. Manufacturers that sponsor quarterly incentive programs in addition to their regular commission structure are experiencing higher monthly sales and profits from their independent reps.

The compensation issue is reflecting this new role that independent reps now play for manufacturers. Selling is no longer an isolated act but rather part of a sales and marketing process or continuum that involves staff from within almost every corporate department as well as the independent sales reps. When in-house employees and outside independent sales reps work closely together as a unified team, then their corporate sales and marketing programs are successful - and their customers remain loyal.

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