Are You Selling More for Less?

Manufacturers, their salespeople and manufacturers sales representatives (MSR’s) appear to be selling more product for less return. Why? Following are two current national trends:

1)    A recent headline announced that manufacturers are forecasting deflation for this year. The National Association of Manufacturer’s survey reported falling prices, lower profits and decreased earnings growth.

2)    MSR’s report that their commission rates are being squeezed even more by manufacturers in response to increased contractual selling and sales through distributors, both of which have resulted in lower margins.

Manufacturers are increasing sales quotas while decreasing commissions. Buying groups and distributors are accounting for the majority of sales, most of which are either non-commissionable or paid at a much lower rate. Is there any wonder why salespeople are less motivated to sell?

Numbers vs. Relationships

Any corporate plan to increase sales must begin with sales in the field, because this is where the buyer/seller relationship exists that drives the purchasing decision. And the value that a salesperson brings to the table today is more than simply product features and benefit. They provide invaluable market information.

The terms “One-on-One” and “Knowledge Selling” are currently being used to denote this different approach to sales that stresses the long-term relationship over short-term selling and providing solutions instead of selling numbers of products. Sales is becoming a complex relationship instead of a simple transaction.

The growth of sales force automation is also placing higher information demands upon salespeople. Customers want to know now available inventory, lead time, freight costs, costing comparisons by program, new product launches and other available promotions.  Suddenly, the salesperson in the field is a more valuable link in the sales process. And more value should equate to a higher return for the salesperson as well as the company.

Recognize the Field Component

The supply chain naturally begins with the manufacturer and ends with the end-user, be they consumer, patient, caregiver, professional or institution. And distribution has worked to make this process more efficient by maintaining the most popular goods closer to the end-users. For the end-user, accessibility and/or lower inventory levels translates into lower costs.

Many manufacturers make the assumption that once they have achieved maximum distribution in any market, then they can simply focus on production and new product development, leaving the selling to distributors. Unfortunately, this rarely works. Distributors are the first to admit that sell programs, not products. Their role is to supply and promote products, and if a manufacturer wants sales representation in the field then they have to use their own people. 

Manufacturers that participate in a distributor’s regular promotional programs usually dramatically increase their sales. But promotional tools such as monthly circulars, buying groups, new product autoship programs, private label programs and trade show specials are simply timed promotions. The customer either takes advantage of them or not, because no one is standing in front of them to influence their purchasing decision. In contrast, whenever I watch a salesperson presenting these promotions to a customer, they have significant influence on which promotions are bought.

Whether the end-user is a business or individual, the buyer in either situation usually has a relationship with one or more salespeople whom they trust. Yes, the buyer probably does buy through a distributor, but from whom do they buy? That is the question.

Valuing Field Sales

If manufacturers employ their own sales force, then their own employees might have developed this long-term relationship with buyers. However, whenever I ask a buyer who they buy from most often, the answer is usually from an independent sales representative. I am not trying to push MSR’s here, but simply state an observation that MSR’s live and work on their home turf and maintain excellent relations with the buyers within their respective territories. For a manufacturer’s salesperson to achieve this same level of trust and sales, a significant amount of time and money must be invested into that person in their particular territory before a return can be realized. Also, if the manufacturer’s salesperson does perform well, they are usually promoted to sales manager or given a larger territory - thereby preventing them from developing any long-term relationships.

What is this long-term buyer/seller relationship worth? Depends on whether you ask the manufacturer or the salesperson. MSR’s are paid commission rates averaging 10 percent on regular sales and as low as 5 percent on volume sales, sometimes with the inclusion of a higher introductory rate of 12 to 15 percent for pioneering. Corporate salespeople are being offered additional incentives today to offset their decreased commissions, such as stock options, matching 401K plans or periodic profit-sharing bonuses.

What is wrong with this scenario? If a salesperson’s value in the field continues to increase, why do their commissions continue to decrease? These commission rates are always being negotiated downward in response to market pressures such as distributor margins and lower contracted or capitated rates. However, the selling process in the field has not changed as far as the buyer’s and seller’s relationship.  When a manufacturer decides they can do business as usual without this field salesperson, it is usually just a matter of time until they lose the account to a competitor that has a salesperson in place who already knows the buyer.

Documenting the Value of Sales

For the salesperson to maintain their position when faced with these increasing market pressures from consolidation and volume, they must document their value for manufacturers. Here are a few suggestions:

Sales & Marketing Strategic Plan: Present a brief, one-page overview of how you would sell and market the manufacturer’s product lines within your own territory. Every territory is different due to population size, distances between population centers, distribution (or lack of) and local characteristics. Identify key accounts and how to increase their purchases. Demonstrate how your intimate knowledge of your territory and accounts will help increase the manufacturer’s sales within that territory.  

Key Contacts & Accounts: Salespeople need to let manufacturers know what relationships they do maintain in order to maximize their own value. List key accounts and buyers by area and market and the number of years they have worked together. 

Local Trade Events: Often manufacturers are unaware of regional or local trade shows, conferences or seminars that are major events for a regional or local customer base. Develop an annual calendar with a listing of these events, who attends them and highlight the events at which you believe the manufacturer should have you attend on their behalf.

Company Referrals: When customers call a manufacturer’s toll-free number with questions about purchasing a product, what happens to this lead? The national statistics are grim, because most of these leads are ice cold (i.e., 45-60 days!) by the time they reach their respective salesperson in the field. Take an active part in working with customer service representatives to ensure that leads are processed and forwarded to salespeople in the field within a specific time period, such as 24 or 48 hours. Explain how the value of a lead diminishes with time from the initial inquiry, and work to speed up your manufacturer’s lead generation process.

Train, Train, Train: Even the best salespeople can’t sell without having current product information. Product inservices help to refresh even the most veteran salesperson’s sales presentations, as well as keep them abreast of new product developments. Also, presentations to key accounts are usually better received - and attended by more senior personnel - when a corporate representative is also present.

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