Outsourcing Field Sales

Edition: March 2002 - Vol 10 Number 03
Article#: 1184
Author: Laurence Kaufman, Kaufman Ryan Stral, Inc.

As the leaders of corporate America react to the constant pressure for greater profits and faster buildup of shareholder equity, an old solution has quietly been taking on new relevance. To better focus on their core competencies, more companies are recognizing outsourcing as a more effective and economical way to perform many functions -- not just security, plant maintenance, payroll and human resources, but even such complex activities as purchasing and field sales.

The trend is visible today in mega-billion dollar worldwide companies, as well as in startups and companies with more limited resources. Professional field salespeople who are not on the company payroll, and who don't get paid until they actually sell something, are now more than ever the choice of companies that had not previously chosen the independent manufacturers' representative route.

Manufacturers' representatives are independent professional providers of field sales and marketing services to manufacturers or suppliers. They typically handle a portfolio of related but noncompetitive product lines, working under a contractual arrangement within a defined geographic territory, on an exclusive basis within their assigned field of responsibility. In the food industry, these businesses and their people have been known as brokers -- although they now prefer the more descriptive term prevalent in some other fields, agent -- which accurately expresses the legal relationship with the manufacturers for whom they sell.

The value that manufacturers' representatives bring -- both to those they sell to and those they sell for -- emerges in great measure from the synergy created through the representation of multiple lines. Their product portfolios allow manufacturers' representatives to present broad-based solutions to customer problems, rather than the price-and-delivery responses typical of single-product selling. Their consultative approach not only opens the door for other lines, but also adds value and stimulates a partnering relationship with the buyer, as the purchase progresses through an entire project.

Unlike distributors, who take title and add cost to the goods they sell, reps are not an additional channel, nor are they middlemen or channel intermediaries. They are the manufacturers' sales personnel in the territory, simply paid on a different basis -- commissions, rather than salary plus incentive plus expenses. In fact, reaching the channel in the most cost-effective manner is probably the most prevalent reason for choosing the rep route -- although manufacturers report that their reps bring them many additional marketplace advantages besides the clear economic benefit of no sales expense until there is a sale.

The ability of manufacturers' representatives to outperform direct employee sales forces starts with the inherent benefits of product line synergy, and continues with the caliber of rep sales personnel. Rep success is directly tied to productivity, so the profession attracts and retains the top talent in each industry -- the entrepreneurial, the competitive, the goal-oriented. Moreover, their success is linked to their contacts with customers and distributors in the territory, not with their friends in the corporate hierarchy.

The factory-direct sales person who produces is likely to be promoted, whether to another location or to the home office. Recent Dartnell figures indicate the average stay of a company salesperson in a given territory is only 22 months. For manufacturers' representatives, a figure of 22 years would be more likely!

Being rooted geographically leads to stability of relationship, an important added value in a world where the customer is king. Another, possibly the most simplistic: the multiple-line sales call is simply more cost-effective. The buyer saves time discussing several needs during a single meeting.

Because of their multiple-line perspective, reps are more likely to look at the forest, not just the trees. Their job is to add value, satisfying the customer's need and facility the flow of goods to the customer, in the way that the customer wants to buy. Astute manufacturers recognize this, and develop compensation programs that compensate the representative on all orders from the territory, whether placed through distribution or direct.

Independent contractor sales representatives are not only a source but a resource. They supply in-depth multilevel, interdepartmental coverage, helping to bridge the frequently encountered communications gap between purchasing and other departments. Their advice is cogent because of the familiarity achieved over the years not only with the customer's needs, but also with the customer's total corporate culture. Their greater market exposure gives them access to a broader range of information, which they can analyze with objectivity and added perspective.

The 18 Benefits of Outsourcing Field Sales
·Predictable sales costs that go up and down with sales
·Standardized sales costs
·Lower sales costs
·Immediate Market access
·Broader market penetration
·More experienced sales force
·Multifaceted, multi-skilled sales team
·Wider, deeper coverage
·Stronger local relations
·Reduced sales force turnover
·Training required only on product
·Closer-to-the-customer forecasting
·Better market intelligence
·Increased sales
·Knowledgeable advice and information – hear it like it is!
·Risk-free exploration of new market niches
·Problem-solving approach outperforms product selling
·Vested partner in manufacturer's success