Manufacturer's Corner

Agency Sales,  Dec 2005  

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The Newsletter For Sales Executives Who Use Manufacturers' Representatives

Sharing best practices to help you get the most from your rep partnership

A Well-Cast Vote Against House Accounts

When we asked MANA's associate (manufacturer) members if they were willing to share their thoughts/philosophies concerning house accounts, one response was especially telling. According to Jim Malloy, vice president of sales, Miyachi Unitek Corporation, Monrovia, California, house accounts occupy no space in his relations with independent reps.

"We've been around for more than half a century and have been working with independent reps for more than 35 years," he explained. "With that long period of time in place, we've adopted a philosophy that we treat our reps as part of our family. We don't look upon them as 'just those guys who get paid a lot for selling something for us.' We recognize the fact that they're a variable cost. We - and they - sell a lot of capital equipment, and everyone makes a lot of money. On the other hand, when things aren't so hot, they don't get paid as much. Having said that, we believe that reps are paid because they know the territory, and we support the heck out of them to let them do their job best. If we introduce the concept of having house accounts for any number of reasons, then that's not supporting the rep. That would work against what we believe in. If anything, that would motivate against them doing their best. Our feeling is that by the way we work with them, we get a much higher mindshare."

As to what he might say to a rep faced with the specter of one of his long-standing principals introducing house accounts for any reason, Molloy offered, "You might want to view that as some sort of a 'red flag.' Perhaps it's the beginning of them thinking about going direct."

If that's what he would say to a rep, here's what he might convey to the manufacturer who contemplates such a move: "Consider for a moment what your sales model is and what you hope to accomplish. If you say the rep is an integral part of your channel, then it's important that you talk the talk, and not everyone does that. By introducing house accounts, you're differentiating your reps by isolating that account, and you're isolating it for the wrong reasons. For instance, one of the most important reasons for using reps is that they call on multiple purchasing points within a customer. They can get multiple sales within that facility. So by turning it into a house account, you're not getting the benefits of the rep's abilities. How many times does the rep come across a new opportunity with a customer because he enjoys better penetration than you could achieve? You get much more motivation by letting them go after anything and everything they can get.

"Some companies have a big problem when they have to write a big check to the reps. That's not me. When I have to do that, I'll be sure to send them a little 'love' note congratulating them on the effort and thanking them for the help. Simply stated, that's our philosophy. We run our business well and our philosophy allows us to head off any problems ahead of time."

One Approach for Split Commissions

In the September 2005 issue of Agency Sales, readers were asked for their input regarding how they address the subject of split commissions. One reader, Stuart B. Marschall, president, International Division of Smith & Loveless, Inc., took us up on our request and offered the following:

"Our company sells a highly engineered product in which the three parties, consulting engineers, end user clients, and contractors, all have a say in what is finally purchased. We have been using the following commission policy statement since the late 1970s to deal with the subject:

A. Jobs containing our (company name) specifications

1. 45% commission for engineering location

2. 30% commission for contractor order location

3. 25% commission for job location

B. Jobs not containing our (company name) specifications

1. 30% commission for engineering location

2. 45% commission for contractor order location

3. 25% commission for job location

"Please note that any portion of the engineering and/or contractor location credit can be split among the different representative offices, if the representative contributed to the sale by working with another office of the consultant and/or contractor. A (company name) specification refers to a condition that we would have a decided advantage in bidding the project. Final determinations in this regard will be made by the appropriate sales manager. Note the percentages above are of the total available commission to the representative on the project."

More on The Legal "Rat Hole"

When Pat Cleary, senior vice president of communications for the National Association of Manufacturers (NAM), spoke at this year's Keystone conference, he cited a 22% cost disadvantage to accommodate legal costs that U.S. manufacturers carry when competing against manufacturers from other countries. Any doubts of the truth of Cleary's figures are put to rest after reading the results of a survey conducted by an international law firm.