Many companies have begun to switch from the old model of internal, direct salespeople to engaging a sales agency to represent their products instead. This is a fast-growing trend, especially in highly technical fields such as manufacturing. Why are so many companies making this decision?
There are many reasons a company might consider changing their sales model. One common problem occurs when a company’s inside salespeople find they don’t have the availability to invest the time and resources necessary to penetrate targeted markets and maintain close relationships with their clients there. For example, an account manager for a large manufacturer may have 500 clients, and he/she can’t spend enough time on each account or prioritize them all. The account manager is forced to focus only on the largest accounts that bring in the most revenue.
But a sales agency, such as a manufacturer representative company working on behalf of the manufacturer, can focus on each customer and invest the resources and human capital necessary to provide a higher level of service to those accounts. The manufacturer’s representative agency is inherently motivated to maintain good relationships with their clients, because when their clients do well, the agency does well too. This is one reason that companies choose to engage with outside sales representative agencies.
Switching to a manufacturer representative agency can also save a company from funneling too much of their resources into hiring, training, and maintaining an inside sales force. The cost of having inside salespeople can be high. Those employees require training, salaries, benefits, and reimbursement for travel. They need a supporting organizational structure, such as an experienced manager to lead them. A manufacturer representative agency’s sales teams are already trained in the territory the manufacturer is trying to sell to. Their representatives already have contacts in the relevant areas.
The manufacturer representative agency arrangement is designed to work in favor of both parties. The representative agency agrees in advance upon a set rate of commission and pays their own selling expenses in return for a contractual agreement to be the exclusive agent of the manufacturers they represent in a given territory. The agency profits by leveraging their time so that sales for multiple manufacturers can be made with the same customer, often on the same call. Because outside sales agents sell several compatible items, they call on a wider variety of prospects and customers, often finding applications for products that would be unavailable to a single-line/internal salesperson. Salespeople from the manufacturer representative company are able to offer packaged solutions that solve complex problems.
Recent trends have shown that the most advantageous business model for a manufacturer representative agency may be to represent a small number of clients and focus on building their sales staff with experts who understand their clients’ products in detail. They may even invest in training their sales force on their clients’ products, so customers can come to them for servicing of the products they sell.
Although this business model has not yet been widely adopted among manufacturer representative agencies, some companies have realized its value. For example, TechStar is one manufacturer representative agency who takes this approach.
TechStar’s business model is unique among manufacturer representatives because we intentionally limit our focus to represent only 8–10 manufacturers; whereas, most other manufacturer representative companies have over 30 clients. This tight model pushes our focus onto building a staff with experts who understand the clients’ products on a deep level. TechStar takes this approach even further by providing our own in-house training to customers who use our manufacturer’s products, teaching their technicians how to install, configure, troubleshoot, service, and maintain the equipment they purchase from TechStar’s manufacturers.
Because of this unusual business model, TechStar feels we are able to provide a level of service that is not available to companies’ internal sales teams. Knowing our manufacturers’ products inside and out allows us to service every step of the process from initial purchase to decommissioning.
Although this approach to running a manufacturer representative agency has not been widely adopted yet, it can offer an edge to manufacturers who are trying to penetrate new markets, make a shift in their sales approach, or reduce the risk and volatility of their sales budget.