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Outsourcing Field Sales. A Better-Than-Ever Response to the Competitive Pressures Facing Today’s Top Executives. Presented by the Manufacturers Representatives Educational Research Foundation . Corporate pressures and responses. Greater profits Faster buildup of shareholder equity

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outsourcing field sales

Outsourcing Field Sales

A Better-Than-Ever Response

to the Competitive Pressures

Facing Today’s Top Executives

corporate pressures and responses
Corporate pressures and responses
  • Greater profits
  • Faster buildup of shareholder equity
  • Focus on core competencies
  • Outsource - security, maintenance, payroll, human resources, purchasing - and now field sales
roots of the trend to outsource field sales
Roots of the trend to outsource field sales
  • Performance-based compensation
  • Practical approach to downsizing
  • Diversification into multiple markets and specialized distribution channels
  • Explore new opportunities with minimal investment in sales infrastructure
  • Lower overhead, standardized sales costs
benefits of outsourcing field sales
Benefits of outsourcing field sales
  • 1. Increased sales
  • 2. Predictable sales costs that go up and down with

sales

  • 3. Standardized sales costs
  • 4. Lower sales costs
  • 5. Immediate market access
  • 6. Broader market penetration
  • 7. More experienced sales force
benefits of outsourcing field sales6
Benefits of outsourcing field sales
  • 8. Multifaceted, multi-skilled sales team
  • 9. Wider, deeper coverage
  • 10. Stronger local relationships
  • 11. Reduced sales force turnover
  • 12. Training required only on product
  • 13. Closer-to-the-customer forecasting
  • 14. Better market intelligence
more benefits of outsourcing field sales
More benefits ofoutsourcing field sales
  • 15. Knowledgeable advice and information - hear it

like it is!

  • 16. Risk-free exploration of new market niches
  • 17. Problem-solving approach outperforms product

selling

  • 18. Vested partner in manufacturer’s success
what is a manufacturers representative
What is a manufacturers’ representative?
  • Independent professional provider of field sales and marketing services to manufacturers or suppliers
  • Typically handle a portfolio of related but non-competitive lines
  • Work under contract in a defined territory on an exclusive basis
  • Income directly tied to productivity
the traits of today s manufacturers representative
The traits of today’s manufacturers’ representative
  • Professional
  • Multifaceted
  • Technologically adept
  • Ubiquitous
  • Come in all shapes and sizes, from small defined-focus firms to multiple-office firms handling all facets of marketing
bringing value to buyers and sellers
Bringing value to buyers and sellers
  • Portfolio synergies
  • Broad-based solutions
  • Consultative approach
  • Partnering relationship with customer
  • Greater speed of market penetration
  • Entrée through portfolio leverage
  • Basic economics of sales before sales costs
what manufacturers representatives are not
What manufacturers’ representatives are not
  • Not an additional channel - they are the manufacturer’s sales force paid differently
  • Not middlemen - they neither take title nor mark up costs
  • Not distributors - and very different from distributors
differences reps distributors
Sell only in a defined territory

Do not handle competitive lines

Sell as agents; do not take possession

Compensated largely by commission on sales

May sell anywhere

Often handle competitive lines

Buy for resale; take ownership

Compensated by margin of sale price over cost

Differences REPS DISTRIBUTORS
more differences reps distributors
Typically handle 12 to 14 lines

Typically entrepreneurial, owner-operated

Add value through design-in, application engineering, product synergy

Often handle several hundred lines

Large firms often publicly traded

Add value through time-place utility

More differencesREPS DISTRIBUTORS
more differences reps distributors14
Interface with distributors, refer orders to distributors, receive commission on sales through distributors

May warehouse (for a fee), but do not maintain inventory

Rely heavily on rep for referrals, training, engineering support

Maintain inventory

More differencesREPS DISTRIBUTORS
more than a source a resource
More than a source, a resource
  • High caliber personnel - entrepreneurial, competitive, goal-oriented
  • Success tied to contacts in the territory rather than the corporate hierarchy
  • Rooted geographically, creating stable relationships
  • Saves time for the buyer by presenting multiple lines in a single call
win win win

Win - Win - Win

The Customer Benefits Too

bringing value to the customer
Bringing value to the customer
  • Stable relationship with someone who knows the corporate culture
  • Long-term commitment to the territory
  • Multifaceted resource
  • More efficient (multiple line) sales calls
  • Consultative selling
  • Bridges intra-company communications gap
more customer benefits
More customer benefits
  • Advocacy, ability to secure exceptions to supplier policy
  • Help in order strategy, distribution or direct
  • Perspective on market conditions and trends
  • Solutions approach -- looking at the forest, not the trees
what happens when buyer needs diverge from seller s sop
What happens when buyer needs diverge from seller’s SOP?
  • Rep has more at stake with other products sold to the company, and thus will fight harder for needed accommodations
  • Rep has more freedom than direct salesperson to carry the fight to the top
the economics
The Economics
  • Comparing commissions with the cost of hiring some-one full time is misleading
  • 1. It ignores costs borne by representatives that would transfer to the manufacturers
  • 2. It ignores administrative and facilities costs in the territory and the home office
  • 3. It overlooks the likely faster growth a team can bring compared to one person
what costs does the rep cover
What costs does the rep cover?
  • Finances the sale, usually receiving commission only after goods are shipped
  • Pays for recruiting, training, employee benefits, travel, client entertainment, automation, order entry, and more
  • Handles extra roles in expediting, returns, trade shows, administration
  • Eliminates manufacturer’s legal exposures
myths and misconceptions
Myths and misconceptions
  • Myth: The distributor can handle the whole field sales process
  • Truth: Distributor function is different, logistical instead of problem-solving
  • Truth: Distributors, stocking competitive brands, cannot be one manufacturer’s advocate
  • Truth: Reps and distributors work as teams
myths and misconceptions24
Myths and misconceptions
  • Myth: The Internet, EDI and eCommerce render personal contact superfluous
  • Truth: they support sales by delivering and gathering information, so “face time” is more productive
  • Truth: High tech can’t replace high touch in creating demand, negotiating contacts, analyzing solutions, dealing with exceptions
myths and misconceptions25
Myths and misconceptions
  • Myth: Reps don’t take a long-term perspective
  • Truth: It would be reasonable not to, given the reality of 30 day termination clauses
  • Truth: Reps invest in their territories and clientele, and in sales that develop slowly
  • Truth: Reps needs long-term mutually profitable relationships with principals
myths and misconceptions26
Myths and misconceptions
  • Myth: Reps are independent and difficult to control
  • Truth: Independent is a legal term that protects manufacturers
  • Truth: The best control is from directing, motivating, and partnering with reps
  • Truth: Reps and manufacturers need to feel inter-dependent
advancing the profession
Advancing the profession
  • Enhancing management skills for reps and manufacturer personnel who manage reps
  • Disseminating information and advancing public understanding of the rep system
  • Three-year Certification program shows commitment and demonstrates achievement
  • Reps offering new services, participating in new selling paradigms
leading indicators of skilled rep firms
Leading indicators of skilled rep firms
  • Have strategic plans
  • Strong territory relationships
  • Able to share intimate market knowledge
  • Technologically current
  • Active in industry associations
  • Network for best practices
  • CPMR certified management
information sources about reps
Information sources about reps
  • Manufacturers Representatives Educational Research Foundation www.mrerf.org
  • Agency Sales Magazine (MANA) www.manaonline.org
  • Industry-specific rep organizations, such as (person using presentation should put in the appropriate association name)
reps more than a source
Reps -- More than a source
  • Synergy of multiple lines
  • Economy of shared costs
  • Permanence of shared costs
  • Intimate knowledge of customers
  • Solutions orientation
  • Perspectives they bring to principals
  • Prosper only by creating prosperity!
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