Anatomy of a Manufacturer's Agent

Anatomy of a Manufacturers’ Agent is to clarify what one can expect -and what not expect- from a sales rep, an independent rep and what the rep's obligations are towards the manufacturer (the Principal).

Note: For simplicity purposes all references are in the masculine form.

What He Is

• He is a fiercely independent entrepreneur remunerated by commissions on sales.
• He is an alternative to a direct sales force (made up of employees).
• Because of his remuneration system he gravitates around products that generate larger sales volumes.
• Manufacturers of specialty or small volume items must find agents whose product lines complete their line or pay a higher rate of commission to compensate for the low volume.
• He divides his time between "revenue producing events" and "non-revenue producing events". Product/manufacturer that generates too many "non-revenue producing events" are soon set aside.

What He is Not

• He does not take title to the merchandise; he is not a distributor. Many take title to the merchandise but it is important to realize that when they do so they act as a distributor, not as an agent and they will propose separate fee arrangements for such activities.
• He is not your employee.
• He is not your marketing director or sales manager who will present you with elaborate market studies or marketing plans. Many can do it but this is not a normal activity of an agent.

Two Fundamental Types

• Product-oriented: He represents 5 or 6 lines covering the different markets his product address (ex. material handling and recycling markets). He shies away from specialty items.
• Market-oriented: He concentrates on one type of market such as architectural lighting. He tends to handle smaller lines and seeks non-competitive products that will meet his customer's needs. You will find more of this type in low-density territories (Upstate N.Y. vs. New York City).

Note: Most agents are a mixture of these two types.
 

What You Can Expect

• Introduce your product to his customers, distribute and keep catalogues up-to-date and ask for the order.
• Participate, along with the manufacturer, in exhibitions, make joint calls, refer complex technical questions to his principal (manufacturer), follow-up on leads (his and those generated by our advertising).
• Report difficulties in selling your product or provide feedback on negative perceptions of your company.
• Recommend advertising or promotion media.
• Participate in establishing budgets and objectives.

We have experienced that these last three points are better discussed in person.

Note: Many agents offer services such as mailings, warehousing, outside inventory control, collection, complaint handling, market studies, etc. but these are not an agent's typical responsibilities. A manufacturer should ask, and note, what other services the agent can provide.

What You Should Not Expect

• Long-term promotion, missionary work. Agents can be involved but long-term promotion and missionary work is the responsibility of the manufacturer. Many agents will take on this type of work but not under normal commission arrangements and at that point they act as a consultant rather than as an agent.
• Cover up for a manufacturer's repeated errors (late deliveries, bad workmanship, etc.)
• Written and regular reports:
  1. It is not his nature and remember he is not your employee
  2. In the USA (Canada is preparing similar legislation), if an agent writes regular reports to his principals (manufacturers), the IRS (Income Tax Dept.) considers him an employee, therefore the commission is treated as a salary. The manufacturer must treat the commission as a salary and withhold and remit the normal payroll deductions. This underlines the importance of a written agreement between the agent and the manufacturer.
• That orders will happen without follow-ups, joint visits and support on the part of the manufacturer. Therefore the importance of regular and well planned joint calls.

How to Lose an Agent

• Do not offer support such as advertising programs, exhibitions that will generate leads.
• Contact his customer "behind his back".
• Do not keep him informed of requests coming from his territory.
• Establish house accounts in his territory.
• Pay commissions late.
• Too many quality, delivery problems.

For more information on manufacturer's agents, how to identify,
approach and support them, do not hesitate to contact us.
info (at) thethinkingsalesman.com