As you grow your organization, are you going to hire a “rep” and risk some loss of visibility and control, or are you going to increase your fixed overhead by hiring a direct sales team? No, it’s not that simple, and I had fun moderating a discussion on this topic at the Heavy Duty Marketing and Sales Forum 2011 Fall Conference. Tim Kraus – thank you again for the invitation!
The Forum, under HDMA leadership, meets twice annually and is comprised of 40+ sales and marketing leaders from a broad range of heavy duty component and system suppliers. Presentations hit on market trends and issues, in a supervised environment that adheres closely to published anti-trust guidelines. Additional information is available at www.hdma.org under “Councils and Forums”.
So when does it make sense to hire a rep, and when does it make sense to go direct? That’s what we kicked around for a good hour. Our discussion was focused specifically on the OE channel, and we started with the basics: Why employ a sales team?
In addition to revenue, your sales team exists to drive growth, profitability and cash flow. They do this by identifying new product opportunities, managing price and AR, nurturing relationships and protecting the brand. This role implies management of a complex web of internal and external relationships. First question – can a rep reasonably manage this level of complexity? One way to answer the question is to ask which organization has the greater perceived level of complexity – the supplier or the OEM? Reps thrive at complex OEM’s, because they are a constant presence. They are challenged when it comes to bigger suppliers due to the inverse … they aren’t there often enough! In either situation the supplier has a commitment to make, ensuring that the field sales team maintains a sufficient presence at the customer, with an excellent support system back at the factory.
This led to the next discussion point – when talking about field sales staff, you have to work from the assumption that the individuals are competent, professional and experienced. It doesn’t matter which model you’ve adopted, if you haven’t got “the right people on the bus” … to quote Jim Collins … then it really doesn’t matter if they are commissioned reps or directly employed account managers.
Working from this assumption, the group discussed some pros and cons related to reps. The table below captures the talking points (Table 1).
PRO
• Reps typically have close customer relationships
• Reps typically have significant industry experience
• Reps are highly motivated to win new business
• Reps do not add fixed overhead cost
• Reps can reduce expenses and workload of sales management
• Reps reduce the expense of new product development
CON
• Reps typically do not have close relationships inside the factory
• Reps may not have a focused technical expertise
• Reps may not have significant commercial business experience
• Reps have the potential to collect sizeable commissions
• Reps cannot be controlled as easily as a direct sales force
• Reps limit effective allocation of the sales and marketing budget
For more on the discussion, check back next month. And thanks for reading! - John
