Through multiple line selling both the effectiveness and cost-effectiveness of the basic selling function are increased. Multiple line selling creates a synergistic effect, with a broader, better defined customer base, and with more complete coverage, resulting in deeper market penetration and increased sales.
The manufacturers’ representative also receives only a commission, and only for their results, therefore, manufacturers who want to lower and stabilize sales expenses, relative to the actual flow of orders can turn to manufacturers' representatives to augment their sales and marketing function. Manufacturers’ representatives ultimately save the customer money because factories that market their products through outsourced field sales can operate more efficiently, which ultimately may be passed on to the customer in the form of a lower priced product.
The manufacturers’ representative also saves the manufacturer and customer money by selling non-competitive lines of several factories that are synergistic in nature. In effect they reduce the cost of selling since single visits can provide sales coverage for many products and ultimately save the customer’s precious time. It is staggering to think of the cost to a manufacturer, and ultimately the cost of the product, if all 1000+ foodservice equipment, supply and furniture manufacturers in the U.S. today used a factory direct sales force to sell their products in the many different territories.
Typically, the manufacturers' representative receives credit for all sales within the territory, and receives a commission for these sales through a mutually agreed upon written contract of varying length with the manufacturer. Reps are paid only after the sale is made. As part of the sales operation the representative maintains a sales and marketing business, compensates sales and administrative personnel, and assumes responsibility for all business and sales operating expenses including employee benefits, taxes, advertising, auto, travel, technology, insurance costs, office equipment, etc.
A true evaluation of the alternative, a factory direct salaried salesperson, which may appear as a total cost of a $80,000-a-year can actually be closer to $160,000-185,000 when commission, employee benefits, auto, travel and expenses, holidays, and all other costs are computed. Manufacturers’ representatives also eliminate the “soft costs” of personnel (i.e. phone service) and wipe out a manufacturer’s legal exposure. Representatives pay for the costs to select, train, compensate, discipline and terminate their own employees, reducing the legal exposure of manufacturers. Today a one-to-one relationship exists between an outsides sales professional and inside support person.
No, representatives can actually save the customer money because in many instances they may be the low cost alternative to factory direct salespeople who are compensated with more than just a commission. A representative is a form of outsourcing the sales function. Just like many companies are outsourcing their manufacturing and many of us outsource our accounting, representatives are an outsourcing of the selling department.
Manufacturers’ representatives are simply a substitution for a direct sales force, nothing more, nothing less—and all manufacturers must have a sales force. A true channel intermediary is one who, like a dealer or distributor, takes title to a product, marks it up and resells it as a service. The service, which may well be an added value, is worth “x” and does add cost to the product.