Maximizing the Manufacturer-Independent Rep RelationshipBy: John Drosos Manufacturing, Sales Strategy
In partnership with NEMRA (National Electrical Manufacturer Representatives Association), Alexander Group (AGI) recently completed a comprehensive study on the key drivers of a strong and effective relationship between manufacturers and independent sellers. One hundred eighty-five sales representative principles and 29 manufacturing executives participated in the study, providing both fresh and invaluable insights on the key ingredients to maximize the seller–manufacturer relationship. The findings show a strong alignment between manufacturer needs and the capabilities of well-managed representative firms. At the same time, it is clear that both sellers and manufacturers should re-evaluate and invest more in key areas that promote an effective, long term relationship.
AGI-NEMRA Study Focus Areas
The study focused primarily on three high level questions:
- Why do manufacturers choose to work with sales reps, and are there certain factors that drive differentiated sales growth?
- What do manufacturers believe are the most important drivers of an effective relationship with reps?
- What do reps believe are the most important drivers of an effective relationship with manufacturers?
Manufacturer Demographics & Strategy: Of all the key factors that AGI analyzed, three correlated to differentiated sales growth.
- Rep time dedicated to specifiers: Rep firms that indicate they spend 20 percent or more time with specifiers–as opposed to other potential buyers/influencers–report on average 10.1 percent annual sales growth compared to 7.3 percent growth for firms who spend less time with specifiers. This growth differential was achieved regardless of firm size.
- Manufacturer preference for rep model: Manufacturers that are primarily rep-centric (80 percent plus of Division sales covered by reps) report 2.6 points higher growth than less rep-centric manufacturers. Focusing more heavily on independent reps may give manufacturers more rapid access to markets and more continuity in sales resources compared to a direct sales model.
- Higher manufacturer C-suite engagement: Manufacturers that cite higher C-suite involvement with the rep channel, also report higher year-over-year growth than peers with more hands-off C-suite engagement. Engaged executives can more effectively translate strategy into execution by actively communicating with their top rep firms. They also have a better understanding of how to effectively support and leverage reps.
Manufacturer Areas of Focus to Support Relationship: Manufacturers primarily focused on structured/frequent communication, training and enablement/support programs to strengthen their relationships with reps. Reps see enablement/support as the most critical factor but are skeptical of how effectively manufacturers are communicating with them. There is tremendous opportunity to improve communication, which sellers feel is often more of a hindrance than a help.
Independent Rep Areas of Focus to Support Relationship: From the seller perspective, the most important relationship driver is better access to manufacturer support programs and resources. This is also a top three priority for manufacturers. Interestingly, manufacturers do not prioritize performance-based compensation or C-suite commitment, which are the other top three relationship drivers for reps. This is potentially a big miss for manufacturers who want closer and more effective partnerships with reps but do not advocate for reps in the C-suite, and stick to legacy commission practices for innovative products and solutions.
The full findings from the AGI-NEMRA study provide unprecedented and invaluable information to help both rep firms and manufacturers improve their relationships and ultimately effectiveness. In addition to a full Study Report, AGI and NEMRA have developed:
- An automated scoring tool to help Reps and Manufacturers gauge the effectiveness of their relationship
- A best-practices Rep-Manufacturer Alignment Model outlining the most critical elements to developing an effective relationship
A summary of the study report will be shared with NEMRA Rep Firms and Manufacturer Members. In addition, NEMRA will highlight key findings from the study at its 2017 annual conference, February 1-4 in Orlando, Fl. If you would like a copy of the study output and/or a review of the findings, please reach out to an AGI Manufacturing practice leader or to NEMRA.