Reps vs. Factory Direct: The Debate Continues…

The current economic conditions have managers looking for marketing options that they may have not considered in the past.

The decision whether to use a direct sales force or an independent rep to call on distributors so often is one based primarily on control and not necessarily effectiveness.

I asked Bill Via, President of CSV Marketing, a leading independent rep firm for his thoughts. Here they are:

Everyone understands that utilizing an independent rep is a fixed cost of sale, but in my opinion that should not be the most important factor.

What is important is that an independent rep gets you access to those customers that have already said no to your direct man, fact is that they are probably already selling them products and the day will come when the opportunity for your products presents itself, will your direct guy be there when that happens?

Sure you do lose a certain amount of direct control and accountability and maybe you’re of the opinion that a focused “direct” guy brings your product an elevated perception of creditability.

One would argue that if you invest the time and energy into product and market training, your independent can bring the same level of professionalism to your product, and most importantly, you get that critical access.

What are your thoughts on this…Direct or Independent?

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9 Comments. Leave a comment

  1. Kathy Hirko

    Having Been an independent rep for over 30 years, I have listened and been involved in this debate several times. I once had a direct sales person who left and tried to be a rep state to me “how hard of a job it is, you really have to work and be organized” .

    I believe we are a different breed, we approach the meetings with a different mentality. We are always looking for the open window/door, we know it will be there, we just aren’t sure when. You may be in a meeting for one product and find the opportunity for another. As a direct person selling for one company, you may miss an opportunity like that.

    Both are great sales opportunities. As an independent rep. I need to make sure that not only is the company’s reputation solid, but so is mine. One day it may be my sales reputation that gets a product in the door and not a company’s, especially if it is a company that is new or not well known.

  2. Tom Szabo

    Wow, I could go on and on about this topic. Let me try just a couple of points. I’ve been in both positions direct and as a rep.

    Yep, there is a fixed cost for each sale associated with a rep. But he brings relationships to the table. We all know the value of that.

    The principle still needs to market the product or service. Marketing does not = sales. So if you’re not marketing your company, don’t expect miracles from the rep.

    If you have no customer base in a territory and you expect the rep to create that for you, You will still have some costs associated with the reps efforts. The rep needs to invest a lot of time and money to develop your territory.

    You need to work with a rep just as you would work with the direct sales force. Your relationship with the rep should be a partnership. That requires communication, trust and communication. Gee, did I say that twice??

    The rep and the principle both need to do their homework. Both want a good mix of product and customer base to insure success.

    That should be enough for now.

    Tom Szabo
    http://www.athomasimage.com

  3. Andy Snelling

    The question of sales rep or company salesman is a perennial question. The effectiveness will depends more on the person than on the form of compensation. However removing the variable of individual human talent there are certain situations that favor one approach over the other.
    The cost of a company salesman has a large fixed component versus the 100% variable costs of hiring a sales rep. Therefore, except for territories with low dollar volume a company salesman will typically have a lower total cost to the company per dollar of sales. The typical cost of a company salesman in an average size territory might be 3% of sales versus 5% for an independent sales rep. This is why established manufacturers lean towards company salesman and start up or small manufacturers tend to utilize sales reps. A sales rep can afford to carry the additional product because they can spread the cost of each sales call over multiple product lines.
    The flip side of getting cost effective exposure to prospects utilizing a sales rep is that the manufacturer doesn’t have the exclusive attention of the sales rep. The sales rep may have an easier time gaining access to a prospect based on an established relationship but he doesn’t have as much time to devote to learning about and presenting each product line. Commodity products or products with a low average sale price are ideally suited for the use of sales reps. Complicated products or higher value products will benefit from the added focus that a company salesman can provide.

  4. Sean Madison

    Ahhh…the old which is better, factory direct or independent sales rep? Having worked on both sides of the fence I feel I have some legitimacy in posting an opinion. The arguments are all true You have more control of a factory rep (so you think), an independent rep is straight commission and will work harder (maybe), a factory rep only has to focus on one product (yours), an independent rep has more reasons to be in front of the customer, a factory rep is 100% on the employers side (not always the best thing), an independent rep fishes for more opportunities, a factory rep can be trusted not to share info about other lines, an independent rep can be trusted to share info about other lines…So which one is better?….neither, either one is only as good as their training, commitment, work ethic, product knowledge and general desire to succeed. There are fabulous factory reps as well as independents, and let’s not fool ourselves there are dullards in both camps. I work exclusively with independent reps which for our company has proven to be a much more cost effective way of going to market, through this model we have over twice as many representatives on the street as our next competitor, and sure they do not spend 100% of their time focusing on us. But, they do have only lines that compliment our products or offer no competitive threat and they are in front of more customers in any given week than the average factory rep. So if you are looking for “Bang for your Buck” Indi is probably the way to go, on the other hand if you need total control and can live with a smaller sales force, then hire your own factory people. Either way if done properly you will be successful….JMHO

  5. Rob Thomasson

    I agree with the insight responses I’ve read so far. However, the responses are from the manufacturers or reps perspective and not from a customers perspective. From a customers perspective, I value a factory rep more than an independent. Independent reps want to sell and factory reps want you to sell. In other words, factory reps, generally speaking, are more likely to want to partner with a distributor to create pull through and grow the business. They have more skin in the game to help you be successful. I have not, in my 25 years in the business, experienced an independent rep that truly partnered with distribution to meet mutually beneficial goals. I recognize that independents serve a purpose and I’ve seen good ones, but in these challenging times I’m looking to partner with key factory reps that are willing to help my company grow. I’m doing this today, and it’s working.

    • tradesmeninsights

      Rob
      Great insight from a distributors point of view. Would you like to do a guest post from the distributor point of view? I also do podcasts and I’m sure you could bring a good twist to the role of the manufacturer in improving distributor relationships. Let me know if you might be interested in either offer.
      John

      • Rob Thomasson

        John- Thank you for the kind words. I’d be happy to make a contribution. I enjoy the dialogue and it’s nice to connect with so many talented professionals. I should caution you that a guest post and podcast are still new to me, but I’d be happy to participate. I’ll get some advice from my 15yr old son on how these work.

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