More informative articles from Mort J. Spiegel:
As appeared in:
Is there a simple procedure to improve performance of sales agents, who are also known as
manufacturers representatives? Or put another way, can chemical intermediate manufacturers
increase productivity of their sales agents by following some universal formula? Of
course, there is no universal formula to guarantee improved sales results. However, it
does require commitment from the chemical producer to allocate financial and management
resources in support of the field sales efforts of the agents to produce gains in
effectiveness.
Often, we hear chemical raw materials executives complain that agents are merely "
order-takers" or that agents are not self-motivated to sell "our" technical
products. Other criticisms are that agents lack product knowledge or selling skills. Are
these justifiable complaints.........or an indictment of sales executives and their
management inadequacies? The evidence suggests that, to a large extent, sales management
should be held responsible for the lackluster performance of selling agents.
Experience indicates that an array of important actions can positively effect the
performance of a sales agent network. These activities range from developing and
communicating organizational goals to incentives for the agent to achieve company profit
and sales objectives.
As our industry enters the 21st century, sales executives will preside over powerful
changes in selling chemical intermediates. At the same time, they will also be under
scrutiny as never before to increase profit margins while building sales. Methods of sales
management that have been practiced for the past 40 years are changing because the ways of
conducting business are changing. Intense competitive forces -- both nationally and
globally -- will force companies be more efficient to survive and prosper.
Moreover, dramatic changes in office automation will further impact selling efforts.
Superimpose these changes on fewer major buying points in the paint and coatings industry
caused by corporate consolidations and mergers. Complicate it more by shortening the lead
times for delivery of proprietary chemicals, as well as reduction in corporate work force
employment.
All these changes mean that the sales manager must work smarter in the years to come to
achieve sales and profit goals.. Boosting the productivity of sales agents is fundamental
to success.
Most sales executives, in fact, already have experience with some of the changes that will
affect their work in the next decade and beyond. Office automation, in the form of
sophisticated personal computers connected with remote mainframes are now being used for
just-in-time production as well as purchasing This is shortening the source/customer
supply line.
Also, written communications via fax messages and E-mail from customers to vendors, and
from field sales to headquarters, are further accelerating the timeliness of information
for sales management. Yet automation is not a cure for poor sales management, weak
strategy or ineffective sales techniques. Not surprisingly, computers can quickly make a
bad situation worse.
Early in the next century, sales executives might preside over a field sales force that has lost its traditional power, effectiveness and prestige. A more optimistic scenario foresees sales management providing guidance to an agent network that is more powerful because it is supported by team selling, database marketing and sales promotion. Innovation, adaptability, efficiency and effectiveness are going to be the operative terms for the forward-thinking sales executive entering the 21st century.
To build a successful manufacturer/agent relationship, a fair rate of commission is
necessary to attract and retain good agents. It should also be understood that commissions
are paid promptly according to the terms of a particular agreement.
Beyond commission rates and agreement fundamentals (which include the market segments,
territory, "house accounts", etc.), the manufacturer's product package is also
highly important to an agent. The company must offer a quality product line that is
competitive both technically as well as in selling price . Orders must be shipped to
customers on time. Quality must be good. Finally, customer service is critical. Good
agents look at everything.
Finally, agents are seeking to represent companies who demonstrate integrity and are
supportive of agents. Finding good agents is not easy. Once they join the sales
organization the manufacturer must enhance the relationship to reap the full gains from
sales productivity.
Of all the tools a firm can use to promote its chemical products, personal selling is
the most effective. However, selling is also the most expensive form of promotion. the
average cost of a sales call is estimated to be about $300. Many small and medium size
chemical firms contract with sales agents because the selling expenses associated with
direct employment are not charged to company overhead. Thus, commissions are paid only
when sales are made. Manufacturers representatives/sales agents, therefore, become an
efficient way to lower costs and enhance sales productivity.
For most chemical companies a large percentage of revenue comes from major accounts.
Typically, 20 percent of the customer base generates 80 percent of revenue.
Hypothetically, if there are 500 buying accounts, then the top 100 are major accounts
generating at least 80 percent of the total revenues. Using a team approach, sales agents
can be quite effective in selling major accounts. This will be covered later in this
article. Furthermore, if properly coached and motivated, agents can increase sales with
the remaining accounts if they are motivated and given reasonable support.
Sales agents want the manufacturer to provide direction with objectives. This way, they
understand what is required to be a successful member of the sales organization. Team
building starts with a personal meeting with each sales agent which broadly outlines
company goals, objectives and business strategies. This is followed with discussions about
territory business goals both from a profit and volume perspective, by product. It
requires forward-thinking sales managers to organize for profitable selling. This is a
vital first step.
To focus agents on the company's volume/profit goals generally requires a variable
commission structure. This way, volume and profit targets can be balanced according the
needs of the manufacturer. There is a tendency for company management to resist divulging
profit margins with sales agents and thereby not focusing agents on selling more
profitable lines. The reasons for this vary. It may be lack of a clear sales strategy or a
misguided focus on volume rather than profitability. Often it is simply and unwillingness
to share what is perceived to be "confidential" information. We will discuss
selling support in greater detail later.
Once territory objectives are agreed upon, the company and agent should jointly develop
written, specific, detailed customer and prospect sales objectives . Usually, this is a
list of target customers, key accounts and prospects, identified with profit goals by
product and sales volumes for each account. On a quarterly basis, this list is used to
measure actual sales for a given account against the monetary volume and profit objective.
Thus, each quarter actions can be taken to correct any shortfall from sales objectives.
This responsibility is assigned to regional sales management.
After the list of target customers, key accounts and prospects has been developed,
specific account action plans should be jointly developed with the agents. These plans aim
at accounts and prospects which comprise-at least 60 percent of total profit or volume of
the agent's sales territory. This document formalizes the actions to be taken by the
manufacturer such as joint sales visits, agent training, introduction of a new product,
support literature to be sent to the agent, and technical service requirements in support
of the agent. At the same time, the agent also agrees to certain actions to accomplish the
objectives. These, too, are put into the written plan. Items such as the number of annual
sales visits to be made, timeliness of the reports to be sent to the company,
entertainment schedule and other expectations. Because a number of people commit to
actions in support of sales objectives........this sales effort is usually called team
selling.
In developing a target account plan, an informal contract is drawn in which both parties
provide agreed upon compensation and mutual responsibilities. The contract conveys to the
agent that the company will commit resources and support towards that end. This informal
contract becomes an important tactic to improve agent productivity. It establishes an
environment which, if nurtured, ultimately forms a long-lasting, mutually profitable
company/agent relationship.
Agents view account action plans positively because it shows customer commitment on the
part of the manufacturer to attain specific goals. It also recognizes the achievement of
the agent with the company management. Essentially, action plans demonstrate that agents
are important to the company--important enough to be motivated, trained, and supported as
would be expected as if they were part of the manufacture's own organization.
Developing attainable, quantifiable sales objectives with agents boosts sales performance of good ones and helps identify poor performers. This helps make apparent to the entire agent network that company actions are aimed at helping the agent succeed. Additionally, it signals that the manufacturer demands a higher level of commitment from the agent and is prepared to make changes, if necessary, to achieve sales and profit objectives in a particular territory.
Today, many chemical companies -- large and small -- are teaming agent sales people
with their own internal staff: direct sales managers, customer-service representatives,
product engineers, maintenance people and production/environmental experts. The primary
reasons are: that teams add value and build strong long-term relationships with major
accounts. Companies which switch from individual to team selling report that the approach
improves customer satisfaction and loyalty, increases sales productivity and shortens
sales cycles.
Moreover, focused selling allows a company to concentrate resources on accounts that can
produce the most gain. Only those target accounts and key prospects with the highest
profit and volume potential can justify the time and money that team selling demands. Team
selling is expensive and time consuming. Therefore it needs to be used selectively.
When agreement is reached on the frequency of calls on target and key accounts, salespeople commit to these schedules. Regardless of the sales objective, each customer must be visited at least once a quarter. Agents should be held responsible for writing at least a quarterly call report on the action steps stated in the account sales plan. While agents may not always be cooperative about writing call reports, management must be alert to non-performance and firmly require such response from agents. Clearly, the call report makes it easier to uncover problems with an account before it becomes bigger and jeopardizes the company's position with the customer.
Improvement of sales productivity includes:
To achieve more personal time with customers and prospects it is essential that the agent develop a plan for each sales visit. All good sales calls contain four elements: These consist of :
Putting all this together in the car on the way to an appointment is hardly the answer. Yet, that is what many salespeople do, even the experienced ones.
Proper planning will specify who needs to be at the customer/prospect meeting, help
prepare participants in advance, insure that significantly more ground is covered and
reduce sales call frequency. Preparation of a plan for each sales call is essential and is
far more effective within an overall account strategy that would be stated in an account
plan. This leads to another cost contributor. Managing prospect expectations by properly
preparing the technical or purchasing buyer for the call is a key, and often overlooked,
activity. When it is ignored, information interchange is stunted and excessive calls
result.
Sales managers should spend more time in field with marginal sales people. Like good
athletic coaches, managers should constantly remind the sellers of the fundamentals,
constantly encourage and constantly praise effective performance.
Recent research indicates that sales productivity can be substantially improved when
more emphasis is placed on sales training. Training agent sales people-- both in product
knowledge and in selling skills--pays off in many ways. It is vital that agents be trained
in understanding the structure of a sales call because the situation is dynamic and
critical to success. Agents will then be better equipped to plan their sales presentation
to meet the needs of a specific selling situation.
When sales people are trained to more accurately perceive customer needs, the better they
become at adapting the presentation to specific customers and the better they become at
selling. Skills training and product knowledge are important factors if a company expects
to increase sales productivity. Annual training is a key tactic for building agent
commitment and in motivating sales people to higher levels of achievement in selling the
manufacturer's products.
Chemical suppliers need to consider all the marketing tools at their disposal if they
intend to boost sales productivity. These tools can uncover new prospects in existing
markets, can reveal new prospects in new markets and can help retain current customers.
Earlier it was mentioned that the forward-thinking sales manager currently harnesses the
power of the personal computer. The PC also facilitates other marketing tactics.
Sales experts have long advocated the development of marketing databases to improve
productivity. These databases can help maintain customer/prospect records and provide
mailing lists. Some database programs interact with other office tools so that sales
people can keep a separate appointment calendar and use computer's word processing program
for correspondence.
This correspondence/list maintenance capability offers a powerful potential benefit to the
producer who is seeks to strengthen sales agent efforts. Personalized, direct mail selling
to customers and prospects can enhance productivity by reducing the selling cycle. This
can help to make the prospect aware of the producer's products in advance of a sales
visit. It can qualify sales leads and can reinforce the image of the company, its products
and its customer services. Chemical marketers who fully exploit this cost-effective tactic
to complement direct sales efforts gain big sales rewards.
In addition to regular direct mail, a marketer can increase agent commitment and
effectiveness with a technically oriented, professional looking, quarterly newsletter.
Such newsletters can be given to sales agents for use as a leave-behind piece when calling
on accounts and can be used as a direct mailing to customers and prospects to convey
industry news, product information and other information.
An integrated, focused marketing communication program in support of field sales efforts does not require a lavish investment. Yet money spent can be ineffectual if the sales organization is not trained in the use of these sales support efforts. Therefore, it is crucial that agents be provided training with these support tools to assist them in achieving goals and objectives. These tools could include:
The cost of developing these sales tools can prove negligible when prorated for each sales
agent on a per month basis over a reasonable number of years. However, by providing agents
with the tools to do the job of gaining sales, will prove to be the best way to ensure
your marketing success.
Although a common way to generate more sales is to add to the sales force, the
relationship between the size of the sales force and total sales can be deceptive. Often,
it can be more
cost-effective to increase productivity of the existing sales network than to expand the
size of the sales force. Thus, a sales manager should explore a variety of options for
increasing sales productivity and annually recalculate the cost of each initiative while
estimating the benefits. A comprehensive program based on sales efficiency will provide
standards against which the costs and benefits of adding direct sales people in the
support of agents can be weighed.
In instances where additional sales personnel are truly needed, this information can
help build a stronger case to convince upper management. When increasing sales force
productivity, the sales manager should consider use of inside sales clerks and newly hired
trainees for personal selling by telephone the company's smaller accounts. These
"telemarketers" can be highly cost-effective if provided with sales skill and
product training. They can also be used to qualify prospects for senior sales personnel
who are most productive when focused on more sophisticated tasks.
When supported by sales skill, product knowledge and appropriate literature, telemarketing
is becoming an important channel for selling products to small accounts. Surprisingly,
when viewed as a group, small accounts often generate higher profit margins than the major
account group. Thus, innovative sales management steps should constantly be alert to any
measure that can increase profitable sales to these smaller accounts. Telemarketing is one
cost-effective tactic that chemical manufacturers can exploit.
As coatings and chemical companies confront an increasingly competitive future, those who deploy agent networks can improve sales results with a focused management process. With dedication to the action steps outlined below, forward-thinking sales management can help produce solid profits.
As the 21st century nears, top performing chemical companies will adapt to accelerating
changes in the business world by initiating efforts that constantly increases sales agent
productivity. These efforts also offer great promise for the future of your company.
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