CERTIFIED PROFESSIONAL MANUFACTURERS REPRESENTATIVES BUILDING RELATIONSHIPS BETWEEN MANUFACTURERS RE

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CERTIFIED PROFESSIONAL MANUFACTURERS
REPRESENTATIVES BUILDING RELATIONSHIPS BETWEEN
MANUFACTURERS REPSAND THEIR PRINCIPALS Daniel
H. McQuistonButler University(317)
940-9474dmcquist_at_butler.eduwww.mcquistongroup.co
m

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OBJECTIVE OF SESSION

• TO EXAMINE THE NATURE OF THE RELATIONSHIP BETWEEN
  MANUFACTURERS REPS AND THEIR PRINCIPALS, AND TO
  EXPLORE AND DISCUSS WAYS TO BUILD BETTER
  RELATIONSHIPS BETWEEN THESE PARTIES

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PART ONE

• HOW RELATIONSHIPS GET STARTED
• Where new opportunities come from
• Prescreening principals
• How principals prescreen you

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PART TWO

• THE ELEMENTS CRITICAL TO BUILDING SUCCESSFUL
  RELATIONSHIPS
• Building Longevity in the Relationship

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PART THREE

• Evaluating how well these relationships have
  worked
• Evaluating the performance of your principal
• Things to think about when considering whether to
  drop a line

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ABOVE ALL, TO SHARE INFORMATION AND LEARN FROM
EACH OTHER !!
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We start with a question

• What are you in business for?
• What are your principals in business for?
• And thats where the problems start!

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How both sides make money

• Principals
• All about plant utilization
• Often 50 of costs
• Need sales growth to increase plant utilization
• Exercise power through incentives

• Reps
• Capturing customers business
• The more sales, the more economies of scale
• 50 of cost is in payroll
• Exercise power through share of mind

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The dilemma

• How do both sides make money while operating at
  cross-purposes?
• By developing and maintaining good relationships

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A Quick Discussion

• Divide yourself up into groups of 3 or 4
• Come up with an answer to the question, What
  makes for good rep/principal relationships?

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PART ONE --HOW RELATIONSHIPS GET STARTED

• What you should have already
• A desired set of goals for your business
• A strategic plan to achieve those goals

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• Therefore, finding new principals doesnt just
  happen !!
• It comes about as a result of a strategic,
  organized, and consistent effort to meet your
  firms desired goals

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BEING PROACTIVE IN SEEKING NEW PRINCIPALS

• Have a high performance reputation
• Listen on the street
• Make a list of complementary lines synergistic to
  your existing products
• Target potential lines and develop awareness
  within those lines -- ethically!!
• What does this mean?

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PROACTIVITY, cont

• Consider direct sales forces who might go to reps
• Start-up manufacturers
• Network-network-network

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PRESCREENING YOURSELF -- QUESTIONS ONLY YOU CAN
ANSWER

• How does this line fit with our current business
  plan?
• Is the line synergistic with our current markets?
• Will the line allow us to grow our markets?

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• What are the opportunity costs (I.e., pioneering)
• Overall impact on profitability?
• Effect on overall market coverage?
• Need a specialist?
• Time and training costs?
• Compatible with current principals?
• Any concern from principals?
• Terminate a line?

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HOW DO PRINCIPALS PRESCREEN YOU?

• Similar objectives, philosophy
• Synergy of lines
• Territory, customer coverage
• Evidence of past successes
• New product introductions
• Line growth
• Pioneering successes

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PRINCIPAL PRESCREENING, CONT.

• Product knowledge
• How proactive are you?
• Example -- determine potential
• Expected value (Potential sales) x
  (Probability of obtaining sales)
• (100 K) x (.5) EV OF 50 K

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PRINCIPAL PRESCREENING, CONT.

• 1, 3, 5-year plans
• Right-sized company
• Ranking on line card
• Level of support expected
• Succession plan

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• Reputation with principals?
• Ability to absorb line
• Professionalism
• Inside support and facilities
• WHERE YOU ARE NOW, WHERE YOU ARE GOING

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KNOCKOUT FACTORS

• Lack of preparation
• No strategic focus
• for line
• Over-enthusiastic
• predictions
• Not listening
• Being unprofessional
• Knocking competition
• Inappropriate statements

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QUESTIONS TO ASK THE MANUFACTURER

• Submit a detailed questionnaire previous to the
  interview
• -- i.e., To make the best use of our time, this
  is the information we would like to discuss
• MRERF, many rep associations have a form you can
  use!

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EVALUATING THE MANUFACTURER

• Need to have some sort of predetermined format
  for evaluating the principal
• Determine important criteria, give prospective
  principal a rating on each one

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Principal Evaluation Form(1 very poor, 10
excellent)
Sales Support
Training Provided
Competitive Pricing
Quality of Literature
Pmts. of Commission
etc...
Prospective principal must achieve some type of
minimum score.
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AFTER THE INTERVIEW

• Follow up -- Follow up -- Follow up
• Letters
• Supply any missing information
• Respond to any additional requests

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CONGRATULATIONS!!YOU GOT THE LINE!!

• NOW WHAT??

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THE LETTER OF UNDERSTANDING

• Non-legal document
• States the important aspects of the relationship
• Helps set goals that are realistic and objective

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LETTER OF UNDERSTANDING, cont.

• Comes between the negotiations and the contract
• easier to discuss points of disagreement here
  than when contract is in hand

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THE ACTUAL CONTRACT

• ASK FOR A LONG-TERM CONTRACT!!
• Recent MANA survey showed that 83 of sales
  managers have contractual latitude when dealing
  with reps!

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THE FIRST SIX MONTHS

• KEY POINT
• Patterns set during first six months set the
  stage!
• Develop intro/absorb plan
• Announcements
• Training requirements, principal visits
• Select specific performance review meeting dates

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• Hold sales meeting when plans are developed
• Emphasize positive start
• Shows new principal you are trying to incorporate
  them
• Watch for any concerns from other principals

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GROUP EXERCISE

• Share with your small group any success stories
  you have from interviewing for a new line
• Assume you will be interviewing for a new line
  next month. Based on what youve learned here,
  how will you approach this task differently than
  in the past?

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PART TWOBUILDING LONGEVITY IN RELATIONSHIPS
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BUILDING BETTER RELATIONSHIPS THE GOLF SWING
ANALOGY

• QUESTION?What's the one biggest problem you have
  with your golf swing?KEY POINTEach element by
  itself is not all that difficult -- the difficult
  part comes in putting it all together

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• Building good relationships is just like a golf
  swing -- you must combine all the elements
  together, consistently, every time, to accomplish
  your desired results!

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Figure 1 How the Relationship Tends to Look
Professional Respect
TIME
Mutual Commitment to the Customer
SHARED GOALS
Open Lines of Communication
CONCERN FOR OTHERS PROFITS
Mutual Dependence
Investment of Effort
TRUST
Personal Relationships
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FIGURE 1

• How relationships tend to look
• Many of the right elements are there, but no form
  or order to them
• Some parts get more emphasis than others

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How the Relationship Should Look A Model for
Building Better Relationships
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FIGURE 2

• How the relationships should look
• Six interlocking Core Values
• Four Supporting Factors

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• Building good relationships is like riding a
  bicycle uphill!
• Only two things can happen!

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SHARED GOALS AND OBJECTIVES

• Critical at the beginning of the relationship to
  have a business strategy with targeted goals
• Terms need to be defined -- need to know and
  understand what the other is looking for in the
  relationship

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SHARED GOALS AND OBJECTIVES, cont.

• If you have done the prescreening procedure
  outlined above, both parties should have a good
  idea of where the other stands

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A question

• Who at the principal should you have the same
  goals and objectives as?
• With as many people as high up as possible!

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SHARED GOALS AND OBJECTIVES A CHECKLIST

• DO YOU
• Have a formal criteria by which to judge a new
  principal?
• Have basic agreement with your principal on the
  way things should be done?
• Know with certainty what your principal expects
  of you?

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• Work proactively to establish annual sales goals?
• Feel you can state with certainty that your
  principal has the same basic beliefs about
  running a business and dealing with customers
  that you do?
• Have a relationship with the higher ups in the
  principal?

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MUTUAL DEPENDENCE

• Definition of mutual
• dependence?When two independent parties need
  each other to accomplish their respective goals

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KEY POINTS

• When the relationship starts, both parties are in
  agreement that the other firm is necessary to
  achieve their goals
• The needs of each party are progressive
• What is value added" one day becomes value
  expected the next!

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KEY POINTS, cont.

• Each party must constantly be aware of the goals
  and objectives of their partner and what they
  expect from you

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MUTUAL DEPENDENCE A CHECKLIST

• Do You
• Willingly let your principal conduct some
  activities you used to do yourself?
• Have a receptive attitude toward requests and
  suggestions by your principal?
• Manage your distributors in the best interest
  of your principal?

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CHECKLIST, Cont.

• Feel that it would be virtually impossible to
  switch to another principal and maintain the same
  level of product and service quality?
• Willingly help out your principal with all
  reasonable requests?

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OPEN LINES OF COMMUNICATION

• Effective communication with your partner
• has a definitive objective
• knows the audience it is communicating to, and
  its main needs and wants
• Is not always a question of supplying the
  information -- but how it is supplied

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OPEN LINES OF COMMUNICATION

• Important to establish some type of regular
  communication pattern with relevant parties
• each person is different
• each one will have different likes and desires
• Helps avoid the "what-have-you-done-for-me-lately"
  syndrome!

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Open Lines of Communication

• ALL principals related that ALL reps could do a
  better job with this!
• Remember that each person in principal has
  different needs and wants
• Communicate bad news as quickly as good news!
• No one likes dealing in a crisis!
• Be proactive about communicating changes at your
  company

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IDENTIFY, WORK WITH OTHERS AT FACTORY

• Those who can help you
• Production, traffic personnel
• The more Champions you have, the better

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BE SENSITIVE TO SIGNS OF COMMUNICATION BREAKDOWNS

• i.e., phone calls not returned quotes late
• Identify problem and work to solve it

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WORK TO ESTABLISH A REP COUNCIL

• Be prepared to offer constructive input
• MANA survey showed that only 17 of sales
  managers run a rep council!

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OPEN LINES OF COMMUNICATIONS A CHECKLIST

• Do You
• Have a regular, established pattern of
  communication with critical individuals at the
  factory?
• Have a good understanding of the type and
  frequency of information your sales manager
  wants?

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CHECKLIST, Cont.

• Communicate bad news as quickly as good news?
• Inform your principal of upcoming events enough
  in advance to allow them to formulate a response
  to it?
• Work to resolve conflicts quickly and fairly?

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CHECKLIST, cont.

• Exchange enough information to properly handle
  and market the product lines?
• Believe in and work to establish rep councils?

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MUTUAL COMMITMENT TO CUSTOMER SATISFACTION

• KEY QUESTION
• What is the key factor that keeps the rep and the
  principal in business -- above making money,
  above anything else?
• The ability to create value for the customer --
  to help them do their business better!

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KEY POINT

• Marketing begins and ends with the final
  customer!
• must always keep the goal of satisfying the
  customer paramount
• that is the reason all parties are in business
• Question???
• If the customer has a problem, do they care who
  caused it?

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MUTUAL COMMITMENT TO CUSTOMER SATISFACTION A
CHECKLIST

• Do You
• When there's a problem, make sure that the
  customer needs are taken care of first?
• Share a commitment with your principal of total
  customer satisfaction?
• Really try to identify and partner with
  customer-driven companies?

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CHECKLIST, Cont.

• Feel your partner really understands the
  importance of developing satisfied customers?
• Willingly give field assistance and technical
  support to create customer satisfaction?

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CONCERN FOR THE OTHER'S PROFITABILITY

• Key point -- a business venture for mutual profit
• Are investments and risks by both parties at the
  beginning of the relationship

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CONCERN FOR THE OTHER'S PROFITABILITY A CHECKLIST

• Do You
• Get a genuine pleasure out of seeing your
  principal make money?
• Willingly accept less money when your principal
  has "gone the extra mile" to be price
  competitive?
• Have a willingness to be totally candid with your
  principal in the profitability of your product
  lines and the profitability of your firm?

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CHECKLIST, Cont.

• Realize that your principal has taken as many if
  not more significant financial risks than you
  have?
• Realize that you could not be profitable if the
  actions of your principal did not allow you to be
  so?

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TRUST

• Doing what you say you will do consistently --
  loyalty through action
• Building trust is a process of demonstrating
  credibility, honesty, and integrity over time

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THE FOUR LEVELS OF TRUST

• Conditional -- Prove it
• Visible -- As long as I can see you
• Experiential -- Time will tell
• Unconditional -- Im sure
• QUESTION
• At what level are you with your principals?
  Where are they with you?

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TRUST A CHECKLIST

• Do You
• Feel you have to keep a close watch on your
  principals?
• Feel that your principal is a company that stands
  by its word?
• Feel as though you "walk your talk?"
• Willingly share information that could be
  considered "confidential"?
• Follow through and do what you say you are going
  to do all the time?

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How the Relationship Should Look A Model for
Building Better Relationships
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THE SUPPORTING FACTORSINVESTMENT OF EFFORT BY
TOP MANAGEMENT

• Investment of effort is best summarized by two
  comments
• After we have gone through the process of
  setting goals and objectives and informing them
  of what needs to be done, we expect them to go
  out and do it. In our business, we need to give
  a fair amount of time to see those results --
  however we look for indications that the rep is
  taking the initiative to move the relationship
  forward.

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Supporting Factors, Cont.

• "We always have to know the reps are putting
  forth an effort -- to know that they are actively
  working the territory"
• Key factor is taking the initiative to move
  the relationship forward
• When do principals and distributors perceive the
  relationship is not moving forward?

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• Principals notice lack of effort more than they
  notice proactive effort
• i.e., No progress in territory, customer
  complaints, no communication, etc.

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CONCLUSION

• "I don't buy the line as much as I buy the
  individual and what they can do to help us --
  don't always be worried about the short-term view
  - you are more than your product line
• Realize that YOU are what your principal is
  buying -- and they have to perceive that you want
  to and are working to move the relationship
  forward

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INVESTMENT OF EFFORT BY TOP MANAGEMENT A
CHECKLIST

• Do You
• Have a management team that is totally committed
  to the idea of building effective relationships?
• Look for opportunities to establish effective
  relationships?
• Have an attitude of being willing to go the extra
  mile to build a better relationship?
• Become totally committed to making a particular
  line a success once you take it on?

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DEVELOPING A PERSONAL RELATIONSHIP

• Involves going past strictly a business
  relationship
• Bringing it down to a personal level
• You are actually friends with the individual

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DEVELOPING A PERSONAL RELATIONSHIP A CHECKLIST

• Do You
• Take the time and effort to get to know people at
  your principal on a personal basis?
• Want to take the time to do so?
• To the extent possible, have a genuine interest
  in your principal's personal life?
• Try and create opportunities for them to get to
  know you on a personal basis?

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HAVING A PROFESSIONAL RESPECT

• ?? QUESTION ??
• Think of an individual you admire professionally.
  
• Describe him or her in a few words.
• Now, how can you emulate these characteristics in
  your dealings with your partner?

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HAVING A PROFESSIONAL RESPECTA CHECKLIST

• Do You
• Feel you have to use coercive power to bring your
  principal around to your way of thinking?
• Having a feeling of pride that you do business
  with your principal?
• Know that they are proud to deal with you?
• Care enough about what your principal thinks to
  want to be seen professionally?

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CONTINUOUS IMPROVEMENT OVER TIME

• QUESTION
• How many principals and distributors have tried
  things like TQM, quality circles,and so forth?
• QUESTION
• What has happened to most of them?
• QUESTION
• Why does this happen?

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REASONS FOR FAILURE

• Top management loses interest and looks elsewhere
  for improvement
• Because goals are set that are achieved in the
  short term -- when achieved people go on to
  something else
• The fallacy of the Ten Steps to Better Quality"
  approach

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CONTINUOUS IMPROVEMENT OVER TIME A CHECKLIST

• Do You
• Have a "never satisfied" feeling about the nature
  of your relationship with your principal?
• Have an attitude of willing to work overtime with
  your principal to get the mutual results you want
  to?
• Continually look for ways to improve the little
  things in your relationship?

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How the Relationship Should Look A Model for
Building Better Relationships
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GROUP EXERCISE

• Within your groups
• Where do you have a low score where another
  member has a higher one? Or vice versa?
• What suggestions can you offer each other on ways
  to improve your relationships in those areas?

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PART THREE -- HOW WELL HAS THE RELATIONSHIP
WORKED?DEVELOPING A REPORT CARD FOR THE
PRINCIPAL
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• On at least an annual basis, helps to evaluate
  the principals performance
• Identify, rate principal on key factors
• Also do a profitability analysis of the product
  line

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PERFORMANCE EVALUATION BY THE PRINCIPAL

• WILL EVALUATE YOU QUANTITATIVELY
• ANNUAL SALES
• OF QUOTA
• ETC.

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• Will evaluate qualitatively as well
• Timeliness of communication
• Share of mind
• Etc.

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WHAT FACTORS LEAD TO TERMINATION OF A REP?

• QUESTION
• What are some of the reasons reps are terminated?

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• QUESTION
• Why does the manufacturer take these actions?
• Because in most cases, the rep has not made the
  principal realize their added value the things
  they do the principal cannot or will not

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• QUESTION
• Do most people at your principal firm realize
  what you do?
• Why is that?

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ADDING VALUE TO THE RELATIONSHIP

• Dont maintain -- grow and develop
• Relationships are either going forward or
  backward!
• Monthly, year-end reports to the principal
• Shows how income is invested
• All because of you
• SELL YOUR PRINCIPAL AS HARD AS YOUR CUSTOMER!

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DISCUSSION QUESTION

• HOW WELL DO YOU KNOW HOW YOU ARE EVALUATED BY
  YOUR PRINCIPALS?

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SHOULD YOU DROP THE LINE?

• Boy, thats a tough one
• A combination of tangible and intangible factors

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TANGIBLE FACTORS

• IS THE LINE
• Profitable?
• Growing or shrinking?
• Acquiring or about to be acquired?
• Maintaining marketplace position?

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INTANGIBLE FACTORS

• Management atrophy?
• Impact on your cash flow?
• Not a fit with other lines?
• Philosophical differences?
• Cant justify time it takes?
• Protecting principal against himself?
• Cant grow due to their problems?
• A bad gut feeling?

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• AND STILL --
• Thats a tough one
• Just because its the right thing to do doesnt
  mean its the right thing to do

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SUMMARY

• Successful relationships require a sustained
  effort on the part of both parties
• Remember the golf swing analogy
• Know why you want to get into this relationship

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SUMMARY, cont.

• Know how principals prescreen you
• Establish compatible, measureable objectives at
  the start
• Build the relationship based on trust
• Have a mutual commitment to the customer
• Have regular, established communication patterns

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SUMMARY, cont.

• Remember the personal and professional side of
  relationships
• Continuously improve the relationship
• Have a procedure for evaluating the principal
• Knowing when to drop a line