A Territory Expansion Discussion

Recently I was with a Vice President of Sales for a larger electrical manufacturer discussing rep consolidations and mergers.  Was it good for the industry and, most especially, would manufacturers consider this a positive as they look to continue to grow with their representative’s coverage and territories? Or would they prefer a rep focus on their current / existing territory?

Why Reps Expand / Why Manufacturers Ask Reps to Expand

His comment was that the most difficult challenge in his experience of selecting representatives was to find one whose strategies and philosophies matched or were similar to those of his company.  Finding an agency that fits these criteria was getting even more difficult given that, in most territories, the number of representatives was diminishing as were their choices.

It reminded me of a time over 20 years ago as our company was being asked to expand our geography by two of our manufacturers.  One of our company’s advisors, a former distributor, who had grown his company by opening up numerous branches successfully offered to our management group a similar opinion.  He said finding salespeople was not nearly as difficult as finding management people that mirrored his plan.  He suggested that the very first step in our growth now that we had manufacturers willing to invest with us to increase our territory coverag, was our choosing a manager and allowing him to be in the process of hiring our staff.

How to Expand Territory Organically

This is precisely what we did.  We knew a manager looking to make a change. We hired him, enabling us to select the right person and he interviewed and hired those people he felt best fit our team’s philosophies and work ethic.  Although our senior management got last say, we agreed completely with his selections, and our efforts in the new territory after this time only seemed to get stronger,  even years later when the manager retired.  The one thing that has remained consistent has been the strategy and type of associate we attract that gives a consistent message to our customers. You could say, we hired to our culture and management philosophies.

The new territory also brought other challenges. 

One was “Should we open up offices in the new territory?” (after all, no one had heard of “work from home” then.)  After speaking to many key customers, we found that getting answers quickly, responding with care and knowing the customers was far more strategic than being in the physical area especially with email, 800 numbers for phones and faxes available.  We were able to hire inside sales associates that knew products, specialized and work together. We were told by our customers our services and responses were of high quality when we surveyed them.  We did make sure all of our outside sales associates lived in the new geography and those relationships only grew as time continued.   I recalled my early days of leaving for sales calls either later Sunday or early Monday and returning Thursday evening, trying my best to cover our territory.  I quickly learned that if we could ever get successful enough to hire additional sales associates, it was imperative to hire those living in their geography.  They would spend less “window time” and enjoy more relationships both at home and with customers close to home.  The outside salespeople also needed to bring the inside sales associates around to meet everyone as often as possible according to our findings.

Remote vs Open an Office?

As manufacturers and distributors grow, various duplicate positions are doomed to be combined.  Certainly, financial positions may well be superfluous as will other non-selling functions.  The positions of sales associates with relationships key to a company’s success are not.  Those positions may be outside or inside because, at least in my experience, both are necessary to grow and both lead to success.  How often does a successful salesperson leave a company for another and maintain or grow their business?  It happens, but certainly not nearly as often as expected.  An outside salesperson may bring many positive opportunities and relationships, but so does an inside salesperson who, if good, allows the outside person more time to explore new opportunities and less time following up, quoting, and expediting.

If the object of sales is to be “closer to the customer” and provide personal services that allow the buyer to place orders without concern or hesitation, it certainly takes more people to make that happen; a true team effort!

Consolidation – Here to Stay

Is the consolidation and merging of manufacturer’s representatives a passing fad?  Likely no more than those of manufacturers and distributors.

What is important is the aligning of expectations for each to be constantly communicated.  In this stage, local representation remains very important and making sure the right decisions on which manufacturers or distributors need to be supported must also include how each is supporting the local market.

The consolidation and merger of various representatives also may make issues such as POS and market plans easier to transact.  Often at headquarters the local representation to that main location is included in meetings, programs and strategies that others responsible for various branches outside the headquarters offices are not included. It always amazed me that we often would hear from the distributors concerning commitments made for us rather than our manufacturers or other representatives.  One of our distributors branches finally told their headquarters that if the local reps were not invited to sales meetings with their manufacturers, they would not be attending.

With rep agencies becoming larger, and even regional, agencies may evolve their model to have strategic account managers with responsibility for factory / key distributor coordination and/or factory / key end-user coordination.

A regional manager for a large electrical manufacturer once told me that his company had to determine who their real customer was.  He said manufacturers want one face before their customer.  As a former product manager, his concern was that his manufacturer considered only the distributor as their customer, however, they failed to properly train or support the reps selected with a more technical background.  This caused them to lose valuable specification efforts that caused his product line to have suffered significantly.  He thought it would eventually be resolved as the manufacturer would have enough evidence to consider either training or supporting through a hybrid effort of reps and directs.

Regional representation should also consider specialization to have that degree of training necessary rather than through local, smaller, agencies that may not have enough financing or territory to support these efforts.  There were many times when manufacturers chose to train their direct salespeople but not their rep specification associates.    

Manufacturers and distributors may decide nationally, or internationally, their preferences for each other; however, we have seen each change their local choice based on the support they receive and the acceptance in their markets.  There seems to be even more diversity now than a few years ago with distribution and suppliers given supply, support and specification efforts being done in the field.

Our industry is constantly evolving and likely will continue.  Communication that seems missing from what we constantly hear from everyone is more necessary than ever.  What our distributors, users and manufacturers need to be successful must be a goal we all look to understand and accomplish. If our industry is looking for manufacturer’s representatives to cover more territory than in the past with quality management and processes, it too will continue.

And yes, there are other reasons for consolidation such as lack of succession planning, the financial benefits of selling, management “challenges” (which could be financial or skill sets), losing a major line, etc.

But, the driving force of much change nowadays is …

Years ago, manufacturers hired individuals (principals) who committed to growing the manufacturer’s business. Now manufacturers are hiring organizations and are much less focused on the individuals.

Channel Marketing Group can help agencies with their strategic direction as well as manufacturers gain insights from their agencies. Click here to learn more.