Independent manufacturers’ representatives have evolved beyond commission-based selling. Manufacturers, reps and distributors need to recognize what that means for channel support.

A few weeks ago, I presented a webinar for NEMRA on rep compensation– one for reps and one for manufacturers. Different audiences, different messages.

For the rep session there were over 100 registrants. The manufacturer session had 25. In the words of Tom Click, President of Patriot Industries, “more manufacturers needed to attend.”

So, if you didn’t attend, here’s an overview:

Rep compensation is a topic that never seems to go away. For manufacturers’ representatives, the conversation traditionally starts with commission rates. For manufacturers, it often centers on the cost of selling through an independent agency. But there is a bigger issue: the role of the rep has changed, while traditional compensation models have not always kept pace.

During the session, I explored the changing dynamics of rep compensation and the need for manufacturers and agencies to rethink how they define, communicate and reward value. The implications extend beyond the manufacturer-rep relationship to the electrical distributors that depend on reps for local market knowledge, customer engagement and sales support.

The Rep’s Job Has Changed, Compensation Should Be Commensurate

Historically, manufacturers’ representatives were compensated primarily through commissions tied to sales. Their responsibilities centered on developing business, supporting electrical distributors and growing manufacturers’ market presence.

Those activities remain important, but expectations have expanded. Today’s reps face more customer service responsibilities, administrative work, meetings and downstream activities designed to generate brand preference and demand.

Representatives may be expected to educate end users, influence specifications, support distributor sales initiatives and develop opportunities long before a purchase order is written. These activities can require considerable time and resources without producing an immediate sale.

Meanwhile, reps must continue supporting distributors and responding to everyday customer needs.

The result is increased operating costs, including personnel, travel, technology and other resources. The question is whether compensation adequately recognizes the work manufacturers now expect their agencies to perform.

From Salesperson to Fractional Sales and Marketing Agency

Today’s rep agency is increasingly functioning as a fractional sales and marketing organization for its manufacturers.

An effective agency brings more than territory coverage. It provides established relationships, local market knowledge, access to distributors and their customers, and the ability to execute sales and marketing activities without requiring a manufacturer to build an equivalent internal organization.

In many respects, the rep has become an extension of the manufacturer’s sales organization and is their go-to-market strategy. Manufacturers increasingly expect agencies to participate in meetings, provide market intelligence, support strategic initiatives and execute activities that advance broader commercial objectives.

The most effective manufacturers recognize this relationship and treat their agency partners accordingly.

That doesn’t mean reps should automatically receive higher commissions simply because their responsibilities have increased. It means manufacturers and reps need an honest discussion about expectations, resources, performance and compensation.

If a manufacturer expects an agency to assume additional responsibilities, both parties should understand what those responsibilities are, how success will be measured and whether the existing compensation structure supports the desired results.

More Channels Complicate the Equation

Manufacturers are also selling through more channels than ever, sometimes including direct sales.

As channel strategies evolve, manufacturers need to consider how representatives contribute across different routes to market. If a rep develops an end-user relationship, generates demand or influences a project, but the eventual transaction occurs through another channel, how is that contribution recognized?

This is more than a question of protecting commissions. It is about aligning incentives with the activities that create value.

Manufacturers need to clarify what they expect representatives to do when sales involve multiple channels. Representatives, in turn, need to demonstrate how their activities contribute to business development, market coverage and customer engagement.

Without that alignment, manufacturers may believe they are paying for sales results while representatives believe they are providing a much broader range of services than the commission structure recognizes.

What Should Be Part of the Discussion?

The answer starts with better communication and a more deliberate approach to measuring value.

Manufacturers and reps should consider five questions:

• What work is expected? Define responsibilities for sales generation, distributor support, customer service, administration and demand creation.
• What does that work cost? Understand the personnel, travel, technology and other resources required.
• How is performance measured? Sales remain important, but customer engagement, project development, market penetration and execution of agreed-upon initiatives may also demonstrate value.
• Does compensation align with expectations? Evaluate whether the structure rewards sales while supporting additional responsibilities.
• How will the relationship evolve? Review responsibilities, results and compensation as market conditions and channel strategies change.

Not every manufacturer needs a different compensation model. However, relying on historical commission rates without examining current expectations may overlook important changes in the business relationship.

NEMRA has developed white papers (and there may be others in the member portal) and other resources through its Strategic Advisory Council to support discussions about representative-manufacturer contracts and commissions. These resources can help establish a framework for conversations that might otherwise focus exclusively on percentages.

The objective is a sustainable relationship in which expectations, economics and performance are understood by both parties.

Why Electrical Distributors Should Care

Although compensation is primarily a discussion between manufacturers and reps, electrical distributors have a stake in the outcome.

Distributors rely on reps for product knowledge, training, project support, problem resolution and help developing business. The availability and quality of that support can influence how effectively a distributor sells a manufacturer’s products.

If responsibilities increase while the economics of the relationship become less attractive, an agency may need to reconsider how it allocates its resources. This doesn’t automatically mean distributor support will decline, but it raises a legitimate question: Are manufacturers aligning their expectations with the resources available to deliver that support?

When an agency has limited time and resources, priorities matter. Additional reporting, meetings and downstream marketing activities compete with other demands on its time.

Distributors should recognize the value of rep support and communicate to manufacturers when local representation, product expertise and customer relationships make a difference in winning and retaining business.

A successful channel strategy must account for the work required to make it successful—not just the cost of processing a sale.

The Conversation Needs to Change

Manufacturers will continue evaluating selling costs, reps will need to manage operating expenses, and channel strategies will evolve.

But the discussion should move beyond whether a commission rate is too high or too low.

Manufacturers need to define the value they expect from their representatives. Reps need to articulate the value they deliver and demonstrate how their work contributes to business results. Both parties need compensation arrangements that reflect their responsibilities and support long-term growth. And, at times, perhaps some of the compensation needs to be behavior, or activity, based and not solely tied to sales.

Consider what would happen if you were told your base compensation is being cut 15-20% but you can recoup some of it IF you exceed your year-end goal? What would you think? Are you motivated to exceed the goal or do you consider expending your energy in other places / on other activities?

For distributors, the message is equally important: the effectiveness of the electrical channel depends on more than product availability and price. It also depends on the people and organizations that create demand, develop relationships and support customers in the field.

The real question isn’t simply what a rep earns in commission. It’s whether the manufacturer’s compensation model supports the level of sales, marketing, demand generation / end-user interaction, customer service and channel engagement the manufacturer expects.

That conversation is worth before the relationship begins to break down.

Next Steps

If you’d like to view either the rep or manufacturer webinar and receive a copy of the presentation, both are free to NEMRA members, contact Mary James at mjames@nemra.org or reach out to me for a copy of the presentation (trust me, the video is more informative as it has commentary for each slide.) Your company must be a member of NEMRA

Given that reps and manufacturers are in the midst of 2027 planning for themselves, as well as joint planning, this is the perfect time to mutually discuss expectations. It is not a partnership if both parties are not able to have, and share, their expectations of each other AND share what the other should expect from them in the pursuit of goal attainment.