by Jerry Leth, Vice-President and General Manager, MANA
When you reach out to manufacturers’ representatives and work on creating a business relationship, one topic that comes up in the negotiations is “exclusivity.” Professional manufacturers’ representatives that perform well for the companies they represent will not sign an agreement without some form of exclusivity.
First, let’s define “exclusivity.” Exclusivity means the manufacturers’ representative gets credit for all sales in the defined territory, Yes, that means sometimes they may get credit for an order they played no part in getting. But those orders make up for orders the rep did all the work to earn but didn’t get because the factory couldn’t meet delivery dates as specified in the RFQ.
Exclusivity means the sole agent/agency on behalf of the manufacturer, whether that means sole agent/agency for “exclusive” accounts or territory or market.
The manufacturer’s team is there to help/assist the sole agent/agency — never to compete or undermine the sole agent/agency. No other entity should compete with the sole agent/agency on behalf of the manufacturer in whatever the “exclusive” territory or accounts or markets happen to be.
Why give someone or some agency exclusivity? Because it focuses the manufacturer’s selling efforts.
Time and time again, focused sales efforts always trump a smorgasbord/medley/buffet of multiple sales initiatives and approaches.
Why do reps want exclusivity? The main reason is that they won’t waste their time creating demand for a product when the orders from the demand they created may end up in the hands of competing reps or factory direct salespeople in the same territory. The really good manufacturers’ representatives create high-trust relationships with customers who in turn buy from them because of their trust in the manufacturers’ representative. If you don’t offer them exclusivity, they won’t work with you and you end up signing an agreement with a lower performing manufacturers’ representative that won’t sell as much.
Let’s talk about “house accounts,” those accounts in a manufacturers’ representative’s territory that are excluded from the agreement because the factory has dealt directly with them for a period of time. Here’s something to consider. If the manufacturers’ representative calls on that house account already and that customer knows and trusts that manufacturers’ representative, the value the rep provides is protecting the account from competitors.
If the factory doesn’t have someone calling on the customer on a regular basis, what’s to prevent the customer from switching to a competitor who is there on a frequent basis? What some manufacturers do in the case of house accounts is offer the manufacturers’ representative a lower commission rate to protect the business. The title of an article written by one of our members, “Why I Love to Call on My Competitors’ House Accounts,” says it all (July 2016, Agency Sales).
What exclusivity options are available? When the manufacturers’ representative model first came into existence a long time ago, it was purely geographic, but that has evolved. For example, the markets within the geographic territory may be diverse. A solenoid valve manufacturer might have aerospace customers and power utility customers and the manufacturers’ representatives only sell to one or the other, but not both. There’s no issue in setting up two manufacturers’ representatives in the same geographic area if they focus on entirely different markets and their paths would never cross.
A newer iteration has now come into existence. When you get to the point in the negotiation where you start to discuss exclusivity, the manufacturers’ representative hands you a list of accounts where they spend all their time. We mentioned earlier that sales come from creating high-trust relationships and if the manufacturers’ representative spends all their time only calling on a specific group of customers, there’s no issue in setting up another manufacturers’ representative in the same geographic territory as long as they stay away from the first manufacturers’ representatives accounts.
Bottom line, you can have multiple manufacturers’ representatives within a geographic territory as long as they do not compete with each other. One final note: the request for exclusivity needs to be realistic. Offering a one-person rep firm geographic exclusivity for North America would be a bit of a stretch.
Jerry Leth, MANA’s vice-president and general manager, started as membership manager in August 2000. Previously, he owned and operated Letco Tech Sales, Inc., a MANA member, multi-line professional outsourced sales agency he founded in 1989. Before starting his own agency, he managed a network of manufacturers’ reps as vice-president of sales and marketing for torque and tension equipment. Leth graduated from Stanford with a mechanical engineering degree. He started his career at Hills Brothers Coffee in San Francisco in engineering and production before embarking on a sales career.