by Charles Cohon, President and CEO, MANA
The manufacturer on the phone asked a question I couldn’t answer.
“I’m interviewing reps for a territory where my company has no existing business. I understand that a well-established rep can’t work for free, so I am willing to pay a monthly Market Development Fee (MDF). What should that cost?
Great question! So I asked a rep who often accepts new lines based on an MDF. The answer they gave me was puzzling: “How long is a piece of string?”
I asked for an explanation, and the rep happily supplied it.
“The point I am trying to make is that there isn’t enough information in your question to answer it. I need to know what the manufacturer needs before calculating an MDF. For example:
- “If the manufacturer asks me to make four calls a month on their behalf, the fee could be pretty modest. If the manufacturer wants 15 calls, the fee would be quite a bit higher.
- “If the manufacturer only wants monthly feedback by phone or text, the fee could be modest. If the manufacturer wants a formal written monthly report, the fee would be higher.
- “How many salespeople does the rep firm employ? A $1,000 monthly MDF won’t go very far if it has to be split between the salespeople of a 10-person rep firm.
“My rule of thumb for quoting an MDF is to start by calculating my cost to deliver the services they want. Then the MDF has to be at least 50 percent of my cost, so we will both have skin in the game.”
“If my MDF doesn’t fit their budget, then they need to accept fewer monthly sales calls and less reporting. Until I know the services the manufacturer requires, asking me to quote the cost of an MDF is pretty much like asking, ‘How long is a piece of string?’”
Note: This article combines several different conversations, which were edited for length and clarity.
Charles Cohon, CPMR, is CEO and president of MANA. In 2016 Cohon earned the Certified Association Executive (CAE) designation after completing American Society of Association Executives (ASAE) coursework and testing. Cohon also earned an MBA with honors and with concentrations in strategic management and entrepreneurship from the University of Chicago Booth School of Business, and was founder and owner of a very successful Illinois manufacturers’ representative firm for nearly 30 years before joining MANA.