Independent reps are more popular than ever, if you ask the folks at several rep trade associations, including the National Electrical Manufacturers Representatives Association (NEMRA), Tarrytown, N.Y., and the Manufacturers' Agents National Association (MANA), Laguna Hills, Calif.
These trade groups are getting more requests than ever for information on the rep's role and are seeing their membership lists grow. Why? I believe more people see reps as the most cost-efficient means for manufacturers to bring their products to market. Let's look at the sheer numbers. MANA has more than 350 rep firms and 55 manufacturers that include industrial electrical products in their profiles. Both numbers are all-time highs for MANA. Add to those figures NEMRA's 550 rep members and 250 associate (primarily manufacturer) members, and it's clear that the electrical industry understands the value-added services that reps provide.
I believe reps toiling in the marketing/sales trenches benefit not only their manufacturers, but end users as well. Distributors' customers are finding that independent reps are better met by this outsourced sales force than by a manufacturer's direct sales staff. Several trends are affecting reps and the markets they serve:
While MANA doesn't count the number of telephone calls or inquiries we receive via the Internet each month, I know nearly 300 manufacturers — including electrical — ask MANA about manufacturers' representatives. Each month, those contacts turn into more than 120 new associate (manufacturer) memberships in MANA. In addition, from our contacts with vertical rep associations, we know they are experiencing this same level of interest.
As the economy was moving positively as late as the end of 2000, manufacturers were quick to make capital improvements to their operations to meet increased demand. Once the economy slowed and some manufacturers lost 10 percent to 15 percent of their volume, that increased capacity worked against them. Many manufacturers have been caught with the expenses they incurred to meet increased need, and closing plants is hardly a viable option. Manufacturers' representatives can market that excess inventory. As reps help these manufacturers solve their short-term capacity problem, the manufacturers begin to see the long-term benefits.
More professional reps.
The manufacturers' representatives of today have rapidly ramped up their professionalism. With that comes serious improvements in productivity for both the manufacturer and the rep.
Changes in agency compensation plans
Independent manufacturers' representatives are only paid when they sell something. As a result, manufacturers have a fix on the cost of going to market with reps. Over the years, however, more demands have been placed on the shoulders of reps, and manufacturers are asking them to perform additional tasks. One problem is that often little or no adjustment in compensation follows on the heels of those added tasks. What has happened — especially with foreign manufacturers that work with U.S. reps — is that reps want to get paid for services such as pioneering work, credit checks, setting up other reps, market research and warehousing.
Reps realize the demand for their services is much higher than the supply of agencies now looking for lines. This, coupled with the extra demands of many manufacturers, means reps negotiate from a position of strength when taking on new lines. Many are now receiving retainers, territory development cost assistance and longer post-termination commission periods. The NEMRA Manufacturers Group (NMG) addressed this subject at the NEMRA Annual Conference in Boston two years ago.
Demands for increased productivity
Manufacturers and customers want reps to do more with less. Reps are rising to the challenge, according to a 2002 MANA survey. It reported that while the number of agency personnel hasn't grown over the last two years, the average agency's gross sales have risen in the same period of time by approximately 15 percent. Since income is reflective of reps selling more — with the same or fewer personnel — they are obviously becoming more productive.
A view to the future
I believe the demand for reps will continue to increase. When the economy picks up, that demand may cool a bit, but it will not decrease. Too many manufacturers are seeing the benefits of outsourced sales. I think the average agency will become larger in the electrical business. But in many niche markets, the one- and two-person firm will still be the preferred vehicle for many small- and medium-size manufacturers. In many industries where business-to-business marketing requires that face-to-face contact be maintained, manufacturers' reps are gaining in both stature and usage.
Mr. Miller is president and CEO, Manufacturers' Agents National Association (MANA), Laguna Hills, Calif. He can be reached at 877-626-2776.