Building stronger ties with manufacturer reps

by Rich Vurva

Mark Magstadt of Hub City Industrial Supply in Lake City, Fla., discovered the hard way what can happen when an unscrupulous manufacturer’s representative calls on an end-user customer. His company risked losing a major account when a factory-employed rep for an abrasive manufacturer quoted a price to an end-user far below the price at which Hub City sold the company’s products.

“I contacted him and thanked him for his support but said I really wanted him to avoid discussing pricing issues when working with my guys in the field. He got offended and said, ‘These are the levels you should be selling at.’  He wanted to dictate to us the kinds of margins we should get,” Magstadt says.

The manufacturer ultimately tried to take another distributor into the account that was willing to charge a lower price. Fortunately for Hub City, the effort failed.

“It shocked us. It was totally unprofessional,” says Magstadt. “We still do business with that manufacturer, but we don’t trust them. It has made our relationship more challenging.”

Lack of trust is a primary cause of bad relationships between distributors and manufacturer reps. Often, however, the way to avoid channel conflict is to establish clear expectations.

Many local reps have significant leeway in determining which distributor they’ll use to gain access to a particular customer account, says Larry White of Interlynx Systems of Bryan, Ohio, a provider of sales effectiveness tools with experience helping manufacturers and distributors manage their channel relationships. If one distributor is unsuccessful, they’ll go in the back door with another distributor.

The best way to avoid such problems, he says, is to formally document expectations. Because reps in the field can change frequently, it’s important to put agreements in writing.

“Distributors need to work with manufacturers to devise a set of core operating guidelines so there is consistency and clarity on how decisions like these are managed,” he says. “Too many times, distributors don’t document handshake agreements, which can lead to broken promises and ultimately an undercurrent of distrust.”

Distributors aren’t the only losers when this is mishandled. Manufacturers lose because their selling partners become less committed and the power of the distributor selling model is dramatically diminished, he adds.

White says the most progressive manufacturers drive an objective measurement process where distributors can have confidence that if they’re doing all they’re supposed to do, it becomes difficult for the manufacturer to make unfavorable, ad-hoc decisions.

Professional code of ethics
Dave Turpin of Turpin Sales & Marketing, an independent manufacturer’s rep firm in West Springfield, Mass., says unscrupulous reps give professional reps a black eye. As president of the NorthAmerican Industrial Representatives Association (NIRA), he works hard to promote the value of doing business with independent manufacturer reps. While NIRA members follow a professional code of ethics, one or two dishonest reps make it difficult for all reps to build trust with distributors.

“NIRA has spent a tremendous amount of time on a code of ethics. The biggest goal NIRA has is education of the reps and how to conduct their business in a professional manner,” he says.

Despite his bad experience, Magstadt’s attitude about dealing with manufacturer’s reps hasn’t turned sour. He’s more cautious, however, and learned the importance of open communication.

When another supplier asked permission to deal directly with a customer if Hub City was unsuccessful in getting the business, Magstadt agreed.

“But we stressed that it’s important that we communicate what each of us is doing and we look at each situation as unique,” he says.

Magstadt willingly cooperated with the second supplier because he trusts the company to honor its agreements. When his salespeople and the supplier’s reps conduct joint sales calls, they communicate regularly to make sure one of them follows through on promises made to the customer.

Eliminate surprises
Frequent communication and clearly defined roles and responsibilities are two cornerstones of successful manufacturer and distributor relationships, says Teddy Pope of Edward H. Pope Ltd., a manufacturer’s rep in Brampton, Ontario.

“Because reps today are mandated by their principals to do end-user calls, reps are developing relationships with end-users. Some people feel threatened by that. They’re afraid we might go in and take the business away to another distributor,” he says. “In our case, our reason for building a relationship with end-users is to try to better understand what they’re doing so we can help them become more efficient.”

If Pope visits an end-user with a distributor salesperson, he says he would never go into that account with someone else.

“If we go into an end-user on our own, our rule is to try to see what distributor he has a relationship with. We don’t believe it’s our job to make a relationship for distribution; it’s our job to discern what relationships exist and try to go along with them. The distributors we work with understand that.”

Turpin says that once they’ve established a set of ground rules concerning which accounts they’ll visit with a particular distributor, professional reps will honor that agreement.

“Once you establish that, you don’t want to go into those accounts with any other distributor,” he says.

Dealing with multi-line reps
Another issue with the potential to drive a wedge between distributors and reps concerns independent firms that represent multiple product lines. Some distributors don’t want multi-line reps visiting their customers for fear they’ll discuss product lines the distributor doesn’t represent.

“You don’t want them to go into an account to work on a product and then go in the back door to try to steal your other business,” says Dave Kaplan Sr. of Northern Tool Supply in Gorham, Maine, and Weymouth, Mass. “We have some factory reps that we just can’t work with because they have some competitive lines.”

In those situations, Kaplan says Northern Tool will continue selling the product but won’t take the rep into the account and may not even reveal the customer’s identity to the rep.

Turpin says the proper way for a distributor to work with a multi-line rep is to be clear about which lines the rep may discuss when visiting that distributor’s customer.

“If the rep is working with the distributor properly, the rep will focus on that specific line and strategize with the distributor about whether they can go in there to sell other product lines. That’s the kind of relationship you want to develop,” says Turpin.

Pope adds that the surest way for distributors to avoid problems with unscrupulous reps is to deal with established companies with solid reputations.

“We encourage reps to join NIRA and go through the Certified Professional Manufacturers Representative program. In most cases, we know as much or more than a factory-direct guy does,” says Pope.

He says multi-line reps bring a major advantage that single-product reps don’t offer distributors.

“We believe we’re more useful in many cases than a manufacturer’s own employees because when we get called in to do a demo on product A, while we’re there, we may see an application where product B or C could save the customer a lot of time or money. The factory rep wouldn’t see that opportunity,” Pope says.

Tapping an untapped resource
Kaplan says he regularly sends Turpin’s salespeople to solve one of his customer’s problems, and has frequent phone contact with other reps he trusts. He views them as a valuable resource.

“These guys bring a tremendous amount of knowledge to us regarding the newest products on the market and the latest changes. When we use them right, they actually become an extension of our own sales force,” he says.

Turpin agrees that independent reps offer an untapped resource for many distributors. “A lot of distributors want to do more business with their existing customer base. That’s a great strategy and the rep can help. They can bring more products and more expertise without adding additional people to their sales force,” he says.

This article originally appeared in the July/August 2004 issue of Progressive Distributor. Copyright 2004.

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