Dovetail 8

Dovetail 8
Suppliers of Products and Services Discover Rep Firms via Mutual Interest and Relationships with Target Customers and Key Accounts

Tuesday, May 8, 2012

Candid Comments about "...Breaking the Law"

I received comments from two industry veterans (OEM and Rep) that are worth sharing.

Bob (Director of WW Sales)
"I think one of the major issues that has impacted the rep business is the EMS model which sees such a large percentage of the design-wins done by a rep go overseas. In the Bay Area, that percentage could be as high as 90%. To be honest, some suppliers don't honor registrations, or pay commissions when the business leaves the USA. As a result, reps spend an inordinate amount of their time trying to track their design-wins and ultimately get paid for them."

Peter (Bay Area Rep Owner)
Here's something else to factor into your "Law"

"As the industry has matured, most of the original sales people have/are retiring. The second/third+ generation of sales management don't appear to have the real passion/understanding of sales and have no loyalty to the Reps that got them where they are. They also weren't there/don't care about the 3-4 years the rep spent filling the pipeline for "free." As their companies have matured, most have felt the margin squeeze and it has been passed along to the reps.

The third+ generation of sales management doesn't see the stock option appreciation that the founders and 2nd generation management did. Without the stock appreciation, they become envious of the monies they are paying reps. There is also a growing group of sales management that have figured out that the first 3-4 years of a rep are almost "free" because the revenues are just starting. They in turn use the lack of revenue over the past 3 years to justify changing reps. In changing reps, they carve out the Key accounts as house accounts and leave a diminished pie for the new reps. On top of this, M&A leads to fewer large customers. 

Add to this, more and more of the larger companies have evolved to being more spreadsheet-driven than sales-driven. Rep commissions come straight off the bottom line while distribution "margin" never appears on a manufacturer's balance sheet.

Bottom Line: An increasing amount of the manufacturing revenue $ is coming from a shrinking number of large customers. It takes fewer sales people (short term) to cover a well established customer.
Sales has been relegated to prospecting for customers. The most successful of which will be M&A targets. This gives distribution the appearance of value, in the eyes of today's 3rd+ tier of manufacturer's sales execs.

Only my two cents, but...."


  1. Dittos to Don

    The old saying:"People treat you the way you teach them to treat you" is alive and well in the rep business. Until reps stop cowtowing to the Principal and demand an Adult to Adult rather than the current Parent to Child relationship not much will change

    Until that happen the Principal will continue to cut commissions, demand more reports, take house accounts, etc.

    Afterall the Rep has taught them that is acceptable.

  2. I think one of the most fundamental "laws" is one I learned from Jack Berman 25 years ago - Synergistic Selling.
    I am amazed at the 'one off' mentality that is way too common in Rep groups I interview. Nothing excites me more than hiring a Rep with a focused strategy for developing business by marketing every line at EACH of their accounts, instead of scattering their lines and valuable time around the far reaches of his/her "geographical" territory to keep a couple squeaky sales managers quiet.
    The real law of supply/demand in compensation is creating a value stream at accounts that no other Rep can perform better - that is the Rep I want to hire and will pay to keep.