5 Reasons Why Manufacturers Should be Using Commissions

In instances where manufacturers lack an in-house sales team, they often depend on representative agencies to market and sell their products to retailers and wholesalers. These representatives are compensated solely through commissions, earning a percentage of the value of the products they successfully sell. However, managing these commissions, also referred to as sales incentive programs, can be quite challenging due to their complexity and intricacy.

In this article, we will explore the significance of commissions for manufacturers.

1. Increase your Sales

The manufacturer rep model is the go-to sales coverage approach of choice for a large portion of manufacturers. Because reps sell on a commission-only basis, they’re very motivated to sell in volume. This becomes the path to success for both parties.  

Experienced manufacturers reps also tend to have large existing sales networks and can quickly identify new customers across multiple industries and where new products can be sold. They already have experience in your industry and existing relationships with the customers you want to reach, so you don’t have to spend a lot of time and money getting them up to speed.

By building diverse portfolios of products and services as well as representing several different companies that complement their manufacturer’s products, regs regularly call on more prospects and have a broader customer base than regularly employed salespeople. Multi-line selling achieves deeper market penetration and increased sales within the market in less time.

2. Gain a Competitive Advantage

Manufacturer reps have a big investment in their business and their territory. Paying an independent manufacturer rep on commission basis, you get a piece of real estate (a market) that is already being covered. They know the territory and their customer base. You benefit instantly from the rep’s history and current activities.  

Also, the fact that reps sell on behalf of multiple manufacturers simultaneously is a huge competitive advantage to companies. It means that your products will have far greater exposure in the marketplace when sold alongside non-competing goods and services.

3. Encourage Greater Loyalty

The key to fostering loyalty among your manufacturer reps lies in making them feel valued. When they sense appreciation, it boosts their morale and not only motivates them to achieve targets but also encourages them to stay on as your sales reps for an extended period. One effective way to nurture this loyalty is by ensuring prompt and accurate commission payments. Delayed commission checks that take months to arrive may lead the rep to consider other opportunities with your competitors.

4. Grow your Market Share

In the past, traditional manufacturers were highly skilled in innovation and production, but they often lacked expertise in sales strategy, process, and management. This could pose challenges in effectively driving sales and expanding their market share. However, there is a solution for those facing such a situation – independent manufacturer representatives.

These reps possess an in-depth understanding of the products they represent, allowing you to leverage their knowledge and capitalize on product synergies for maximizing opportunities. Manufacturers find significant benefits in partnering with reps, especially when exploring new markets.  

Instead of hiring in-house salespeople for uncharted territories, working with reps proves to be a more cost-effective option through paying them through sales incentive programs. Due to their established networks and relationships with buyers in those markets makes entry into a new market smoother and more efficient.

5. Incentivize Behaviour

Since manufacturer reps are independent contractors, the usual motivational tactics you might apply to in-house sales reps or other employees won’t work. To get the most from a rep, you’ll have to do some “selling” yourself to keep them engaged and motivated. If you want to incentivize them to hit their numbers, you need a strong compensation strategy in the form of commissions. The higher the commission, the more likely reps are to generate a higher volume of sales.

Commissions for independent sales reps selling wholesale products vary widely. For products with a fixed price, commissions are typically a percentage of the product’s price. For products with variable pricing, commissions are typically a percentage of the gross margin.

Alongside monetary benefits, you should also provide the rep with access to sales and marketing materials, offer sales training and respond quickly to any of the rep’s questions to ensure knowledgeable representation. In return, they will provide essential intelligence and feedback to you due to their unique perspective in the marketplace. They often know what will and will not work because of their experience. Their experience becomes yours.  

Commission Management Software Drives Accuracy and Efficiency

Spending countless hours each month on manual commission calculations is a common practice among manufacturers. Unfortunately, this process is not only time-consuming but also prone to errors, lacking transparency and leading to disputes over commissions. Such disputes can be a significant distraction for salespeople, diverting their focus from their primary objective of driving revenue for the business.

To address these challenges, it's high time for manufacturers to embrace automation. By doing so, they can centralize all commission-related activities into a single, efficient platform. This approach ensures that sales representatives receive fair and timely compensation for their hard work without any delay.