5 Reasons Why Manufacturers Should be Using Commissions

5 Reasons Why Manufacturers Should be Using Commissions

When manufacturers do not have an in-house sales team, they rely on rep agencies to sell their products to retailers and wholesalers. These reps are paid on a commission-only basis, meaning they receive a percentage of the value of the products they sell. Due to their complexity, commissions are notoriously difficult to track.  

In this article, we’ll cover why commissions are essential to manufacturers and how Enable can help you strategically manage commissions with ease.

  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.

  1. 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.

  1. Encourage Greater Loyalty

Making your manufacturer reps feel valued is the key to loyalty. It boosts morale and they will not only be motivated to hit targets, but they’ll also want to remain as your sales rep for longer. One method for encouraging loyalty is to pay your reps promptly and accurately. If their commission checks take months to arrive, the rep may turn their attention to one of your competitors.

  1. Grow your Market Share

In the past, traditional manufacturers excelled at innovation and production but may have lacked expertise in sales strategy, process and management. As a result, effectively driving sales and growing market share was sometimes a challenge. If you’re in that situation, that’s alright: that’s where independent manufacturer reps step in. With an extensive understanding of the products represented, working with reps allows you to capitalize on product synergies to maximize opportunities.

Manufacturers also benefit from having a rep when they want to test their products in a new market, making it far more cost-effective than hiring in house salespeople in uncharted territories.

There is also the added bonus of speed of profitable entry into a new market. Reps and buyers have pre-established relationships, meaning your entry is smoother. Manufacturer reps know from their vast experience those who are responsible for purchasing as well as the other decision-makers within the company.

  1. 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.  

Using Enable you can manage all your commission activity in one place and accurately pay your manufacturer reps their commissions on time with no delays. Schedule a demo to see how it works.

Elizabeth Lavelle

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