You can put a price on a product or service, but not on a customer relationship | Daily News
So, you want to start-up and develop a small business – Part 21

You can put a price on a product or service, but not on a customer relationship

Curt Carlson one of the most successful American entrepreneurs, coined a phrase years ago that American sales veterans know by heart: “Nothing happens until a sale is made.” What Curt was saying is that a product or service, no matter how good it may be, will live or die based on the ability of the sales and marketing staff to generate sales.

Because sales are so critical to the success of your small business, we have dedicated today’s entire section to the topic. Read on to find out how to make sales a top priority in your business.

Pitting in-house versus outsourcing

Face it: Someone has to sell your products or services. The question is who that selling-someone should be: (a) should the seller be you, (b) an employee hired by you, or (c) a team of employees hired by you? (These are examples of an in-house sales force.)

Should the seller be an outsider - someone who’s already calling on your potential customers with related products? (This is known as outsourcing, and the people who do it are typically called manufacturers’ representatives, or reps.) The following sections are designed to help you make the decision about whether to sell in-house or to outsource.

Using an in-house sales force

An in-house sales force is comprised of employees of the company whose products they sell. In-house sales people are usually hired, trained and compensated by the company itself. Thus, their mission is to sell only the company’s offerings.

The advantage of hiring and maintaining your own sales force is that you can exert direct control over your sales people and they, in turn, can direct all their energies toward selling your products or services.

The disadvantage of hiring an in-house sales force is thatyou’re picking up 100 percent of the expenses involved in employing and deploying your salespeople; therefore, you must be able to find enough sales potential within any given geographical area to financially support the salesperson assigned to it.

Most in-house sales people today are compensated on a commission basis and you can choose from a wide variety of ways to pay that commission. (We will discuss about compensation plans, in a future date)

Using manufacturers’ reps

Manufacturers’ reps (also called independent agents, independent agents or commission agents) are independent sales people who carry a “line of products” from different manufacturers and get paid a percentage of every sale they make. The collection of products they choose to sell usually is aimed at customers within a given industry. For example, the sales rep who calls on photography stores will pitch products, such as film, tripods and scrapbooks, from varied manufacturers. The collection of products from any one manufacturer is called a line, and a typical rep may have anywhere from 1 to 30 lines of products in her bag.

Always ask how many lines the rep you are considering is carrying; the more lines in her bag, the less attention yours will get.

Some reps are part of a larger rep agency; others work solo. Manufacturers’ reps are paid only for what they sell (in other words, straight commission) and they often cover a large geographic territory, depending on the density of population. The commissions they charge vary with the product and the areas they cover; commissions can range anywhere from as low as five per cent (on big-ticket sales) to as much as 25 per cent (on small-ticket, difficult-to-sell items).

Advantages

The primary advantages of using manufacturers’ reps include the following:

You do not have the out-of-pocket expense of maintaining a sales force: no salaries, benefits, or travel expenses. Because the reps are paid solely on commission, if they do not sell your products or services, they do not get paid.

Because reps can spread their costs over a number of manufacturers’ lines, they can cover a wide geographical area for minimal expense. Networks of manufacturers’ reps, both individuals and firms, cover every province in the nation; you can pick and choose until you find the combination you need. Reps can make small-ticket (low-price-tag) sales as a result of their ability to spread their time and expenses over a number of products.

This means that when you have a small-ticket product, your reps can afford to sell it to customers in outlying areas, whereas in-house salespeople, with only one manufacturer’s product in their bag, usually cannot afford to make the sales call in the first place.

Disadvantages

The primary disadvantages of hiring manufacturers’ reps include the following:

You lack control over your reps’ activities. After all, you are not employing them; they are employing themselves.

Due to the reps’ distance from and non-involvement in your day-to-day business, they canot possibly know your product as well as an in-house sales staff — especially if your product is technical in nature.

Manufacturers’ reps, like all salespeople, have limited time in front of each customer. The products the reps choose to sell during that designated time depend on their perception of how easily they can sell a given product, as well as how much commission they can generate from the transaction.

If your product or service is well established and relatively easy to sell and your customer base is widespread, manufacturers’ reps may work well for you. In these cases, the reps will be sure to pull your product out of the bag during the course of a sales call. On the other hand, if you have a relatively new product or one without an established customer base, manufacturers’ reps may not give your product the time or attention it needs.

Where do you find these reps? Look in your industry’s trade magazines or visit a trade show within your industry and ask. Or make a Google search. There are a number of companies available locally.

Making the decision

In short, you sacrifice control for expense when you employ a manufacturers’ rep in lieu of an in-house sales force. Not surprisingly, the correct decision depends on your situation. The following “equations” can help you decide which of the two options is best for you:

Easy products to sell + Limited finances = Manufacturers’ reps

Difficult products to sell + Adequate finances = Your own sales staff

Small-ticket item + Wide territory = Manufacturers’ reps

High-ticket item + Small territory = Your own sales staff

Becoming a sales-driven company

Today’s owners and leaders of sales-driven companies know that to be truly sales driven, every employee - from the person who answers the telephone to the one who drives the delivery truck - must understand the overriding principles of a sales-driven company:

Sales-driven companies sell solutions, not products. Product- driven companies focus on the product, which is only a part of the solution. Sales-driven companies focus on the entire solution, which is what the customer is really seeking. The result is that the company that provides solutions builds relationships with its customers, while the company that sells products only sets itself up to be undersold by its competitors.

Sales-driven companies sell benefits, not features. The sales-driven company’s sales force sells the benefits that a product provides, not the product’s features. For example, it doesn’t matter how light the razor is, or what colour it is, or how easy it is to change blades. What matters is the ease and quality of the shaving experience.

Sales-driven companies respect their sales force. One sure sign of a sales-driven company is the manner in which its salespeople are perceived by the other employees. Because salespeople are the voice of the customer and because they are responsible for making the sale without which “nothing happens” — salespeople in sales-driven companies are held in high esteem. And yes, they are usually paid more than the other employees.

Sales-driven companies build relationships; they do not just sell products or services. The typical business’s primary sales goal used to be to get the order. Everything that the company did was in response to that goal. If the salesperson wrote the order, the sales call was a success; if he did not, the call was a failure.

Today, the sales-driven business’s primary sales goal is to establish an ongoing relationship with the customer. Relationships come from employees understanding the value of the relationship with the customer and doing whatever they can to foster that relationship.

Incidentally, whether it is you, your employees, or your manufacturers’ reps who are dealing with the customer does not matter. Every employee in the business chain - from customer service to the shipping department - must be in tune with the relationship-building principle when dealing with customers.

Understanding the business triangle

To be a successful sales-driven company, you must first create a mind- set within your company that everyone needs to be a winner in the sales transaction, the customer included. To understand how to develop this concept within your company, consider the business triangle model.

Visualize a triangle with three equal sides. This triangle represents the relationship among the three principals of the business: the company itself, its employees, and the company’s customers. When the three sides of the triangle are equal and stable, you have a balanced triangle.

However, when one side is significantly longer or shorter than the other two, the triangle - and thus the relationships among its principals - becomes unbalanced and precarious.

Expectations

The benefits that each party derives from the relationship determine the length of each side of the triangle. Because those benefits are measured against expectations, you need to consider what each of these three parties expects from a business relationship:

Customer expectations: Solutions to problems and promises kept regarding quality, delivery, and pricing

Employee expectations: Fair wages, reasonable job security, and courteous treatment

Company expectations: Fair profit, good professional reputation and opportunity for continued growth

Your job as a small-business owner is to make sure that you and your employees understand how this Business Triangle works and then see to it that the three legs remain balanced. The overriding principle here is that, in the long term anyway, everybody must win.

(Lionel Wijesiri is a retired company director with over 30 years’ experience in senior business management. Presently he is a business consultant, freelance newspaper columnist and a writer.)


 

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