Factsheet – Threshold of Economic Viability between Sales Reps and Sales Agents

There is an old saying that is relevant here: ‘different horses for different courses’.

Sales agents’ strengths usually lie in penetrating independent businesses. They find very large customers hard for a variety of reasons:

  • Buyers are often transient, making it difficult for self-employed commission-only sales agents to make and maintain relationships
  • Buyers are professional and so find sales agents less beneficial
  • The selling in process can be very complicated and long winded
  • Multiples require greater servicing than sales agents can often provide
  • Multiples require discounts and trading terms that sales agents are usually not empowered to offer
  • Multiples usually have branches that spread out over several sales agents’ areas, making commission calculations complicated or unworkable
  • Etc.

Larger customer such as national multiples are usually best left to company employed sales reps, with the very largest ‘key accounts’ dealt with by the most senior sales staff such as sales directors. Multiples are likely to want to negotiate special discounts and terms. Sales agents may not normally be authorised to offer such deals. Larger customers may want to feel that they are dealing with the top sales staff, and may not be happy dealing with what they regard as a ‘junior’ commission only sales agent, or even ‘ordinary’ company reps. Sales agents simply may not know enough about the product and company to be able to answer complex queries at this level. Large customers often have long sales gestation periods, complex consultative sales processes that may need to involve other support staff, and have meetings at specific times and locations that might not suit the sales agent. And customers will know that the sales agent is receiving a commission which may make them feel they are not getting the cheapest prices.

Also the kind of discounts demanded by larger customers would generally not allow you to pay the sales agent the full commission rate. If sales agents do have strong connections with multiples, you can negotiate commission rates with them specifically.

You should draw up an exclusions list of all such accounts and issue this to the sales agents (possible within the agency agreement).

On the flip side, you cannot really ask reps to do the job of a sales agent. This is why companies seek sales agents in the first place: it is usually simply not economically viable for reps to call on the smallest customers. They may travel 100 miles and spend a whole day visiting a single customer who may (or may not) place a small order. The sales agent can make this viable because:

  • A sales agent normally has a pre-existing relationship with the customer, therefore his chances of getting the order should be higher
  • A sales agent is likely to be more local to the customer so incurs less time and expense in travelling.
  • A sales agent has several agencies, and therefore several opportunities to gain an order
  • A sales agent knows more clients locally and so can make several calls in a day

Think of sales agents as fish and company staff as mammals – and the dividing line as the water surface: now, don’t take the fish out of water; and remember that mammals can only hold their breath for a short time!

Working with sales agents can be an ideal way to grow a business or launch a new product with minimal costs. Often sales agents are the most cost-effective, quickest and lowest risk route to market. They may also simply be the best strategy when trying to open up new markets, where pre-existing customer relationships are key.

At AgentBase we have extensive experience of sales agent planning, recruitment and management. Call our friendly staff for a chat about your situation and how we can help you to get the most of out of using sales agents.

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