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Sales Management Information
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Outsourcing the Sales Function
Small to medium companies that want to increase sales or profits and find it is possible to outsource sales should - do it! At this point most business owners and executives either become overwhelmed with doubt or fear. Here's what we hear: "We can't give up control of sales, that's too risky." Or "Our products can't be sold by anyone but us, they are too complicated for anyone else to understand." Many small companies outsource accounting and legal work, but still find using contracted sales professionals universally out of the question. Unfortunately, most small to medium sized companies are good at one thing: making a particular product or providing a particular service - not selling. Hence, many companies find themselves dissatisfied with the salespeople they hire. They tend to hire people who have experience with a product or market and figure they can teach them how to sell. This, rarely works, and the company ends up with a product expert who just is not selling. A lose-lose situation is born. There are many industries that have a preponderance of willing and able partners that are looking for new and innovative (read profitable) products to sell. The vast majority of these re-sellers operate on a regional basis, other work on a national or even international level. There are even companies that will set up and manage the entire process for you, and some will even manage your marketing activities as well. So what makes this approach so good? Here are seven reasons: * Pay for performance. Contracted re-sellers do not get paid unless they sell something. They will either receive a commission on the goods sold, or be sold the goods at a discount which they in turn mark up and sell for a profit. This lowers your risk of having to pay salary and benefits and can also allow you to put more feet on the street faster because you're not handcuffed by these costs. * They already know how to sell. Professional sales organizations, whether they are called reps, agents, distributors, wholesalers, partners - whatever - have one thing in common, if they don't sell they don't get paid. This pretty much ensures that resellers who've been in business for any length of time already knows how to sell. * Specialization. Re-sellers tend to pick a niche and specialize in particular industries and markets. So they spend their days in this environment and know what needs to be known from a business and technical standpoint. Therefore, if you pick the right ones they surely can handle your "complex" product. * Instant credibility. An established re-seller has been calling on companies in their market or territory for years and has long standing relationships in place. These relationships allow them to call their contacts within a target company and easily get some time to present a new product or service that they are now handling. This is, obviously, a lot more effective that having an inside salesperson from the your company cold calling on the same target companies. These existing relationships, therefore lead to increasing a product's speed to market. * Other lines bring leads. Almost all re-sellers have other products to sell. In selling these other products they will uncover opportunities for selling yours. * They will tell it like it is. They need you to be doing the right thing because they need to make money, not secure their job. Therefore, you will get candid and timely feedback from the field, allowing you to serve you customers better. Often, feedback received from a rep and one territory can be used to improve relationships and increase sales in all territories. * An enhanced sales function. This approach can replace or enhance your current sales function. In some cases it is appropriate to disband an existing direct sales force and commit fully to an indirect or outsourced sales strategy. In this instance you would have a sales manager working directly for you or hire a sales management agency to recruit and manage your indirect sales force. In other instances a company may choose to retain all or part of its direct sales force to certain markets, or manage certain accounts, and outsource other pieces. Despite the many virtues of outsourcing there are some caveats. First, you've got to pick the right ones. Independent re-sellers need to be selling products and services that line up with your offerings. They also need to be selling to the right customers, and the right players within those companies. (Example: You don't want a re-seller that makes its living calling on purchasing agents if engineers or CFOs are responsible for making the ultimate buying decision for your offering.) Taking the time to find the right reps is more productive and cost efficient than taking the first that express an interest. You don't want to spend the recruiting and training resources twice if you don't have to. Secondly, treat them well and they sell. Simply put, re-sellers follow the money. If your commission rates are on the low end of industry average, you give no added incentive for meeting quota, or you just make doing business difficult, an average agent will spend his time selling other products. If your commission rates are good, you offer attractive incentives and you make their lives easy, you'll have agents that turn over every stone in effort to sell your products. Three other major factors in using an independent sales force are: Support, support, and support. A good rep will know a lot about your product, they will also make sure they know what they don't know. When faced with a question from a customer for which they don't know the answer, a good sales agent will say, "I don't know, but will have you the answer tomorrow." It is your job to make sure that you provide them with assistance in finding such answers in a timely fashion. You should also make it a practice to share these questions and answers with the entire sales channel, because questions usually arise in multiple places. Lastly, outsourcing sales is a commitment. You need to realize that it is going to take some time to establish the sales channel. Usually the same year to eighteen months it takes to get a direct sales person up to speed. With this approach, however, you can have twenty to forty individuals up and selling for you, rather than a handful. Also, with regard to commitment, you cannot vacillate between direct and indirect selling. If the independent channel feels you will be selling direct again soon, they will slow their efforts to a crawl. Plus, word travels fast, if you went from indirect selling, back to direct, agents will be hesitant to engage you if you decide to go back to the indirect approach. Outsourcing, or indirect selling has been going on for ages. As companies become more conscious of their bottom lines and to sticking to their core competencies we are seeing a renewed vigor in this approach. If you're a small or medium sized company that is looking to grow sales and you're in one of the many industries that lends itself to outsourcing the sales function, it is surely worth investigate. Gaetan Giannini is a partner in Giannini O'Connor LLC, a full-service marketing/PR firm whose goal is to increase clients' sales through imagination. Contact him at gaetan@goimagine.biz GAETAN GIANNINI Gaetan Giannini serves as a board member on the Small Business Council of the Lehigh Valley Chamber of Commerce and the Business Advisory Committee at Ben Franklin Technology Partners. He was named among the "Top 20 Under 40" by the Eastern Pennsylvania Business Journal. He has taught at East Stroudsburg University and given marketing seminars for the Pocono Mountains Chamber of Commerce, the Manufacturer's Association of Berks County, and the Greater Lehigh Valley Chamber of Commerce. He is the occasional host of "Pocono Perspectives," a business talk show produced by the Pocono Mountains Chamber of Commerce, East Stroudsburg University and Blue Ridge Cable. Giannini holds an undergraduate degree in Mechanical Engineering Technology from Temple University and an MBA from Seton Hall University. His experience spans from sales engineering to director of sales to vice president of marketing for a variety of domestic and international industrial companies. He is a partner at Giannini O'Connor LLC, a full-service sales and marketing firm in Allentown, Pennsylvania.
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