Outsource Sales? Why (not) use manufacturer’s reps to launch your consumer tech hardware?

A common question I hear when talking strategy with Consumer Tech startups is, “Should we work with a manufacturer’s rep firm?”.

My answer: It depends.

The Pros:

Time to market.  A rep can short-cut the line to get your product in front of retail buyers, particularly valuable with tier 1 players. They’ve established themselves with retail merchants as the go-to for new technology, leaving the door open for their recommendations.

“We’re a startup company with a small Sales force. Using manufacturer’s reps has been beneficial, because we don’t have to hire someone full time to develop each account. Our Sales process is expedited by leveraging our reps’ skills and relationships, which helps us achieve our company’s Sales goals,” shares Steve Monnier, Vice President of Sales at iHealth Labs, a health and fitness wearables company.

Retail expertise.  They’ve been around the block a few times and know what (doesn’t) works from the experience of multiple vendors in multiple product categories and with specific retailers.

Customer relationships and extensive networks.  Via DMMs, VPs and buyers, reps can get meetings you may not until you’re more established.  The right reps know someone who can connect your product with anyone.  “Your manufacturer’s rep can often be the constant in a world of change, and can be that bridge of comfort for the buyer as someone who can make the manufacturer’s side of the business successful with minimal to no work needed from the buyer,” says Christian Carroll, Managing Partner with Lienau Sales and Marketing.

Internal resources. Well-established manufacturer’s rep firms have staff to support the operational aspects of retail, such as product setup, reporting, and inventory management.  Many consumer tech startups don’t have the headcount to hire for these important administrative aspects of the business, making this a real nice-to-have.

The last word.  At other meetings or events, a rep can slip in a word on your launch or drop off a product sample.

Relatively affordable. Reps are typically “pay to play”, signing on for a percentage of revenue for the accounts they manage. A startup can budget the expense of a rep as a cost of revenue versus the up-front financial commitment of hiring staff. In some cases, a start-up or a long term retainer may be required (more typical in geographies outside of North America).

The Cons:

Control over your business.  Reps are negotiating on your behalf, often without you in the room.  Risk exists in that the (potential) customer loses a direct connection with your internal team.  When it comes to the longevity of your retail channel, you must be the face of your business, whether directly or with the cooperation of a firm.

You have warm-up time to market.  Starting retailer conversations during the pre-launch phase of your product gives you the luxury of a reasonable Sales cycle and learning curve in which to generate interest and commitments.  Be realistic and give yourself a minimum of six months to generate interest and get the conversation going on your own, tapping into your network to facilitate introductions.

There’s a retail channel expert on your team.  Hiring a first business executive or strategic consultant with a deep understanding of the retail channel and connections at the right retailers will get you in the door and lay a proper foundation.

Your company is prepared to hire a Sales staff.  Startups typically prioritize their early hiring budgets to recruit engineers and technical staff.  If yours is in a position to hire a full-fledged Sales team and Sales support functions from the get-go to cover key regions and accounts early, you can bypass the rep firm option.  Keep in mind, your Sales executive leadership may choose to engage rep firms as part of her Sales team.  I’ve worked in and run successful Sales organizations that blended staff and reps according to the needs of the business.

If you choose to engage a rep firm, choose wisely.

It is critical to be completely in sync with your manufacturer’s rep to provide strategic guidance, articulate the goals of your company, share product plans, provide pricing and negotiation guidelines, manage channel marketing budgets, plan inventory, and monitor the business. DO NOT turn over the reigns of your business, but think of the rep instead as your partner.

“A good rep is more than just getting a meeting – it is about follow-up, working on strategy to drive the brand and set it apart from the competition, and the ability to speak the language of the retailer to get things done,” shares Carroll.

There is a short list of manufacturer’s rep firms I will engage or recommend that have either represented my company or worked with me as a trusted colleague or customer.  Among their qualities are integrous, realistic, connected, savvy, and fun (yes, that’s a big one).  I also like a rep who will give me his opinion, not just do as directed.

Tips to select the right firm:

Be strategic. Decide which retail accounts would benefit most from a rep firm, select the right firm for those accounts, set goals, and stay involved to support the effort.

Meet in person.  Looking a prospective manufacturer’s rep in the eye is important. After all, they will be looking your future customers in the eye on your behalf. An efficient way to interview manufacturer’s reps is at major industry events like CES and Shoptalk, where they line up meetings with potential clients.

Identify potential conflicts of interest.  Is their overlap on their line card with the technology you offer?  Think this one through. You know the direction of your roadmap and must be sure not to introduce unnecessary conflict of interest.

Check references, especially those they don’t give you.  A colleague heard a rep firm’s pitch, complete with bells and whistles and talk of major lines they had launched into national retailers. All it took was a few phone calls to her network to raise doubts about the legitimacy of this rep group.  Needless to say, her company went in a different direction.

Ask for recommendations from your network. If you don’t have a strong network within the consumer tech industry, ask your angel/VC investors to tap their connections.

Ask me.

Final thought…

When working with startups, I like to find the right balance between staff and manufacturer’s rep Sales coverage, making sure to communicate the strategic direction of the company to all involved and to keep lines of communication open at all times. The right manufacturer’s rep can be a partner for the long haul.

About the author:

Suzanne Oehler is an energetic, driven business leader with 15 years in consumer and enterprise tech Sales. Widely regarded for opening and expanding business in brick-and-mortar Retail and digital E-Commerce for consumer technology hardware start-ups, she designs and implements winning Sales strategies that navigate the complexities of Consumer markets.

Follow Suzanne on twitter and read more at www.suzanneoehler.com

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