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Initiate a conversation on the subject of the how and why of representing principals that have no existing business in a territory and it's inevitable that independent manufacturers' representatives, prospective principals and business consultants will very quickly address the concept of shared territorial development fees.
Simply stated such fees are those paid by the principal to the rep during the period of time the rep develops business in the territory where no business previously existed.
The continued timeliness of the subject was proven when speaking with Hank Bergson, president of Henry Bergson & Associates, LLC, and the former president and CEO of NEMRA (National Association General Merchandise Representatives).
According to Bergson, who together with Kris Hefly will be conducting MANA's latest Manufacturers' Seminar in Chicago next month, not a great deal has changed with the concept of pioneering, and it remains a topic of consideration for reps and principals. "Pioneering for a new manufacturer or a new product line is extremely expensive for the independent rep," he maintains, "unless he can perceive an immediate demand that offsets his start-up costs. Furthermore, it's understandable that it's going to be very difficult for a principal to get an 'A' level rep to develop new business in a territory unless that product line offers something truly unique. But moving beyond the basic concepts of retainers or fees to cover start-up costs, the principal has to be certain that his line is a good fit for the agency and is a line that enhances what they are already selling. On top of that, whatever effort is expended by the rep has to have with it a financial reward in near time."
Historically, according to Bergson, "Manufacturers often arrive at the process of having reps develop new business for them with the following philosophy: 'Here I am with a new and better mousetrap. I've got an outsourced sales force (i.e., independent reps) in place that I don't have to pay unless they sell something.'
"But there's more to it than that. How are you going to get the attention of the 'A' level rep without paying bigdollar retainer fees? The answer to that is really a matter of product fit.
* Is the new product truly innovative or will the...