Outsourcing some of its sales efforts can provide a producer with several advantages. We’ve already mentioned a few, such as gaining access to more buyers because the organizations and people to which the company has outsourced the work sells a broader array of products. Having a broad array to choose from is more desirable from a buyer’s perspective. Moreover, outsourced salespeople have existing relationships with the buyers that can be leveraged. Thus, entering new markets, such as new product markets or new countries, via distributors, independent agents, or manufacturer’s representatives can increase the speed at which the company’s offerings penetrate a market. These people and organizations also possess key market information and understand competitors and their strategies—information marketers can leverage.
In terms of a company’s costs, outsourcing can be less expensive. The company that outsources the work doesn’t bear the responsibility and expense of training the salespeople, except to inform them about the company’s products. In addition, because the salespeople often work on a straight commission basis, the company only pays them when they sell its products.
The disadvantages of outsourcing can be boiled down to one word: control. Distributors, manufacturer’s representatives, and agents are independent. They can decide what to sell and when to sell it. Unlike an employee who can be required to offer your product, they can choose to offer a customer a competing product or simply a different product than the one you sell. Nor can you force them to make sales calls. If it is a beautiful day and the golf course beckons, you may find your rep somewhere on the links.
To deal with control issues, companies often create incentive programs to motivate independent agents and manufacturer’s representatives. Attractive commissions are more likely to get your product mentioned on every call. So are spiffs. Spiffs (a term that began as an acronym for special promotion incentive funds) are short-term bonus payments companies use to encourage salespeople to sell certain products. Also keep in mind that salespeople want to pitch products that are easy to sell and have short sales cycles. Why? Because they get rewarded for making sales. To the extent you can shorten a product’s sales cycle and increase their conversions, you will gain their attention, time, and effort.
In addition to creating incentives for independent salespeople, a company will usually employ a sales manager to work with independent them. The sales manager’s job is about selling as much as it is about managing, though. The manager has to constantly sell the agents on selling the company’s offerings, and provide them with product information and tips that help them do so.
Finally, just as they listen to their own sales forces, good marketing professionals pay attention to what the independent salespeople and organizations they work with are saying. Not only can marketing managers create better strategies by doing so, they will create strategies that get used. In other words, the salespeople will be more likely to support those strategies with their own efforts because they believe in them.
Outsourcing the sales function can be done through distributors, independent agents, and manufacturers’ representatives, as well as other types of sales organizations. The entire sales cycle can be outsourced or only parts of it. Outsourcing can cost less and requires less investment than a company-employed sales force. Moreover, independent agents, distributors, and manufacturers’ representatives often have established relationships that make it easier for a company to enter and penetrate new markets.
Outsourcing the sales function(s) means that a company will lose some control over its sales activities. To counteract that loss of control, companies try to devise attractive compensation schemes, as well as effective marketing strategies for the independent sales organizations and people with whom they work. Companies also hire sales managers to manage the relationships with the outsourced sales staff.
- Which parts of the sales cycle can be outsourced and to whom?
- When does outsourcing make the most sense? The least sense? Why?
- What can marketers do to make outsourced sales functions more likely to succeed?