Tips on cost investment between small business manufacturers and sales reps, from the perspective of each. Charge or not charge sales reps

To Charge or Not to Charge Independent Manufacturer Sales reps for samples, demonstration units and marketing material.  Many small business and start-up medical product manufacturers and service providers wonder if reps are willing to, or should be required to, pay for samples, demonstration units or marketing material.  A discussion for small businesses and start-up medical product manufacturers, suppliers, inventors and service suppliers in the medical and healthcare industry.

In another article, Building the High Impact Sales Force with Independent Medical Sales Representatives: An Investment You Can’t Afford Not to Make,  we review various cost savings with hiring independent reps as compared to hiring a salary rep. Additionally, we discuss creative Compensation for Independent Manufacturer Reps along with offering an overview on Creative Commission Structure Variables for aligning and building your independent sales rep team. In all of our topics of discussions, it is our goal at MedCepts to maintain a Liaison Positioning For Independent Medical Sales Reps, Medical Product Suppliers, Medical Product Distributors, and healthcare providers. In doing so, our discussions make every attempt to look at various perspectives.

Understanding the independent or manufacturers rep’s business is helpful. The Independent Sales Rep operates as an independent business and is responsible for all related operating expenses, including advertising, auto, insurance, office equipment, taxes, technology, travel, and so forth for their own business. These costs are paid out of the gross commission received by the Independent Rep entrepreneur. The independent rep needs to carefully evaluate products to determine if a product will be successful in his or her territory and niche relationships they have established. Now, we would like to address a very common question for product manufacturers and suppliers when selecting their independent sales rep team members when it comes to building your independent sales rep team –

The perspective of the Supplier: To Charge or Not to Charge Independent Manufacturer Sales reps for samples and marketing material

Below are a few topics of conversation that have been brought to our attention relative to providingcharge or not charge, invest or not invest marketing materials such as brochures, business cards, product samples, and demo units :

  • Should our company supply a demo unit for all of our sales reps? Our units are $16,000 each and we can’t possibly provide a free demo unit to multiple reps.
  • I was out with a sales rep and noticed brochures of many other products all over their trunk. I have a few thoughts on this.
    • I know the rep was not representing all of those products based on the way the brochures were not managed and thrown all around.
    • I do not want my brochures to end up the same place, just tossed somewhere.
  • We need to hire about 20 – 50 independent reps and independent rep teams. My marketing will primarily be by providing brochures. I believe each brochure rack should have at least 200-300 brochures in them so the rep doesn’t have to come back so often to restock. How can I minimize my expenses?
  • Our team feels the reps will succeed best with the ability to provide a demonstration of our product. However, the problem is the cost factor to do so for a national launch. Our CEO wants to be able to capture some of this cost when providing reps.
  •  We have a lot of independent sales reps interested but we cannot possibly provide all of the reps individual or mass amount of marketing material.  Do we turn some of those reps away for now or can we split the costs with them for the marketing material, samples and demonstration units?

Samples of what we captured on the web, and there are all sorts out there

Here are two different samples of what’s out there (captured on the web) as this is written – neither of these two companies are network members (or advertising network members.) We have uncovered numerous concepts that we gasped at as we read but, none-the-less, these two samples below are perfect for this discussion.

The perspective of the Independent Sales Rep: Here are a few thoughts from the reps

  • I have worked with many small start-up companies pioneering their products in my territory. I can appreciate their need to watch their budget coming out of the gate.
  • I aligned with several companies that had not completed their marketing material. I wanted to begin introductions in my territory rather than waiting for the brochures. For many products, this is not a challenge but for some, it is a huge challenge.
  • I refuse to pay for any samples, demo and/or brochures. If they want me to market their product, the least they can do is supply the material I need to market their product!
  • I don’t mind paying a few dollars for products when I know I can close some sales!
  • I don’t really think I need a demo, I can probably close the sales without it. I’ll feel the market out on the product and see where it goes from there.
  • I have my own business cards because I represent several different lines and it is better for me to just carry my own business card.
  • We’re a distributor with over 20 reps spread across multiple states. We don’t mind paying for one demo unit which our team members can schedule to use when they need to. Yes, we have paid for our own marketing material and in some cases, we have also helped to develop sales brochures for our specialty call points.

The perspective of MedCepts – There is an assumed Shared Risk factor for both parties

We recognize both parties (manufacturers and reps) typically can work through all concerns if both parties truly believe in the other. Independent Manufacturer reps and medical product distributors sort through hundreds to thousands of medical products in the course of their business, just as the manufacturer explores through a similar number of rep profiles over the years of business developing and team building. (Sales Team building is an ongoing and proactive process whether you’re hiring salary employees or independent sales reps.) The key to success is working closely together and communicating. The MedCepts Network consists of start-ups to multi-national Fortune companies and specialty niche consultants from the “New Idea” to Concept and distribution.

Take a look at one of our Survey Results: 1,028 Independent Reps Responded.

MedCepts works with thousands of manufacturers and inventors often seeking to penetrate the market or augment their present sales team with independent 1099 or contracted sales reps.  According to the US DePaul Centre for Sales Leadership, DePaul University, Chicago (for salary based sales reps) the average sales staff turnover per annum is 12 to 18% – with 24% of firms reporting turnover higher than 20%. Some specialty sales areas {and for some companies} these figures can soar as high as 100%.

Now consider the potential turnover of Independent Reps on commission only for a company building a sales team. Regardless of the type of rep placed, high sales rep turnover can impact the bottom line for any company. This is particularly true when the company invests in marketing collateral, product samples, demonstration units, etc. The incredibly high costs to bring a product through the various stages of the” new idea to concept” and on to you for distribution is probably not news to you. (Brand Drug: Over $1 Billion and 12 years – Class II or Class III Devices range anywhere from  $<500K – $100 million and take anywhere from 3-10 years or more depending on the complexity of the device.) After the long and costly process for the product during the development stages, it’s time to take it to market and funds are ridiculously low for some companies. They may be in the midst of aligning with investors and creating a soft launch of their product or in other stages of increasing sales/revenue.

The question we asked sales reps is presented below with responses and overall results.

  • Would you be willing to Lease, split or assist in some manner for the purpose of reducing the cost for a demonstration unit, product samples and/or other marketing material with a Small Business entity or start-up company offering an innovative product for your territory?
    • Yes, if I could return the demo and samples for a full refund.    904
    • Yes, if I received a refund structure based on sales results.      756
    • Maybe, but I would definitely have to evaluate the potential.   989
    • No, under no circumstances would I pay to sell a product.            39


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