Managing third party selling is not easy.  But in many sectors it is very important! The intermediaries hold the key to increased income from existing clients and to winning new clients.  

Third-party sellers can either be the way the company delivers customer intimacy or a barrier to customer intimacy.

In the past companies often took the view that provided the results were good (right volumes, right margins, right compliance) then the activity of distributors did not really matter.  It was almost part of the deal: “as long as you deliver the result we will leave you alone. You get your freedom. We get our results?”

But today’s major economic, demographic, regulatory and technological changes make it essential for companies to focus not just on results (the outcomes, the “lagging indicators”) but also on activity (the inputs, the “leading indicators”.)

This is particularly important in a multi-channel environment where a decision to buy may be influenced by media campaigns driving responses, outbound telephone calls, internet presence (both B2C and C2C) as well as local sales activity.

Many companies want to move to a more hands-on, more scientific, more professional approach to managing their distribution to move towards more performance management.

This may involve more accurate and regular use of a CRM . It may be a question of tracking responses to avoid duplicating effort and irritating prospects.  It may require a defined sales approach as part of a multi-channel campaign.

This all seems reasonable from the manufacturer’s or provider’s perspective.  But it causes alarm bells to ring in distributors. It raises questions about “who owns the customer?” and ignites intermediaries’ fears that the company is trying to “steal my customers” (a strange but very prevalent view!).  

Distributors are often angry that the company is trying to control them, to remove the very freedom that made them want to be third parties not employees. They don’t want the increased workload that performance management seems to bring.  They do not believe that performance management will help them sell more. In short if it’s sometimes difficult to introduce performance management to an employed sales force it is much more difficult to bring it in for distributors.

So what should companies do?  Just put the idea away in the filing cabinet “under too difficult”?  Just accept the status quo? Water down the proposals so that they cause no offense but don’t achieve anything either?  Take an aggressive position that alienates even the best agents and drives them into the arms of the competition? There must be a better answer than these!

Based on our experience of working with distributors themselves and the businesses who well through them, we believe there are certain keys to success.

1. Base decisions on real information not on what you think you know.

Distributors are salespeople.  They express their opinions strongly, whether in the field or in head office.  

Try and get at the true picture or at least understand the range of opinions. For instance how many individuals are motivated by success and financial gain and therefore are willing to work harder to win more business; and how many are satisfied with their income but would be very motivated by ideas that would allow them to achieve the same result but for less effort?

Before embarking on a performance management program you need to know what people think; what they believe really matters; what are the obstacles; what are the rewards they are looking for. One tool for doing this would be to segment individuals in a distributor into four different categories as shown in figure 1. below and then design different approaches to get the best out of each group.

2. Make it easy

However valuable the performance management process you bring in it will not be used if it is not easy and quick.  This is true for most salespeople but it is even more true for third-party sellers.

Most people want to be independents partly for the freedom it gives them.  Whether that is the freedom to go fishing on a Friday afternoon or just not having “the boss” looking over their shoulder. So if you need them to capture data for a CRM system or an account plan then try and minimise the work involved.  

Ask yourself if you really need that piece of data? Look at ways of making data entry easy web access, form design, apps etc. Consider who is the best person to provide the information it may be best done by an office based employee rather than a field based agent.  Consider the need to train people to do what you want, making sure that they are able to do the required task.

I remember being shown a beautiful, elegant, sophisticated account planning tool built in Excel. It was very clever. I asked how many distributors were using it none! Keep things as simple and easy as possible.

3. Show the benefits

It is amazing that if people believe that a task will make their job easier, more rewarding or more enjoyable, they will find a way to carry out that task.  I was talking to a product manager responsible for distributing asset finance through a distribution channel.

The distributors swore that the product was unsalable and inappropriate for the relationships they managed.  The VP Sales worked with the CFO to change the reward system in a way that did not reduce economic profit but which increased the reward to the distribution sales force.

With no change in marketing support and with no extra training sales went up by 25% over the next 6 months! So look for ways to make your performance management initiative attractive. It may involve making the business case, perhaps using a pilot group and a control group to demonstrate improved results.

Maybe you can reward compliance, providing more marketing support or even more leads to agents who do what you want.  You could consider a retrospective hike in commission (for example based on completing relationship plans or information returns to a certain standard). Whatever you do, ensure that agents and agency owners can see that it is in their interests to comply.

4. Demonstrate Trust

It may be unfair, but most distributors believe that any  new way of working brought in by the company is designed to cheat them!  If the big issue in your distribution network is “who owns the customer” then don’t go behind the sellers’ backs by using information from a CRM for a direct marketing campaign. Be transparent. If that is what you plan to do then be open about it and demonstrate how it can help them. (see point 3 above).

5. Take the managers with you

Don’t try and bring in performance management without the commitment of managers. You will succeed or fail to the extent that you win over the managers whether these are employees of the company or owner managers of their own agencies or managers employed by the distributor principals.  

Sometimes even if the company cannot be directive with its agents, the owner managers can. But they will only do this if (as above) they believe it is in their best interests. There need to be both negative and positive arguments i.e. the changes will not involve extra work and they will give significant payback.  It is usually worth taking the management into your confidence early in the process.

6. Be ready to enforce as well as encourage

If you are serious about introducing performance management with your distribution then you will need to be willing to enforce it if needed.  The credibility of your initiative will need to be maintained by demonstrating that you mean what you say. This is particularly important if you are going to ensure you keep the commitment of those who are finding the new demands onerous.   

Possible sanctions include holding back leads from those who do not provide accurate data, withdrawal of marketing support or (depending on contractual terms) termination of the agency.

Whatever sanctions you use, agents need to believe there are negative consequences for non-compliance. Another necessary step will be to check the accuracy of data being input. If agents do not think anyone is checking their data they may start cutting corners; so some form of check will be essential.

Of course it will always be better to encourage than to enforce, so although you need to be ready to be strong if required, concentrate on making your performance management easy to use, productive for all concerned, engaging for your managers and based on hard facts.

Conclusions

Selling through distributors, agents and other third-parties can be very rewarding and can help you manage risk. And seize opportunities  However it requires a special approach to sales management to reap the rewards and avoid the downsides. If you are looking to drive growth through third-party selling then contact us to see how to improve processes.