The Art of Partnership: Optimize Your Rep Agency Program for Maximum ROI

Maximizing ROI from your Independent Agency Program

Rep Agencies Offer Long-Term Benefits

For some companies, selling through independent agencies is an essential channel to get products to market. Agencies often hold crucial relationships throughout the value chain, as well as an expanded breadth of products that can create a more holistic offering to customers and earlier access to opportunities. However, a sales model that is less reliant on direct employees poses inherent challenges with not only driving desired sales behaviors, but also measuring overall effectiveness. With a strong agency management program, organizations can realize all the benefits independent agencies provide while mitigating many of the risks this model creates. This approach relies on four key elements:

1. Tiering program definition
2. Compensation program alignment
3. Evaluation of new and existing agencies
4. Ongoing agency management

The first step in optimizing agency management is defining the dimensions of success for the business relationship. Once your company’s strategic objectives for a successful relationship are identified and prioritized, a comprehensive agency management program can be implemented to drive priorities through a combination of tiers, compensation, agency evaluation and your ongoing agency management efforts.

Tiering Helps Prioritize and Allocate Resources

For best-in-class agency management programs, agency tiers provide a mechanism to accentuate multiple measures of success such as growth, volume or market share. Once a yardstick has been established, an agency tiering program can be defined to optimize investment and interactions with each agency for maximum ROI and to track and incentivize agency performance. The approach to tiering program design that we find works best is to:

• Identify and prioritize the strategic objectives to be driven through tier definition
• Identify metrics to measure agency progress on or alignment to strategic objectives, and blend them in a scoring index
• Manually evaluate the outputs and apply management judgment to fine tune the scoring index; split Agencies into different tiers
• Gather intelligence on agency strategic objectives and their enablers (e.g., training, in-market specification or customer appreciation) and define how your company will deliver each value proposition for rep agencies of each tier to maximize return on investment
• Define value-added activities and non-financial obligations for your company and rep agencies

While each organization is different, applying best practices can enhance your agency program. Most companies choose two to five unique tiers and up to five differentiating factors that support strategic priorities. While companies often include overall volume and growth drivers, there may be additional factors to account for the breadth of product/offering capabilities, value-added service offerings, manufacturer exclusivity and market share expansion.

Successful tiering programs are commonly linked to compensation, working in tandem to encourage desired behaviors. For example, to drive growth, better rates are offered for higher tiers to promote long-term growth while reinforcing annual results through a higher commission rate above yearly sales targets.

Additional best practices include:

1. Managing the resource interaction level
2. Re-evaluating tiering results annually
3. Transparent reporting of results to guide the partnership relationship
4. Incorporating both monetary and non-monetary benefits
5. Driving intended outcomes through incentives and disincentives
6. Partnering with agencies to plan their ascent up the tiers over time

Determining Comp for Agency Performance Management

Addressing compensation program alignment includes three steps:

1. Maintain a straightforward plan for each agency
2. Align pay to priority strategic objectives
3. Ensure pay rates offset the cost of value-added activities for the agency

A clear, straightforward compensation plan includes measures and rates that are differentiated by tier with a single core structure. Key elements should reinforce tiers by defining strategic growth objectives and supporting them with targets or quotas. Growth, overall volume, strategic products, product sales vs. service, new vs. core sales and defined customer types are often priorities driven by different elements or measures of the compensation plan.

Rep agency compensation plans guide behavior to achieve strategic goals. Best practices include:

• Defined, clear, concise and straightforward compensation plans
• Pay for persuasion, influence and performance
• Alignment of plans to business, strategy and agency rep job roles
• Mutually profitable compensation plans that offset increased agency investment with additional incentives
• Market competitive pay rates, which provide additional earnings opportunities for exceeding targets

After incorporating these best practices, leaders may refine their program by:

• Providing incentives that reward partners for incremental value-added behaviors and results
• Incorporating straightforward baseline comp
• Offering SPIFs that support the core plan while driving additional desired behaviors
• Making expedited payouts within 30 days of crediting events
• Using “carrots” and “sticks” to drive desired behaviors while disincentivizing undesirable behaviors

Choosing and Evaluating an Agency

The ongoing market evaluation of new and current agencies is critical to maintaining program effectiveness. Establishing a tiering program or other means of evaluation of the alignment between your strategic goals and your rep agency is essential to driving results. While reps in the top tier will receive a number of benefits, reps that consistently land in the bottom tier should also be subject to scrutiny and potential replacement.

Beyond metric-driven tiering, some best practices for your company’s evaluation of both new and existing agencies include:

• Quantifying opportunities across all core markets
• Evaluating sales coverage capacity relative to the opportunity
• Understanding competitive intensity and firm switching costs for each market
• Targeting candidate agencies within under-covered territories
• Tailoring sales, growth and strategic targets for existing agencies based on market opportunities

New agency identification best practices:

• Online visibility – Optimizing online presence to increase visibility to prospective agencies via an improved digital presence and search engine optimization.
• Associations and networks – Leveraging existing manufacturer associations and proactive networking of internal company resources with current agency firms’ networks.
• Tradeshow attendance – Optimizing trade-show attendance to build relationships in new or growing markets can be especially useful when elevating presence in new, growing or untapped markets.
• VOC leads – Utilizing the Voice of the Customer (VOC) feedback to identify candidate firms within an existing ecosystem of contractors, engineers and distributors.

 Evaluating current agency best practices:

• Strategy and goal confirmation – Confirm focus areas through regular meetings with agencies to ensure continued alignment.
• Recurring evaluation – Set agency evaluations to a specific cadence, addressing all program aspects from strategic alignment to business performance and utilizing detailed scoring systems.
• Close communication – Conduct regular sales meetings to drive accountability and identify corrective actions.
• Revisit evaluation priorities – Perform an internal review of evaluation processes, adjusting as required to maintain synchronization with strategic goals.

Agency Management: Onboarding and Oversight

After selecting the rep agency that best supports the company’s business goals, companies should implement a consistent ongoing agency management program that includes onboarding and oversight. Ideally, ongoing agency management offers mutual revenue retention and growth for both participants.

While driving successful tiering and compensation programs are key aspects of a successful overall agency management program, partnerships must also address unique challenges likely to arise and strategic alignment that cannot be boiled down to tiering or compensation metrics. For example, there may be areas of significant variability year-over-year, metrics may be difficult to track and select company goals may not have been included or were difficult to reflect in a comp program. Creating a win-win environment for both partnerships requires diligent internal and external management practices.

Internal management best practices:

• Aligning differentiated channel management roles and a defined mix of resources to provide the highest touch management investment to the most strategically important agencies.
• Defining the appropriate span of control for channel managers and their firm assignments and addressing high-touch managers with lower spans of control.
• Distributing enablement collateral, including agency management playbooks, to support channel managers in enhancing agency relationships and results.
• Crafting agency business plans, such as an annual plan, which dovetails with your company’s corporate annual planning. Desired outcomes and strategic objectives may include cross-sales, growth or new market entry, or other factors.

 External management best practices:

• Onboarding should include training focused on critical reporting and systems, sales strategy and processes, and identifying key contacts at the company and the agency.
• Sales support practices should address services that drive sales, providing direction about training, product collateral, sales strategies, marketing and online resources.
• Knowledge sharing can be accomplished through product and sales training, regular agency updates, joint calls, mutual field visits and defined rules of engagement for the multiple reps who serve the same territory.
• Rep performance measurement, reported via monthly updates, should reflect ongoing and annual planning and business reviews.

Tiering, compensation and agency management are essential approaches to developing an agency management program that supports your strategic objectives, drives desired behaviors and maximizes the ROI.

Have You Accurately Identified Your Best Agency?

What does strong performance look like for your ideal agency rep partners? Are your established targets working or do they need adjusting? And finally, what does success look like for your company, and how do you appropriately manage agency relationships to support your goals?

Alexander Group is a leader in developing market-leading commercial effectiveness and sales compensation models that support strategic outcomes for manufacturers. Defining, driving and monitoring agency relationships will help your company reach your growth and sales objectives. Alexander Group has the expertise to define and employ best practices, ensuring your company successfully manages agency firm partnerships.