We Are The Same, But Different

Lamps are different, but light is the same.
(Rumi, 1207-1273 AD)

Travel across the Atlantic Ocean, and you’ll often discover that things abroad may seem the same but also different. And, in the process of learning about things from foreign lands that are the same but also different, you may develop a deeper understanding of the familiar things from home.

A cost effective route market
For example, on both sides of the Atlantic, commission-based outsourced sales forces are a popular, cost-effective way for manufacturers to go to market. In Europe, Commercial Agents and in North America, Manufacturers’ Representatives.

We are the same but different
Are Commercial Agents and their North American counterparts both the same but different? Research conducted by IUCAB (Internationally United Commercial Agents and Brokers), MANA (Manufacturers’ Agents Association) and Professor Trond Bergestuen at the University of Wisconsin – Eau Claire, USA, says yes. And that studying those differences can shed light on how manufacturer/salesforce relationships on either side can be more successful.

Long lasting relationships
How were Commercial Agents the same on both sides of the Atlantic? For example, Bergestuen’s research showed that the average firm had been in business for over 20 years and had worked with their most important principal for most of that time.

An instant sales team
How were they different? Average European Commercial agents that responded employed two salespeople and five to six principals. Average US Manufacturers’ Representative firms employed six salespeople and represented 12 principals.
What can these counterparts learn from each other? Europeans can give some thought to whether or not merging smaller firms might create a bigger firm with greater income potential. US firms can give some thought as to whether or not paring down to a smaller size might make a better work/life balance.

Open to learning
Another area of difference was in Commercial Agents’ perceptions of their principals. Europeans tended to find their principals’ training programs less useful and praise for a job well done less common.
In some European countries, Commercial Agents also reported that their commission rates were less satisfactory than their US counterparts. In others, such as the UK and Ireland, satisfaction with commission results was about the same as US Manufacturers’ Representatives reported. Communicating these findings to manufacturers who sell through European Commercial Agents might trigger improvements in training programs, more recognition being given for special achievements, and giving thought to the possibility of lifting commission rates in countries that fall below average.

Relationships matter
European Commercial Agents gave their principals lower scores for fairness, trust, and support in the relationship between the agency and principal than US Manufacturers’ Representatives. Commercial Agents had fewer friendly personal relationships with principals and were less likely than Manufacturers Representatives to agree with statements like:
• The principal takes a personal interest in me.
• I receive fair treatment from the principal.
• The principal is approachable.
• I have complete trust that my principal will treat me fairly.

Sparse personal relationships are not uniform across Europe, with manufacturers in the UK, Ireland, Austria and Germany most likely to have personal relationships with their Commercial Agents and manufacturers in Italy least likely to do so.

Better together
Manufacturers’ Representatives often say that personal relationships with principals can be more important than commission rates, so manufacturers who don’t develop personal relationships with their Commercial Agents are losing out on a powerful incentive that could get them more mindshare from their Commercial Agents. The area with one of most significant differences between Europe and the US is that European manufacturers are much more likely to bypass their Commercial Agents and service selected territories through in-house sales employees to avoid paying commission to Commercial Agents.

Beware of house accounts
European Commercial Agents reported that 71 percent of their largest principals handle some territories with in-house sales employees instead of commercial agents. Just 45 percent of US Manufacturers’ Representatives make the same complaint.
The pattern is similar for non-commissionable house accounts inside the Commercial Agent’s territory. House accounts were reported by 39 percent of European Commercial Agents and 23 percent of US Manufacturers’ Representatives. There were significant differences within Europe. For example, in Italy, 48 percent of Commercial Agents have house accounts in their territories, but just 23 percent of German Commercial Agents report this practice.

Inclusion v exclusion
Territories handled by in-house sales employees and territories with house accounts have proven to have a significant chilling effect on the relationship between manufacturers and outsourced sales forces. This chilling effect could be one of the reasons that Commercial Agents are more critical of their principals and have fewer strong personal relationships within those companies than Manufacturers’ Representatives. This practice is not uniform across Europe, with the most pronounced chilling effect reported in Italy and France and the least effect in Austria and Germany.

With this in mind, manufacturers might want to reflect on the more subtle downsides of excluding Commercial Agents from particular territories or accounts and reconsider these policies.

Even though European agents are less satisfied with their relationship with the most important principal, they allocate more sales resources (mindshare) to their most important principle than the agents in the US. This increased mindshare is not unexpected because European Commercial Agents, on average, have half the number of principals as US Manufacturers’ Representatives. Because US Manufacturers’ Representative firms average six salespeople and European Commercial Agent firms average two salespeople, total sales per firm are much larger in the US. Sales per salesperson, a more meaningful number, average 850,000 euros in Europe and 1.1 million euros in the US. Within Europe, that range is from just below 700,000 euros in Italy to an average of 1,050,000 euros in Austria. Further research may reveal some of the underlying causes.

We expect that further comparisons of these similar business models will reveal more insights and opportunities for Commercial Agents and Manufacturers’ Representatives to grow their businesses.

About this research:
During Spring/Summer 2021, IUCAB, in collaboration with Professor Trond Bergestuen at the University of Wisconsin – Eau Claire, USA, surveyed commercial agents in Europe. The objective of this research was to explore key variables that affect the relationship between commercial agents and their principals and make these relationships successful.
The study was designed to allow comparisons of findings from Europe with corresponding findings from Professor Bergestuen’s collaboration with MANA in the United States. Almost 2,000 commercial agents responded to the survey. We believe this is the most extensive commercial agent survey ever conducted and the first multinational survey focusing on commercial agents.

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