Managing Sales Representatives in the Semiconductor Equipment and Materials Industry, Part 1

by  John C. Housley

Frequently, OEMs or materials suppliers for the semiconductor industry will refer to their sales agent/representative as, "my distributor." In fact, to be a distributor, a company must take both title and possession of the goods and re-sell the product at the price of their choosing, not necessarily at the manufacturers suggested price. In the case of a true agent, the agent usually has the power to make commitments and binding contracts for the company that they represent. Unless a company has very great confidence in such an agent, they do not usually want any non-company representative making binding contracts for them.

Most often, SEM (semiconductor equipment and materials) type companies will take their products to market by selling through a combination of direct (company employee) sales people along with commissioned sales representatives. These commissioned representatives (reps) simply use their relationships or product and industry knowledge to persuade a customer to buy products from the OEM or materials supplier they represent. In turn, they are paid a commission on the net proceeds of the sale.

A typical sales rep will represent anywhere from two or three up to ten or more of these companies. (commonly referred to as principals) It is always interesting to note how a particular rep will succeed abundantly for one or two principals and virtually ignore the others. The secret is usually how that principal manages the relationship.

Keys To Rep Success

Successfully managed rep relationships are simple:

1. Choosing the right rep with the best relationships for the right territory. Often, the principal chooses the rep for all the wrong reasons. For example we hear . . .

• "They spoke good English" - While good communication with your rep is important, in a non-English speaking country, their selling skills lie with the local language, not the language of the principal.
• "They were the most technically competent. They were all engineers and understood our product." - While this is a desirable and important trait, the principal's company probably has plenty of technically sharp employees who can go with the rep to speak with the customer. It is the rep's relationship(s) that opens doors. It does no good to be technical genius if you can't get past the front door to the real decision maker. Contrary to popular belief, just because you build a better mousetrap, the world will not beat a path to your door until they are aware of it.

Reps should be chosen because they have a good reputation, a proven track record, have developed close relationships in the territory, and have some reasonable level of technical knowledge about the industry. If they have good technical knowledge about the principal's particular product, that is just a bonus.

2. The next step to managing the relationship is to properly train the rep. Most good salespeople have the kind of personality that just drives them to want to go out and tell someone something they know. Those principals who have invested the maximum time, energy and cost in training the rep will find they get a larger share of their time. They can't wait to share their knowledge. However, if they do not really understand the product or its features and benefits, they will somehow shy away from that line.

3. One of the common problems to managing the relationship is the overall compensation. I have heard principals say, " Well, they started out wanting ten percent commission, but I negotiated them down to seven percent." What the principal doesn't realize is that he probably just negotiated himself into a guaranteed last place priority in that rep's daily routine. The cost of running a rep company (especially in foreign countries) is substantial. When principals calculate the fully loaded cost of running their own sales organization they usually find that the rep is cheaper. However, the main consideration is did they get the order? It is much better to raise your price a few percent to compensate the rep and get orders than to save a few percentage points of commission on a sale that never occurred.

4. The next key to managing this successful rep relationship is communication. Many principals do everything right except spending the time and effort to form personal relationships with the rep and "Work" the rep on a regular basis. If your company is the one that is most often sending faxes, phone calls, frequent visits and information, you are most likely going to get a larger share of the rep's time and attention.

‹‹ John C. Housley [About the Author]