Organizations should consider finding an agent when they are uncertain of business practices and market preferences in the international market. Agents are individuals or firms authorized by an exporter to enter into contracts on the exporter’s behalf. Agents normally work on commission and, apart from making sales, they often offer a complete range of additional services to exporters including receiving goods, clearing them through customs, and shipping them.
Here are some of the advantages and disadvantages of using sales agents to distribute services and products:
- Established distribution and delivery system in the market
- Offer services such as receiving goods, clearing through customs, warehousing and delivery
- Established network of customers for organization’s products and services
- Familiarity with local business practices and regulations
- Less expensive than hiring, training and paying benefits and wages to sales representatives
- May also represent competitor’s products and services
- Lack of loyalty
- Lack of motivation to sell organization’s products and services due to low agent risk
- Added costs if subsequent sales are required from agents to distributors
- Decreased direct contact with end-user
It is important to thoroughly research and screen potential sales agents prior to entering into an agreement. Organizations should seek information on the specifics of the relationship, the sales and marketing strategies that the agent will employ, the agent’s reach within the target market, and their technical capacity. It is also critical to request and verify business references.
The questions to ask of potential sales agents will change depending on the specific needs of the organization and the type of product or service being sold. This list is not exhaustive but provides an example of the information that exporters should gather and use to screen potential sales agents.
- Why do they want to act as an agent or representative for your company and product?
- Who will be your main point of contact at their company?
- Is it possible to have direct, face-to-face meetings?
- Will any of the processes required for selling your product be outsourced to third parties? If yes, who are the third parties?
- What support do they expect from your company?
- Expected sales volume (broken down by time frame, e.g. year one, months one to three)
Sales and Marketing
- What is their marketing strategy, e.g. how will they build your brand, what medium will be used (social media, print, web)?
- What is their sales strategy?
- Do they plan on using any images, logos or information other than those provided by your company?
- How large is their sales force?
- Where are they located and what is the extent of the territory they cover?
- Are they currently selling any similar or competing products?
- How many companies are they currently representing?
- What competitors do they face and are those competitors selling any products that are similar to, or compete with, your product?
- What methods of stock control do they use?
- Can they describe and provide market intelligence on the territory that they will cover?
- Do they have previous experience with the type of product you sell?
- Does their sales force understand, or have the capacity to understand, any technical requirements of your product?
- Are they qualified to provide after-sales services?
- Asking for references is an absolute must. Inability to provide references should be considered a red flag.
- Other data to access, if possible, such as a business plan or financial statement
Contracts with sales agents should specify the territory the agent is responsible for and whether or not exclusive rights to sell within that territory are granted. If an agent requests exclusivity in a country or region, exporters should first consider whether the agent can provide effective and efficient coverage. Inadequate coverage, or inability to apply sufficient marketing, sales and follow-up efforts in the region, could translate into loss of prospective sales.
Contracts must also stipulate how sales agents will be paid. The most common method of payment is commission. Other financial details that should be addressed in agent contracts include what, if any, expenses will be covered by the exporter, as well as any compensation payments that the exporter may need to pay if it decides to terminate the relationship. The specific conditions that would initiate the termination of the contractual relationship should also be defined.
This relationship can be complicated by the fact that the exporter may be held responsible for the agent’s actions or for shortfalls in the agent’s earnings if the exporter fails to supply adequate stock. Organizations should seek legal advice before signing a contract with an agency.
This content is an excerpt from the FITTskills Selling to International Markets online workshop. Sign up for the workshop today to learn how to convert your leads into paying customers, and keep them returning for years to come!
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