by Charles Cohon, President and CEO, MANA
It’s a common reason for reps to call MANA — but the reason this rep was not getting paid was not common. I’ll let the rep explain.
“My business model is not unusual,” said the rep. “I have a geographic territory with all my principals. I call on decision makers in my territory who decide what brand of products their company will use.
“If I am successful, those decision makers standardize on my principals’ products and buy them from one of the stocking distributors in my territory. I get paid commission on anything distributors in my territory buy, so it doesn’t matter to me which distributor the customers in my territory buy from.
“Except that many companies I convinced to use my principal’s products have been buying from distributors outside my territory lately. I did all the work, but the rep whose territory includes the remote distributor has been getting the commission.”
“My principal agrees that this is unfair but claims their hands are tied. What can I do?”
If the principal is serious about allocating commission fairly, there is a solution.
Your principal’s current commission model is called Point of Purchase (POP). The rep whose territory includes the distributor’s location gets the commission.
But there is another commission model. It’s called Point of Sale (POS).
In a POS commission model, the principal pays sales commission when the distributor sells the product to the distributor’s customer. The principal assigns sales commission to a rep based on the distributor’s customer’s location instead of the distributor’s location.
How does the principal know when a rep has earned a sales commission? The distributor provides a POS report to the principal, which may name the customer or may only list the customer’s zip code.
Is this an undue burden on the distributor? Probably not, because off-the-shelf distributor software often includes this functionality. Is this an undue burden on the principal? No, because the principal still only pays the commission once, based on which rep really earned the sale.
And everyone benefits when the rep doing a great job never has to say, “I need help to get paid.”
Note: The rep’s comments have been edited for length and clarity.
Charles Cohon, CPMR, is CEO and president of MANA. In 2016 Cohon earned the Certified Association Executive (CAE) designation after completing American Society of Association Executives (ASAE) coursework and testing. Cohon also earned an MBA with honors and with concentrations in strategic management and entrepreneurship from the University of Chicago Booth School of Business, and was founder and owner of a very successful Illinois manufacturers’ representative firm for nearly 30 years before joining MANA.