In a recent call with a prospect, the question of “outsourcing the sales function” came up.
Rather than answer the question directly, I asked him what he meant by that. He proceeded to tell me that he had read how some companies are outsourcing everything, including their sales effort. However, he said, from his perspective it was not a particularly good idea.
He’s right.
Rather than tell you why outsourcing sales won’t work for most companies, let me tell you where it does work.
One client has been successfully outsourcing their sales effort. They are in the Internet advertising business and are now placing their inventory with brokers. This company sells “clicks”. This is a totally generic product. Where one click might be better than another click, it is adjusted through tracking results. Their click and Google’s click are essentially the same thing. If their click is better than Google’s click, the results are all tracked and balanced out. There is no way that Google will get more than his click.
On the other hand, client David W. is moving from a rep strategy for his internationally marketed industrial products. Rep firms are outsourced sales teams. However David is reversing the “outsourcing” because he knows that having his own rep in a territory means better sales focus and better accountability.
Another example is when, ten years ago the radio advertising business got all excited about selling its inventory like Google sells clicks. A former partner created a company to do this and sold it to Google. It was a giant dud. He made millions. Google ended up shutting it down and writing off their investment. Why? Because local advertising is not a commodity. It responds to sales effort and it cannot be tracked the way clicks on the Internet can.
Where its true, in my view, that business has used the excuse of this Crash of 2008 to outsource and downsize, efforts to outsource the sales effort have been a failure. In fact, when the Government stops QE whatever number we’re on, companies who’ve been ramping up sales efforts will prosper. Nothing works better than a great sales team to improve the top and bottom line.
photo credit: markhillary via photopin cc
Disagree. This is a pretty stiff jab in the face to reps, and, in my view, does not address the whole story.
If the question is: “what type of sales scenario will yield better results, an outsourced sales force (reps), or direct salespeople?,” I think most would assume the direct sales force is better because the direct salespeople (generally but not always) have a higher level of expertise, and spend 100% of their time on the one company that pays them. That’s true … IF:
1) the direct salesperson actually does know the product(s) better
2) the direct salesperson knows the accounts in the territory at least as well as the rep
3) the direct salesperson knows the right people at those account at least as well as the rep, and can actually get to them
4) the direct salesperson stays in the job long enough to pay the company back for their sunk cost in salary, bonus, remote office, car, expenses, management time, etc. (a commonly overlooked weakness in the “direct is better” argument)
5) the company can afford the cash outlay required to fund the direct salesperson, no matter the market conditions
Bottom line from my 33 years of selling, 6 direct and 27 as a rep, is that there are good and bad direct people, and good and bad reps.
In my opinion a good rep will easily out-produce a bad (or mediocre) direct person, and over the long haul, a good rep will give a good direct presence in a territory a run for the company’s money, because it is really hard to keep good direct salespeople in a remote territory. Good
reps tend to stick around for much longer periods of time.
So I see it as a much more complicated issue than “direct is better than rep/outsourced.” It requires hiring a good rep (person, or company), treating them as part of the team like the company would a direct person, and providing them all the training and support required to achieve success. Too many companies hire reps without a proper search and vetting process, and do not invest in building strong, long term relationships.
Mike
Thanks for the comment — I’m not sure that based on your comments you totally disagree, since as you say it really depends on the rep. For sure the ability to directly manage a seller can be very important. However, point made and I apologize for having shot from the hip — especially to an established client who’s hired reps successfully using the AHS System
Alan