Manufacturers' representatives: relationships between selling support and satisfaction.

Pass, Michael W.

INTRODUCTION

Manufacturers may choose to outsource all, or part, of the selling function to independent firms, termed manufacturers' representatives, as a way to reach more customers, thus achieving sales objectives while also having the potential to reduce direct selling expenses. When relying on these firms to fulfill a boundary-spanning role, the manufacturer must provide adequate selling support because it influences a representative's ability to interact effectively with customers, on behalf of the manufacturer. By examining the quality of selling support in relation to the manufacturers' representative satisfaction, this study focuses on an area that has not received much empirical attention. Understanding the influence of support quality on the representative's satisfaction is important because, presumably, the manufacturer desires a long-term relationship with ongoing contract renewals to continue the interfirm relationship. For the remainder of this paper, manufacturers' representatives are referred to as MRs and the manufacturers are called principals, as commonly identified in the literature (Ross, Anderson & Weitz, 1997).

Study findings answer these questions: (1) Does the quality of sales support make a difference in the MR's satisfaction? and (2) Which types of support will have a greater impact on the MR's satisfaction? Despite practitioner interest in knowing how to interact effectively with representatives, the marketing literature has not fully explored this area of inquiry. Answering the two questions contributes to the marketing literature by explaining whether or not the quality of support matters and which types of support have greater influence on MR satisfaction. Previous literature examined differences between the best and worst manufacturer relationships with representatives (Sibley & Teas, 1979), conceptualized how the firms develop and maintain these relationships (McQuiston, 2001), described different approaches to structuring the relationships (Dishman, 1996) and reported how MRs evaluate principals (Merritt & Newell, 2001).

The importance of good interfirm relationships is recognized by these researchers and general factors contributing to their development have been identified (e.g., McQuiston, 2001). With the exception of Brown and Chin (2004), not much research on the effect of principal selling support has been completed even though many principals regularly decide on support to be provided and its quality. They examined principal's support in relation to MR satisfaction with support measured as the MR's perceptions of principal performance in brand building, lead generation, advertising support, and ability to maintain company awareness among end-customers. The current study complements this research by placing an emphasis on types of support that are different than ones they examined, with the exception of advertising support.

BACKGROUND

Some manufacturers choose to outsource because it allows them to focus on core competencies and reduce costs, thus achieving competitive advantages and beneficial bottom-line results. Benefits accrued to them when they accurately estimate costs and learn how to interact effectively with firms handling their vital business functions. Therefore, understanding how a principal's conduct influences a partnering firm has become paramount. Principals find this to be true as they regularly outsource functions such as research, human resources and customer service. They realize that building durable long term relationships requires an understanding of the other firm's needs. In addition, some functional areas have not been outsourced to a great extent because firms may not understand how to interact with a potential partner. For instance, outsourcing of the field sales function is not as common as the outsourcing of other functional areas. However, the activity is increasing as firms have found that MRs are readily available to perform the field sales function.

MRs work with several principals by selling a portfolio of noncompeting product lines on a commission basis. They perform the selling function on an extended contract basis and do not take possession, or ownership, of products. Firms taking this role have also been called independent agents or brokers. The most recent economic census (released 11/24/2009) reported they operate 45,458 US firms (2007 Economic Census) which is a substantial increase over 32,320 US firms reported in the previous census (2002 Economic Census)

Principals deal with a complex context of tradeoffs when working with MRs as all or part of the field selling effort. They benefit from the MR's sales experience, established customer contacts and the MR's ability to cover territories that are not served by a direct sales force. Principals also benefit by not having the same fixed costs required to staff and supervise a direct sales force. A tradeoff for the principal is less ownership of the customer relationship. As closer and more frequent interactions occur during the selling process, the MR may form customer bonds that are stronger than ones existing between customers and the principal. This tradeoff is significant because there is the possibility that a principal will lose customers if the MR switches to represent another principal. This could happen if the MR becomes dissatisfied with the relationship. Therefore, it is important for the principal to achieve a level of satisfaction with the MR to ensure a long term MR-Principal relationship. The quality of support they provided is important and noted when describing different ways a principal can become the "emotional favorite" of representatives and maintain their "share of mind" in order to obtain greater sales coverage (Agency Sales Magazine, 2006a; Agency Sales Magazine, 2006b).

Theoretically, a resource based view (RBV) and transaction cost analysis (TCA) explain the benefits of increasing MR Satisfaction. Based on RBV logic (Espino-Rodriguez & Padron-Robaina, 2006; Grant, 1991) there is less interfirm conflict when the MR is satisfied so end-customer relationships are more stable. In turn, the likelihood of an MR achieving acceptable sales performance is greater, thus enabling the principal to allocate more time on activities related to core competencies. This is more advantageous than the principal spending time managing and monitoring the MR, which TCA (Williamson, 1985) suggests would be needed because of uncertainty resulting from dissatisfying circumstances.

HYPOTHESES

Figure 1 depicts MR Satisfaction and three categories of support comprised of specific types of support that were examined to determine relationships between the MR's perceptions of support quality and satisfaction with the principal. MR Satisfaction is defined as the degree with which the representative is pleased with a principal overall and perceives that a principal provides beneficial programs and policies, treats the MR fairly and is good to be involved with in business. This definition, based on a scale used to measure satisfaction (Dwyer & Oh, 1987), reflects a description of channel member satisfaction as a "positive affective state resulting from the appraisal of all aspects of a firm's working relationship with another firm" (Geyskens, Steenkamp & Kumar, 1999, pg. 224). The three categories of support are: (1) sales planning support, (2) selling process support, and (3) administrative support. As shown in Figure 1, sales planning support includes the analysis of markets and case histories of accounts. Selling process support includes products delivery (i.e. timely delivery), product training, technical support, product literature, and advertising. Administrative support is the timely payment of commissions to the representative.

[FIGURE 1 OMITTED Of the three support categories (Figure 1), sales planning support and selling process support help improve an MR's ability to perform well when interacting with customers (i.e. the principal's end-customer). Knowledge and expertise related to the principal's end-customer result from sales planning and selling process support (e.g., analysis of customer markets, case histories of accounts, technical support, product training). The selling process undertaken by the MR is impacted by selling process support, including the timely delivery of products to customers, product training, technical support, product literature, and advertising. The types of support within each category are expected to be positively related to MR Satisfaction because they enhance the MRs expertise when contacting customers, performing the selling function and servicing customer accounts. As the quality of this support improves, MRs will more than likely be more motivated to allocate greater time and effort to represent the principal's products. The support increases their motivation so they have a greater interest level in representing the principal (Tyagi, 1985). As a result, commissions from sales performance increase and this leads to greater MR Satisfaction with the principal. Based on this reasoning, the following hypotheses are presented:

H1: There is a positive relationship between the quality of sales planning support and the manufacturers' representative's satisfaction with the principal.

H2: There is a positive relationship between the quality of selling process support and the manufacturers' representative's satisfaction with the principal.

Path-Goal Theory of Leadership has been referred to when explaining the influence of rewards on channel member satisfaction (e.g., Price, 1991). It supports the idea that timely payments of commissions contributes to MR Satisfaction by suggesting that individuals are satisfied with leaders providing rewards associated with their performance. Since the MR relies solely on commissions to cover overhead costs and generate profit, the reward is not only the commission amount but also how quickly it is paid. Therefore, a positive relationship is expected between the timely payment of commissions and MR Satisfaction. This relationship is stated as:

H3: There is a positive relationship between administrative support (i.e. timely payment of commissions) and the manufacturers' representative's satisfaction with the principal.

METHODOLOGY AND RESULTS

A nationwide survey obtained MRs' perceptions of the quality of support provided by principals and their satisfaction with principals (i.e. MR Satisfaction). Members of the Manufacturers' Representatives Educational Research Foundation (MRERF) were randomly selected and offered an incentive to participate. The questionnaire was sent by fax to 2,000 owners and managers of MR firms with a chance to win $50 gift certificates valid at major retailers through several drawings. A total of 328 questionnaires were returned, after a second distribution via e-mail, thus yielding a 16.4% response rate. Respondents work with one to ten principals (64%), eleven to twenty principals (27%) or greater than twenty principals (9%). Annual sales volumes were reported at less than $5 million (45%), $5 million to $11 million (25%) and above $11 million (30%). Respondents worked with principals less than two years (18%), 3-10 years (48%), or greater than 10 years (34%). The cross-sectional survey included MRs from a variety of industries so the responses did not reflect opinions from one dominant industry.

MR Satisfaction was measured using a scale developed by Dwyer and Oh (1987) that was modified so items referred to relationships with principals instead of distributors. A five-point Likert type scale with Strongly Disagree (1) to Strongly Agree (5) anchors was presented with scale items. The scale exhibited satisfactory internal consistency with a Cronbach's alpha score of .93, thus exceeding the recommended level of .70 (Nunnally, 1978).

Principal Support Quality was assessed with a direct measure of each type of support. The eight types of support (Figure 1) were rated by asking respondents to indicate the quality of each type using a five-point Likert type scale with Poor Quality (1) to Excellent Quality (5) anchors. Respondents could also indicate if the principal did not provide the item of support. The types of selling support were selected based on review of industry literature (e.g., Agency Sales, 2010; 2006a; 2006b; 1995a; 1995b; 1997; Abramson, 2001; Castro, 2001), discussions with practitioners and consideration of support provided to distributors (Cronin & Morris, 1989).

Table 1 shows mean scores and standard deviations for MR Satisfaction and perceived quality of the eight types of support. Regression analysis was used to examine relationships between each type of Principal Support and MR Satisfaction, thus testing hypotheses H1, H2, H3 with the equation: [[??].sub.1] = [b.sub.1][X.sub.1] + [b.sub.2][X.sub.2] + [b.sub.3][X.sub.3] + [b.sub.4][X.sub.4] + [b.sub.5][X.sub.5] + [b.sub.6][X.sub.6] + [b.sub.7][X.sub.7] + [b.sub.8][X.sub.9] + [b.sub.0]. Table 1 shows each variable with its designation for this formula. The findings are reported in Table 2 and tests of H1, H2, and H3 were supported. All individual types of support were positively and significantly related to MR Satisfaction--with the exception of Product Training and Advertising. Therefore, one could say that H2 is partially supported. The regression results, reported in Table 2, do not include these two support items. Significant positive relationships were found with Market Analyses, Case Histories of Accounts, Timely Delivery of Products, Technical Support, Product Literature and Timely Payment of Commissions. Moreover, the level of variance, or R-square, in MR Satisfaction accounted for by all types of Support Quality is .691 with acceptable tolerance/VIF levels. In addition to revealing that the quality of these types of support account for 69.1 percent of the variance in MR Satisfaction, the relative impact of each is also shown. The standardized coefficients for Beta indicate that quality perceptions for the Timely Delivery of Products has the greatest influence, followed by Technical Support Quality, Timely Payment of Commissions and the other types of support.

DISCUSSION

Developing an effective relationship with the MR is important to the principal because an MR is the primary link to customers. A strong sales and profit incentive supports the need to know which types of sales support increase MR satisfaction. As previously noted, higher quality support may increase the MR's motivation, thus yielding greater interest in representing the principal (Tyagi, 1985). This additional attention could lead to more commissions from sales of the principal's products and even greater MR Satisfaction with the principal.

Study findings show that six types of support make a difference in the MR's Satisfaction, thus answering the first question stated in the Introduction. They also indicate which types of support should receive attention before others. The chief one is the Timely Delivery of Products and this makes sense because the end-customers are served by the MRs and commission generation is based on taking care of these customers. Higher quality Technical Support also enables the MR to take better care of customers and the Timely Payment of Commissions ensures the motivation, to do so, will continue. Both Market Analysis and Case Histories of Accounts are significant but relatively lower than the other types of support. This could be due to responses from MRs that have been serving principals longer and do not need this information. Similarly, the quality of product literature has the lowest impact on MR Satisfaction and this may be due to responses from MRs not using literature when calling on customers they know well. To develop higher quality sales support, it is important for principals to actively discuss, with the MR, the level of quality that will be provided. Managing the MR's expectations is crucial because MR Satisfaction will be influenced by the degree with which expectations for support are fulfilled. When support quality falls the MR's satisfaction with the principal will, more than likely, decline.

The analysis of selling support and MR Satisfaction completed in this study will hopefully stimulate discussion that will advance research activity in this area. It would be beneficial to explore the perspective of principals to determine if their perceptions align with those reported by MRs in this study. Perceptions of end-customers could also be obtained and compared to these findings. Although not within the scope of this study, these are contexts which could yield a better understanding of factors leading to greater MR Satisfaction. One could also study the influence of selling support quality on MR Performance, thus developing a fuller picture of how the support and MR Satisfaction with it ultimately impacts performance. Another area to explore is how the MR's perceptions of support and relationships with MR Satisfaction are moderated by factors such as the degree of dependence on the MR-Principal Relationship, length of the relationship and industry conditions.

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Michael W. Pass, Sam Houston State University Table 1: MR Satisfaction and Principal Support Quality ITEM Mean (n) SD [Y.sub.1]-MR Satisfaction 3.39 (321) 1.16 Sales Planning Support [X.sub.1]-Analysis of Markets 2.78 (316) 1.26 [X.sub.2]-Case Histories 2.71 (316) 1.23 Selling Process Support [X.sub.3]-Timely Delivery of Products 3.45 (322) 1.24 [X.sub.4]-Product Training 3.16 (324) 1.34 [X.sub.5]-Technical Support 3.33 (324) 1.29 [X.sub.6]-Product Literature 3.52 (324) 1.27 [X.sub.7]-Advertising 2.94 (326) 1.41 Administrative Support [X.sub.8]-Timely Payment of Commissions 3.54 (315) 1.35 Table 2: Influence of Support Quality on MR Satisfaction Adjusted R-square(n) .691(310) [b.sub.0] [X.sub.1] [X.sub.2] [X.sub.3] Beta Unstandardized .276 .137 .147 .238 Std. error .131 .044 .046 .039 t-value 2.10 3.09 3.19 6.07 p-value * Significant .036 * .002 * .002 * .000 * Beta Standardized -- .150 .156 .257 [X.sub.5] [X.sub.6] [X.sub.8] Beta Unstandardized .196 .095 .150 Std. error .044 .039 .036 t-value 4.42 2.39 4.17 p-value * Significant .000 * .017 * .000 * Beta Standardized .219 .104 .175