Companies who outsource sales may have a variety of imperatives for doing so. The advantages of lower selling costs feature on the website of the
Manufacturers' Representatives Educational Research Foundation (www.mrerf.org) and has been observed by authors, researchers and consultants.
Sales outsourcing is expected to be cheaper than the fully loaded cost of employing salespeople, but calculating the cost comparison over time is far from straightforward. Nevertheless, replacing fixed costs with variable costs is attractive to budget-holders. However, unlike many forms of outsourcing the advantages of sales outsourcing does not often come from saving costs but rather increasing revenue or providing speed of response or
flexibility.
The business case for sales outsourcing should also include consideration of the cost of controlling the contract. Difficulty in measuring the link between sales activity and sales performance leads to a preference for employed salespeople. However, the issues internally are often the same and the internal hire has many other corporate "distractions" that do not occur with external resources.
Companies may also choose sales outsourcing as a means of accessing the best sales skills. Although the pejorative term “rent-a-rep” is still used, there
is some evidence that contractors are perceived as good performers against qualitative as well as quantitative performance criteria. Even
so, the reputational risk of third parties handling customer relationships has been observed as a factor restricting sales outsourcing. One
could argue that an employee is often using a company to gain 2–3 years salary and experience whereas a sales outsourcing firm would usually be looking at a long term contract even though the staff may change during that time. So the aims of an outsourcer can be closely aligned with the aims and objectives of the contracting company.
A recent study has highlighted flexibility as an important driver for outsourcing sales. Uncertain business environments accentuate the need to turn sales resource on and off quickly. Industries and companies undergoing rapid change may need to avoid hiring and firing costs and risks. Contract sales organizations can absorb employment risk, enabling their clients to respond to short-term opportunities or competitor activity. However, an
outsourcer may build in more of a premium to the rate or commission if excessive flexibility is required on a contract. Contract sales organizations are growing in volume and influence, able to provide both tactical activity and long-term strategic support to their
clients.
Speed of response is seen as a key reason to use an outsourcer. if a company was looking to enter a market it may take several months to recruit the local manager which then takes several months to find and office and build a team. With an outsourcer, once selected often a full working team can be operational within a matter of days or weeks.
Manufacturers' Representatives Educational Research Foundation (www.mrerf.org) and has been observed by authors, researchers and consultants.
Sales outsourcing is expected to be cheaper than the fully loaded cost of employing salespeople, but calculating the cost comparison over time is far from straightforward. Nevertheless, replacing fixed costs with variable costs is attractive to budget-holders. However, unlike many forms of outsourcing the advantages of sales outsourcing does not often come from saving costs but rather increasing revenue or providing speed of response or
flexibility.
The business case for sales outsourcing should also include consideration of the cost of controlling the contract. Difficulty in measuring the link between sales activity and sales performance leads to a preference for employed salespeople. However, the issues internally are often the same and the internal hire has many other corporate "distractions" that do not occur with external resources.
Companies may also choose sales outsourcing as a means of accessing the best sales skills. Although the pejorative term “rent-a-rep” is still used, there
is some evidence that contractors are perceived as good performers against qualitative as well as quantitative performance criteria. Even
so, the reputational risk of third parties handling customer relationships has been observed as a factor restricting sales outsourcing. One
could argue that an employee is often using a company to gain 2–3 years salary and experience whereas a sales outsourcing firm would usually be looking at a long term contract even though the staff may change during that time. So the aims of an outsourcer can be closely aligned with the aims and objectives of the contracting company.
A recent study has highlighted flexibility as an important driver for outsourcing sales. Uncertain business environments accentuate the need to turn sales resource on and off quickly. Industries and companies undergoing rapid change may need to avoid hiring and firing costs and risks. Contract sales organizations can absorb employment risk, enabling their clients to respond to short-term opportunities or competitor activity. However, an
outsourcer may build in more of a premium to the rate or commission if excessive flexibility is required on a contract. Contract sales organizations are growing in volume and influence, able to provide both tactical activity and long-term strategic support to their
clients.
Speed of response is seen as a key reason to use an outsourcer. if a company was looking to enter a market it may take several months to recruit the local manager which then takes several months to find and office and build a team. With an outsourcer, once selected often a full working team can be operational within a matter of days or weeks.