Sales outsourcing is a way for companies to attract increased, high volumes of sales for their products or services by using a third party. The company typically uses outsourcing companies to improve sales volumes without links to the sales teams that carry out those campaigns. The company that undertakes the outsourcing normally will be paid based on the results that they are able to generate and therefore creates a mutually beneficial situation for both Client and outsource.
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Background
Full 'sales outsourcing' is observed where companies have an external third party sales force. It is differentiated from value added reselling or distribution in that the business model can be based on shared risk, although there are models where the outsources is paid for all of their activity - just as with a hired direct sales force, but the outsources provides rapidity, flexibility and experience. Other names for sales outsourcing include 'indirect sales' and 'channel sales'.
Full sales outsourcing is different from telemarketing in that it requires direct recruitment of sales personnel with specific backgrounds for each sales campaign. Usually the sales executives will be part of a team that may include telemarketing, marketing, tools systems and methodologies as well as sales management.
Sales outsourcing firms provide accountability regarding all sales results and activities while representing the brand of the client. For the end-customer, it usually appears as if the sales team sold the product themselves rather than the sales outsourcing firm. The outsourcing firm is, in essence, an extension of the client but is responsible for all operations associated with direct sales activities, often receiving sales engineering and initial product/service training support from the client.
Purpose of indirect sales
The sole purpose of a contract sales organization is to provide sales resource to its clients, without taking title to their products. Sales outsourcing providers include manufacturers' representatives, contract sales organizations, sales agents or sales outsourcing consultants. One way of organising the sales effort, especially when product delivery is erratic, is to replace or supplement internal resources with functionality and expertise brought in from contract sales organisations.
Sales outsourcing is quite different from large-scale service outsourcing, which has its advantages but also requires pro-active contract and relationship management. In addition to full sales outsourcing, many partial models are observed, particularly in large firms.
Typical outsourced activities
A variety of sales activities may be outsourced such as:
Any of the following may also be considered as partial sales outsourcing or sales out-tasking:
Advantages of Outsourcing
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 (see Lean Startup. 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.
Sales Outsourcing can also be used as a Market entry strategy and avoids Permanent establishment risk.
Indirect Sales Growth Rate
The experience of many organizations over the past several years demonstrates that indirect channels can be critical to expanding market coverage. This has been particularly true in the electronics, communications and high tech sectors. For example, the indirect channel now accounts for 66 percent of overall technology sales, up from 53 percent in 1997.
Examples of Indirect Sales Companies
Examples of Sales and Marketing outsourcing Companies include: Some examples of communications companies who employ indirect sales forces to their internal sales efforts include: AireSpring, AT&T, Comcast, Earthlink Business, Integra Telecom, Level 3 Communications, Time Warner Cable, TelePacific, tw telecom, XO Communications, and Windstream. Some top sales agencies who sell voice and data services for these carriers include Telarus, based in Salt Lake City, Utah, Intelisys, based in Petaluma, California, and Telecom Brokerage Inc (TBI), based in Chicago, Illinois.
A Contract Sales Organization that has been providing services to the Pharmaceutical and Medical Device Industry since 1997 is Promoveo Health.