Academic journal article Journal of Managerial Issues

Factors Influencing the Exit Intentions of Manufacturers' Agents

Academic journal article Journal of Managerial Issues

Factors Influencing the Exit Intentions of Manufacturers' Agents

Article excerpt

This study examines the impact of a range of factors that might affect the propensity of manufacturers' agents (MAs) to exit the agency contract with their principals. A structural model is developed and tested that posits the presumed relationships between these factors and the agent's exit intentions. A central tenet of the model is the crucial role of the agent's satisfaction with the agency relationship in mediating the impact of these factors on exit intentions.

An MA is an independent firm employing its own sales representatives to sell a principal's goods on a commission basis. The agent's sales force replaces the principal's sales force wholly or in part. The use of MAs began to accelerate in the late 1970s. The role and importance of MAs as extensions of companies' own sales forces continue to increase. In its annual survey intended to profile manufacturers' sales agencies, the Manufacturers' Agents National Association reports an average increase in the value of the average MA's shipments of their principal's products fi'ore $12,750,000 in 2002 to over $17,000,000 in 2005, a 33% increase (Agency Sales Magazine, 2005). While definitive numbers are not readily available on the current use of MAs by manufacturers, one can assume that their use continues to account for a large proportion of manufacturing selling efforts.

Employed primarily to provide sales coverage for smaller accounts or for accounts in less concentrated markets, MAs offer valuable services that supplement the efforts of a manufacturer's own sales force. The usual justification offered for the continued popularity of agents is their more intimate knowledge of products and markets that provide them with an advantage over the traditional in-house sales representative. Their use frees up the manufacturer's own sales force (if there is one) to focus on larger, higher volume accounts (McQuiston, 2001). Equally important, the costs of employing MAs are virtually all variable in nature. In contrast, there normally is a substantial fixed cost associated with the manufacturer's own sales force (Anderson, 1985).

The dyadic relationships between MAs and their principals are carefully nurtured with the objective of creating a continuing close, and mutually profitable, working relationship. Valuable relationships take time and energy to develop. These relationships evolve. There is a substantial investment by both parties in the dyad in terms of training, dedicated assets and tools, as well as emotional ties. Older, established dyads tend to have stronger, warmer interpersonal relationships, are more trusting, and possess better, more efficient intercommunications. Most importantly, those dyads that have endured through their formative years are a significant asset to both partnering firms (Anderson and Weitz, 1989). McQuiston (2001) suggests that successful, enduring relationships between MAs and their principals tend to be characterized by six core values consisting of trust, mutual dependence, shared goals, open communications, mutual commitment to customer satisfaction, and concern for the other's profitability. These values take a long time to develop, so principals and agents are equally motivated to retain their valued partners, and in continuing to nurture these relationships.

Oddly, the research into understanding the nature of the relationships between MAs and principals is sparse. Extant research in this area has focused primarily on understanding those variables that contribute to the MA's satisfaction with the agency relationship and examining a limited number of factors that affect aspects of the MA's performance. Early work by Mahajan et al. (1984) suggests a strong, positive link between elements of the inter-organizational climate between MAs and their principals and the MA's satisfaction with the agency relationship. Satisfaction is also positively impacted, but to a lesser extent, by the MA's ability to participate in goal setting and the presence of minimal supervisory, efforts imposed by the principal. …

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