It is always fun to write about Distributor Loyalty programs and Channel Marketing Group. David Gordon has been involved with over 100 programs (as he started his career in the incentive space and has worked with countless distributors on their programs. I was fortunate to be involved and help lead 9 loyalty programs as a program, so we spend a lot of time talking about programs with our readers and partners.
Why do contractor loyalty programs work for HVACR distributors?
- HVACR Contractors are in the spec, bid, buy business. HVACR contractors are heavily in the service business. Both types of work require a competitive bid for them to win work. So, when two distributors are bidding for the same project and have similar prices and service who wins the jump ball? Simply put a loyalty program where a contractor earns something extra helps them win more jump balls.
- Loyalty programs are everywhere in your contractor’s personal life. We all are enrolled in loyalty programs for groceries, food, clothing purchases, and many more programs. We want to earn something extra for our loyalty and purchases in our personal life, and you expect the same in your business life.
The right loyalty program can move business to distributors from contractors who are motivated by these programs.
Our partners at ITA group shared with us a checklist and tips that we liked so much that we wanted to share it directly.
Pat Pelischek at ITA Group a 20-year veteran who developing and implementing contractor loyalty programs with some of the biggest distributors in the world and shared the below tips.
So, how does an organization build a successful loyalty program? Here are some frequently asked questions from channel leaders about implementing programs. When taken together, the FAQs form a guide for designing new (or improving existing) contractor loyalty programs.
Do Contractor Loyalty Programs Work?
These loyalty programs drive growth because of the structure: The more you buy the more points and stuff you earn.
Here’s how it works:
- The contractor is only rewarded when they increase business with the Distributor
- The contractor earns points for every sale they make with distributor (but they don’t get paid until they hit a preset threshold).
- Supplier partners help pay for the programs
- The distributor only pays for points contractors redeem.
The contractor loyalty program structure increases top-line sales with disengaged (or only slightly engaged) contractors. It also allows the organization to centralize development funds from multiple vendors into a single program that benefits everyone.
How Do You Create a Contractor Loyalty Program?
So where do you start creating one for your organization? Begin by defining your contractor customers and how they buy from the channel.
By segmenting and understanding the relationships between your contractor and the distribution channel, you can ensure the program design meets everyone’s unique objectives.
Better audience segmentation creates increased alignment and productivity, which impacts your ROI. Understanding how the relationships work will also make it easier to get buy-in to participate in your program.
What’s the Benefit of a Contractor Loyalty Program for Each Audience?
A successful contractor loyalty program offers something to each audience segment.
- Manufacturers/vendors often don’t know who the end customer is or what is actually being sold. But with a loyalty program to track it, you will. Plus, they’ll have the margins to support purchase incentives (which you need).
- Contractors/customers have a lot of options when it comes to buying products, and they typically don’t have a lot of loyalty. They tend to buy products in spurts as supported by their individual business cycles, so rewards can incent them to purchase from you.
- You (i.e., the distributor/wholesaler/dealer) can use the program to connect the dots between vendors and contractors to sell more! Help manufacturers make their money go further through sales and brand awareness when they invest in your loyalty program. Give customers an incentive to buy the manufacturer’s products again and again.
How Does Data Play a Role in Loyalty Program Success?
With any successful loyalty program, accurate data is critical. For example, you can use past sales history to set attainable goals and appropriate point thresholds for each customer. Or, you can analyze current audience demographics to find new customers and contractors to enroll in the program. Data requirements for each group will vary, as will their role in the program earning structure.
Here are some examples of the necessary data to include in a program.
- Sales down to the customer level by:
- Product
- Location
- Manufacturer
- Sales type – Stock or Direct
- Gross profit by product
- Customer and contractor identities
- Sales goals broken down for each contractor
- Base goal: Amount they need to purchase in order to get their points
- Stretch goal: Amount they need above their base goal to earn points at a higher rate
Collecting this data and pairing it with your understanding of what’s important to each stakeholder segment makes it easier to get their buy-in. You can offer manufacturers information on what’s selling and where, helping them to know where and how to focus their promotions. You can also offer customers a choice of award (e.g., merchandise, gift cards, travel, etc.) for meeting purchasing goals with your organization.
Takeaways
I really like how Pat focused on following a simple 1, 2, 3 Approach to help design a top loyalty program.
It starts with –
1. Segmenting your contractor customers by size, type of work, and potential so you can set goals and rewards that motivate the enrolled contractor to move business to your distribution business.
2. Understand how to communicate the why benefit to everyone – your own distribution team, the contractor customers, and the manufacturers who are supporting your program.
3. Then use data to design a program that drives the behavior that you need. Do you want to give more points for stock sales from a specific manufacturer? It all starts with the data to design a program that motivates your customer to buy more and increase their business.
4. Building goals that ask and motivate a customer to buy more and buy the products and solutions you want is need.
The final step is choosing rewards that resonate …Is it a trip? Cash back rewards, merchandise, special discounts, or special products and services?
That final step will be easy if you first start with the contractor customer and your data. Those two steps are crucial for any successful program
As always, we appreciate your support and comments.
