Using Incentives To Build Distributor Loyalty
Exclusive to Industry Today Volume: 8 Issue: 26, 2015
By Steve Damerow
As a manufacturer, if you make up less than 10% of your distributors’ product mix, you are not getting the attention of management or, more importantly, sales representatives.
Your distribution channel works with many manufacturers and, naturally, prefers some to others. Manufacturers who don’t catch their eye with tangible benefits are easily forgotten. You can’t change this basic sales channel principle, but there are ways to make your organization more relevant to distributors.
Being out of mind is not a winning strategy. The most important thing you can do to distinguish yourself from competing manufacturers is create a set of brand values and goals that align with your distribution goals. These values should be clear so that your distributors can identify with them. Actively promote a culture of channel partner engagement so there is a symbiotic interest in each other’s organizational success. Barring fundamental issues with product mix, quality, service or pricing, a reward program that communicates, measures and recognizes exemplary performance could be the best way to gain mind share.
More companies are catching on to incentive benefits.
An American Compensation Association study states that “organizations earned $1.34 for every dollar spent on incentive rewards.” The International Society of Performance Improvement reported, “properly structured incentive programs increase performance up to 45% in teams, and 26% in individuals.” The financial benefits of incentive programs are well-documented. In addition, current online and technology grants incentive programs the ability to be reward structures and marketing tools in one.
According to a 2015 survey, incentive budgets are expanding rapidly. Incentive magazine found that “Firms with budgets of $1 million or more for their incentive, recognition, and reward programs nearly doubled, to 15.5 percent in 2015 compared to 8.2 percent last year…Those budgeting $5,000 or more per recipient also nearly doubled, to 9.1 percent this year, compared to 4.7 percent in 2014.” Companies across various industries are recognizing the value of incentive programs. For manufacturing industries, it was once difficult to use incentive program effectively due to complex demands and sprawling supply chain networks. Today’s online technology allows incentive platforms to bolt onto CRM systems and make training, communicating, tracking, recognizing and rewarding channel partners much more efficient and cost effective. Until recently, it was a financial burden to acquire all these tools, but online reward programs are capable of meeting several needs through one, multi-functional platform.
Make a strategic incentive program investment.
All this convenience and expansion of capabilities does not mean that incentive programs are automatic productivity-boosters. To operate as efficiently as possible and maximize their return-on-investment (ROI), channel incentive programs must be aligned with specific goals that are backed by data analysis. Channel partner incentive goals should be understandable, attainable and easily verifiable.
One method of outlining clear goals is to separate incentive program participants into three tiers. Most sales organizations exhibit a revenue split of 20%/60%/20% with the middle 60% having the most upside, and the bottom 20% having none.
The top 20% of your distributors are already giving their all and should be thanked so competitors don’t steal them away. Consider traditional group travel for the top performers and label it a “President’s Advisory Board” in order to bestow prestige to your top executives.
Create a sub category for the middle 60%, allowing them to earn cyber currency, or points, for an online rewards mall. Advanced reward program technology features extensive reward catalogs that can host travel and merchandise incentives, along with all communications and reward fulfillment. Online reward features allow you to maintain and track point balances, host educational tutorials, publish leader boards and track engagement levels. The rewards program becomes the vehicle and the embodiment of the engagement you want with your partner.
Incentives have evolved from warehouses sending out overpriced toasters, to full marketing platform that provides emotional engagement to the team that has the most impact on your success. More than merely a means to dole out rewards, incentive programs enable multi-faceted engagement tools and provide useful data about supply chain productivity. Research supports the fact that incentive program budgets are expanding as more manufacturing leaders learn how to implement incentives effectively and take advantage of their benefits. Staying ahead of the curve where incentives and other marketing tools are concerned will keep you relevant and attractive to your distributors.