Best Practices for Distributor Sales Incentive Programs
By Steve Damerow, July 10, 2015
Featured in HVAC Insider Magazine
Manufacturers strive for coveted distributor relationships because they offer the advantage of dealing with a select few major buyers. Selling to retailers is typically time-consuming, and retailers can be choosy about who they work with. They prefer the one-stop shop of distributors, or working with preferred manufacturers who offer them deals and incentives for their business. When working with a distributor, for the most part, that distributor handles the responsibility of selling your product to retailers, dealers, and end-consumers . As the manufacturer, using a distributor sales channel means you can focus on doing what you do best—producing. HVAC manufacturers sell products in at least one of three ways:
- selling directly to consumers through a website
- selling to retail stores that sell to consumers
- selling to distributors (who sell to retail stores, who then sell to consumers).
When you think you’re ready to pitch your product to distributors, there are a few things you can do to stand out among competing manufacturers:
- Present the Proof
The more desirable your product is, the more likely distributors and retailers will see the benefit of reselling your products and services for you. A distributor’s first concern is usually going to be whether your product is worth selling. The best way to prove this to them is with a well thought-out presentation that backs up your product’s merit with numbers from retailer or consumer sales . The more evidence you have of your ability to successfully sell new systems and parts, the more reason distributors will have to take on your business.
- Create a Marketing Plan
Of course distributors are going to pay more attention if you offer to do their work for them, and do it well. Preparing a marketing plan idea will give distributors a clearer picture of how successful your product could be. Understanding the distributor’s other HVAC manufacturer relationships will also go a long way in demonstrating your product’s value to them. Being well-versed in the units and parts the distributors carry can help demonstrate how your own product ties in. For example, you may be able to provide parts that complement heating and cooling equipment already existing in the distributor’s inventory.
- Offer Incentives
When a distributor likes your product but is still somewhat hesitant to partner with you, incentives can be the factor that tips the scales in your favor. Look for an incentive program that offers online reward technology equipped to target channel sales interactions like the manufacturer-to-distributor relationship. You can invite distributors into a points-based (cyber currency) program in which they earn points each time they order or sell your products. They can then redeem their points for rewards in an online catalog similar to Amazon, with millions of merchandise, ticketed event, and digital download items.
- Make Their Rewards Program Easier to Access Anything you can do to save your distributors work shows that you will pull your own weight and give you an advantage over competing suppliers. While many other suppliers may be willing to offer incentives through reward programs, you can distinguish yourself by making your reward program effortless to access. Features such as Incentive Solution’s Mobile App module were made with a distributor’s busy, daily networking in mind. Wherever they are, distributors can input sales claims, receive push notifications about program and promotion updates, and access the rewards catalog. You can easily track your distributors’ sales while they are able to conveniently stay updated on product and incentive reward information.
- Work Your Way Up
Just as it may take time to build the relationships with consumers and retailers, relationships with large distributors may not be immediately within your reach. The best strategy may be to approach smaller, regional distributors to build up your credibility and slowly gain larger-scale interest over time.
- Give Them More for Their Money
Providing distributors with savings for doing business with you can distinguish you from competing manufacturers. One of the advantages you have as a manufacturer new to a distributor relationship is that there are no national norms for the sales percentages that distributors receive. They may ask for 5% cuts; they may ask for 20%. This means you can offer them higher cuts than your competition does. You can also offer distributors more for their money—giving them 15 free products for every 150 that they order, for instance.
When setting out to court distributors for your product line, keep in mind that their end goal is the same as yours: to make money and satisfy customers. Ask yourself what makes you and your products special, worth a distributor’s time and money. Presenting proof of products’ profitability and marketability will always be important determining factors, but perks like incentives can capture distributors’ attention when they’re undecided.