The challenge of creating a value proposition that will compel manufacturers to sponsor a wholesaler loyalty program is far from a walk in the park. Simply put: Manufacturers do not want to sponsor a wholesaler loyalty program. Period.
And while there are some hindrances to a thriving manufacturer/wholesaler relationship—namely the fact that the two parties’ interests often aren’t mutual—a channel sales incentive program can help establish some common ground and allow each group to work toward their most important shared goal: increased sales.
Home Improvement and the Wholesaler/Manufacturer Relationship
Let’s start with the obvious. A wholesaler doesn’t make anything—they simply sell what others make. Take a look at an example. Think about your home. Imagine you want to do a kitchen remodel so you need to buy new sinks, new faucets—all that good stuff. You’re going to call a contractor and they are going to buy those products from a wholesaler. Let’s say they purchase manufacturer XYZ products. While XYZ made that product, they rely on the wholesaler to sell it to the contractor, who will actually install it. So XYZ is interested in people being loyal to their brand. However, the wholesaler just wants your contractor to buy the supplies from them. They don’t care whether it’s XYZ or not—just that the contractor buys from them.
When designing programs for wholesalers, it’s important to keep in mind what they are most interested in: the loyalty of the contractor. Whatever the contractor is going to install in your house—buy it from here. That really doesn’t help the manufacturer. But, the manufacturer has the vested interest in helping the wholesaler sell more of their products.
Responding to the Changing Environment
Wholesale distributors are under siege from several fronts and must reinvent themselves in order to compete in the digital economy going forward. The channels that were clearly defined for years are dynamically shifting due to the disruptive force of e-commerce and its impact on the duties of wholesale distributors.
A key factor to assist wholesalers in modifying their business model is to leverage the loyal relationships established over the years to solve some of these business problems in new ways. This may also mean leveraging manufacturers in ways they’ve not considered before.
Wholesalers can appeal to manufacturers by encouraging sales to specific brands and items. This boosts brand loyalty for sponsoring manufacturers, increases sales for local companies and product manufacturers alike and builds rapport between manufacturers and those shopping at the wholesaler.
Well-managed, mutually beneficial wholesale/manufacturer relationships lead to increased reach and revenue for the manufacturer, while the wholesaler has access to a trustworthy brand with a steady supply of excellent products they can promote.
Manufacturer Training and Wholesaler Data
There are two things a manufacturer will always fund: training and access to data. A manufacturer wants to ensure their product is understood by the wholesaler as well as the customer. Training programs make manufacturer brands more appealing to wholesalers by supplying them (and their customers) information about products and likely offering incentives for promoting their brand. After all, the manufacturer does not typically call the customer directly. The wholesaler is the one dealing with customers—they actually own the relationship.
From the customer and wholesaler training perspective, manufacturers can offer that in two ways:
- The manufacturer will train their sales people at the wholesale local branch location on the features and benefits of their product—what they need to know to be able to sell it. They’ll also invite their customers in for that training as well. This provides manufacturers with the opportunity to talk face-to-face with those people who are buying and using their products. Manufacturers will also do something called a ride along where they can get in the car with the distributer’s sales people and go and visit their customers and talk to them about your product and how they’re participating in, and taking advantage of, the wholesaler loyalty program.
- If a manufacturer wants their products to capture focus—the mindshare of the contracter—you might consider product promotions. So for a 30-, 60-, 90-day period, as part of the loyalty program, you can offer double or triple points when a contractor buys your product. That provides an additional incentive for the customer to focus on that manufacturer’s brand rather than just purchasing anything.
Access to Pull-Through Data
The other part is wholesalers giving manufacturers access to data. A wholesaler will never tell what customers are buying the manufacturer’s product, because they know the manufacturer will market directly to that customer then. However, they can provide the manufacturer with where their product is selling geographically—and where their product is not. It’s not uncommon for wholesalers to have distribution centers in strategic locations all across the country that are geographically convenient for their local branch locations.
A manufacturer will ship a truckload of product to that distribution center. So they understand how much they sold to the wholesaler. What information they don’t have is when that product leaves the warehouse and where it’s actually sold in the marketplace. They may know they’ve sent a truckload of products to a distribution center in Colorado, but they don’t know if it was people in Denver, Wyoming, Nevada or wherever that actually pulled that product through the channel.
A Mutually Beneficial Relationship
A well-crafted incentive program can be instrumental in helping a manufacturer boost sales, expand its market share and increase its leverage with its wholesalers. It’s important to view your distributor not as your customer, but as your channel partner who is your ally in making sure the needs and expectations of the customer are met. You need to work closely with your wholesaler to clearly identify what you expect of them and what they can expect from you. By carefully defining each other’s roles and responsibilities, you can maximize your respective profitability by avoiding costly duplication of effort and preventing the problems that frequently arise from unreasonable expectations. Still not sold on the benefits of a channel incentive program? Check out the wholesale distributor we helped who experience unprecedented results with our distributor incentive solution.
Pat has over 20 years of experience in developing and implementing contractor loyalty programs with some of the biggest building materials wholesalers in the world. As a Sr. Business Development Manager at ITA Group, Pat operates with one guiding principle, "I will always and only work in the best interest of my clients." He prides himself on providing data driven recommendations, actionable reporting and remarkable experiences for the clients he serves and their customers.