Getting Started With Contractor Loyalty Programs

Pat Pelischek
Pat Pelischek

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In today’s competitive world of distribution, setting yourself apart is all about creating additional value for your vendor partners and customers while driving behaviors to increase top-line growth and reduce cost to serve. Is there a way to successfully do that? The answer is yes. And you can do it with a contractor loyalty program.

We all know someone who only flies with one airline because their rewards account lets them receive extra perks. And you probably have three other credit cards, but you never use them because you’re building rewards on your favorite one. The difference in these types of programs and a properly structured contractor loyalty program is that even if you fly less in a year, you still earn miles. A properly structured program only awards when a customer has increased business with you. That’s how a contractor loyalty program works to increase sales for you.

Still on the fence about whether a contractor loyalty program is the right strategy for your organization? Don’t know where to begin? Here are a few common questions asked about implementing contractor loyalty programs and our answers to them.

Why Should We Consider a Contractor Loyalty Program?

A contractor loyalty program is a growth strategy. It increases top-line sales with customers who are not at all engaged or only slightly engaged. How? Because it is strategically designed to effectively motivate customers/contractors/builders and they don’t earn anything without directly increasing sales for you, the wholesaler.

This results in no fixed costs because vendor sponsorship pays for that. The only cost to wholesalers is points that are redeemed by customers who have bought more from you as a result of the incentive program.

But do these programs truly result in substantial growth? The proof doesn’t lie—check out an example of a wholesale distributor incentive program ITA Group has been running for 7+ years that has resulted in an average ROI of 468% year-over-year since its inception.

wholesale distributor incentive program case study shown on a laptop computer

How Do We Integrate and Implement a Performance Initiative Like a Contractor Loyalty Program for Our Company?

Identify stakeholder audiences and distribution channels

  • Stakeholder audiences include: corporate, local operating companies, vendor/manufacturer partners and customers/contractors/dealers
  • Distribution channels include: e-commerce, inside and outside sales, counter distribution and special orders, among others, depending on your organization and business model

By segmenting and understanding the relationships between your stakeholder audiences and distribution channels, you ensure that program design meets the objectives of all included stakeholders. Better audience segmentation impacts ROI on your incentives by creating better alignment and increased productivity.

Related: These steps to greater ROI for your incentive programs help you identify program objectives and utilize best practices for audience segmentation, goal setting, financial forecasting and program design.

Determine Data Requirements and Availability

With any performance initiative, accurate data is critical to the success of the program and to the identified stakeholders. Corporate will lead the way to ensure data integrity, and thus program integrity. Data requirements for each audience group will vary, as will their role in the program earning structure. Data needed includes, but is not limited to:

  • Sales down to the customer level by:
    • Product
    • Location
    • Vendor manufacturer
    • Distribution channel
  • Gross profit by product

Related: Today’s world of distribution is ultra-competitive and ever-changing. Learn how to use your data to differentiate yourself and drive results with this ebook.

Determine an Effective Communication Strategy

It is crucial to communicate your contractor loyalty program in a way that makes all stakeholder audiences aware of how to effectively work the program and achieve maximum results. An airtight communication strategy and campaign allows your brand, product and messaging to penetrate the channel and define the relationship with your partners, but you need the means to implement it. Make sure your incentive technology platform integrates with and supports the advances of digital marketing in order to create scalable, personalized communications.

Effective communication is often the most overlooked piece of the incentive puzzle. Learn how to start a buzz with creative communications that give your incentive personality.

Determine an Awards Strategy to Motivate Program Participants

Not all people are motivated in the same way. Give participants the power of choice so they can decide what motivates them. Awards have to create value and an emotional connection to represent what will lead a participant to be a peak performer. Or, even better, create a memorable experience. According to the Incentive Research Foundation Pulse Study, 42% of program owners are increasing the number of experiential rewards within their offering. Experiential rewards connect people with your brand, and that brand connection can transform the power of channel loyalty.

Related: Does your participant audience skew millennial? For this audience, experiential rewards tend to be the most powerful. Learn how to motivate millennials in today’s experience economy.

Establish Goals, Funding Models and ROI Projections

This step is critical to ensure a program is developed that provides a positive return on its investment. Recommended next steps following the receipt of customer data are as follows:

  • Complete customer segmentation analysis
  • Re-confirm program objectives
  • Define program earning structure
  • Set customer goals, if applicable, by segment
  • Complete financial modeling by segment to begin to determine financial impact
  • Begin defining additional program details to finalize the funding amount for your company, your vendors and your local operating companies

How Do We Evaluate the Progress and Results?

There are three types of measurement statistics to consider when evaluating a contractor loyalty program. These include:

  • Financial – program ROI and sales performance
  • Operational – audience engagement and activity
  • Qualitative – audience feedback

Defining output needs prior to program launch assists in establishing benchmarks to measure against.

Getting Started With a Contractor Loyalty Program That Ensures Outstanding Results

Choosing the right loyalty program partner to develop and administer your program makes all the difference in getting optimal results for you. ITA Group is an expert with 50+ years of experience in performance improvement. While at first glance this process may seem arduous, ITA Group ensures the bulk of the labor occurs on our end. We make incentive program strategy and implementation easy to follow, understand and get excited about. Learn more about our channel incentive capabilities and discover how to build loyalty, boost sales and hit profitability goals. Strategically.

Pat Pelischek

Pat Pelischek

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.