What Audiences Should I Be Targeting With My Contractor Loyalty Program?

Pat Pelischek
Pat Pelischek

Dart hitting bullseye of a target

You understand the importance of contractor loyalty programs and why you should have one in place, but where do your best opportunities lie? Who should be in your target audience segments to get the most bang for your buck? Read on to learn about the three main loyalty program audiences and how to target them.

The Typical Loyalty Program Audience

Local management at the wholesale level is always concerned about retaining what business they have, so they tend to target customers who are already on the high end of the loyalty scale. But that’s not the most effective audience to target with a loyalty program.

Those customers are already doing business with the wholesaler; therefore, the opportunity for those current customers to grow is very little. The best opportunities lie with the middle 60%. Most wholesalers want their distribution curve to look like a bell curve, not a hockey stick. The typical formula is a few customers doing a lot of business and multiple customers doing a little, but that formula is not the formula for the highest growth opportunities.

Rick Dunham, research manager at Principia, says in a ProSales article that it is all too common to go for the big fish. Instead, Dunham believes that “finding contractors on the way up is crucial. There’s a much bigger pond with lots of smaller fish who aren’t in any program.” And if you can hook them and then keep them close to you, he says, your prospects for revenue growth likely will top what you can get from one big company.

Retaining current customers is important, but putting too much focus toward increasing loyalty with customers who are already loyal to you doesn’t make sense.

A Better Loyalty Program Audience to Target

Say, for example, a contractor has been in business for three years at minimum. They’re probably purchasing somewhere around $75,000 per year in product from somewhere, or they wouldn’t be in business. That means if your customers are not spending those dollars with you, they’re spending them elsewhere with your competitors. How can you increase your market share?

By targeting a contractor who is currently only buying between $15,000 and $50,000, you can incrementally increase their purchases by 25% over multiple years while demonstrating your high-level customer support to win their loyalty.

The Best Loyalty Program ROI Opportunities Lie With New Customers

The biggest lost opportunity with contractor loyalty programs is failing to target prospects who are not currently customers at all.

While it can be more work to get those prospects in the door, in that scenario every dollar that contractor would spend is incremental growth for the wholesaler.

The key when you’re targeting a customer for a loyalty program is not to ask, but tell. There’s no reason to ask a contractor if they would like to be in a loyalty or rewards program. Best practice is go to them and say you are one of the few customers in this market that we have chosen to put in our rewards program, now let me show you how it works and what the benefits are for you.

Loyalty Program Strategies for Success

ITA Group has done surveys with thousands of contractors over the past eight years. On average, we've found that they buy from around three different wholesalers, but the primary wholesaler gets 65% of their business. Even when contractors say they are loyal, the numbers show that 35% of their business is still going somewhere else. A contractor loyalty program creates an opportunity for a wholesaler to demonstrate to a customer that they should be doing more business together. That in turn can help the wholesaler capture more of that 35%.

Here are a few contractor loyalty program strategies to keep in mind to set you up for increased market share and success as you seek new customers and optimize existing programs.

The right rewards—Targeting loyalty program participants with the proper rewards is critical. Knowing the psychographics and demographics of audience segments as well as analyzing previous redemption patterns if you’re working with customers you want to retain will tell you what rewards motivate your audience most.

Realistic goal setting —Once you’ve set up target audience segments and started going after them, you have to be smart about goal setting with the programs you implement. Just because customers might be million-dollar customers in that market, you can’t set a $500,000 goal with them when all they did with you last year was $50,000. A good rule of thumb to keep in mind is about a 25% increase in business year-over-year per customer. That way, you are only rewarding them if they continuously do more business, not just the same amount year-over-year.

Communication —Consistent and frequent channel loyalty program communication is crucial to ensure your audience understands how the program works and that they are engaged every step of the way. Motivation isn’t one-size-fits-all. Understanding what inspires people and catering to those motivators with strategic engagement tactics is how you’re going to get the most out of an incentive program. Loyalty program communication also helps motivate participants to reach goals they might not be aware of if communication wasn't consistent. Informing a customer that they’re within 10% of hitting their goal will speed up the timeframe in which they achieve that goal.

Related: Learn how to increase ROI from your loyalty and incentive programs with audience segmentation and targeted strategies in this white paper

Properly Designed Loyalty Programs Get Results

Whether your contractor audience is in plumbing, HVAC, electrical, building or remodeling, people’s motivations and what influences them remains similar. A properly structured contractor loyalty program gives them the opportunity to get or experience something they crave. But what do the results look like after a loyalty program has been in place for a while? Check out this example of a channel incentive program that rocketed to triple-digit growth in the first year and continues to grow more than five years later.

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.