Being a distributor in the modern business landscape means meeting a host of challenges head-on—not just competition from other distributors, but also from DTC manufacturers and online marketplaces, not to mention contractors’ constantly evolving expectations for a fast and easy business experience amid the digital transformation. It’s a lot to juggle.
But there are ways to gain the upper hand. In HMI’s market research report from 2021, 72% of contractors said that their business could be moved from one distributor to another with an incentive program, all else being held equal. That means that in a crowded distributor market, a contractor loyalty program can be a crucial differentiator for your business.
That said, it’s also important to go into the process of designing an incentive program with eyes open. Knowing your competition is, in some ways, just as important as knowing your audience. So, here are a few vital steps to take if you’re looking to use a contractor loyalty program to increase sales and wallet share amid stiff competition.
Competitive Analysis: Getting the Lay of the Land
Based on your industry, region, and relationship to the rest of your channel, you likely already have some understanding of your top competitors. That’s critical—while no company is going to willingly divulge their business secrets, you’ll need a solid grasp on certain aspects of what they’re doing. Consider questions like…
- Are your competitors currently running their own incentive programs?
- Are incentive programs standard practice in your industry, or are they relatively unknown?
- Are your contractor partners currently enrolled in other programs?
Start things off with a bit of competitive analysis to help you figure out the answers to those questions. Here are a couple of tips on how to go about it:
- Check out what your known competitors are up to. Can you find any sign of a program that they run based on their website or their news? Sometimes these programs aren’t easily accessible via their main website, but a Google search for terms like “dealer portal” or “rule structure” alongside their company name can turn up results that indicate they run a program.
- Get in touch with your outside salespeople. What are they hearing on the ground? Is there any indication that someone’s running a program that could be capturing mindshare and wallet share? (Bonus—when you do start your contractor loyalty program, these are going to be the people who will be evangelizing it to the target audience, so having them involved from the get-go will be super useful).
Once you’re able to get a sense of what’s going on in your industry in terms of incentives, you can move on to consider another vital question—if there are other programs out there, how can you make yours better? What’s missing from those programs that yours can accomplish? How might your program better address your contractors’ needs, help them work towards their business goals, or make them feel appreciated and rewarded? This is where we start thinking about incentive strategy.
Strategies, Not Tactics
When it comes to the design stage of an incentive program, we like to differentiate between an incentive strategy and an incentive tactic.
What’s the difference? Well, whereas a tactic might be a one-off move like a short-term promotion that may grow your sales temporarily, an incentive strategy offers a more comprehensive foundation for a program that gives you different levers to pull. Basically, it’s more malleable and adaptable, better at targeting new goals and emphasizing new behaviors in your audience. Whereas an incentive tactic may address one specific area of growth, an incentive strategy is able to hit multiple areas when the opportunities arise.
A key element here is data, as it so often is these days. A strong incentive strategy will be driven by strong data, informing what you design and how you target your contractor partners. Data analytics allows you to segment your audience into smaller cohort groups based on their spending patterns, allowing you to target those groups with different goals and rewards.
For example– you might decide to hit your mid-performing customers with ambitious spending growth goals. But your top performers, who already give you a lot of their business, probably aren’t going to love you targeting them for even more money. Knowing exactly who’s who will be important to the success of your program.
Moreover, having an adaptable, data-driven program also allows you to more easily implement changes to your business at scale, making change management across your channel a more streamlined and profitable process. Some examples here include:
- Lowering your business’s cost to serve
- Highlighting your business’s CSR activities that are important to your contractor partners
- Encouraging participation in training and enablement programs that help grow your partners’ business alongside your own
- Easily communicating other changes to your business or pricing models
(Of course, all of this depends on you having a solid set of clean data on your customer base. But we can also help with that.)
There are a ton of benefits to making your incentive program the champion behind your go-to-market strategy. But like anything else, that needs to be done with an eye to what’s already going on in the wider market.
Your contractor loyalty program should be designed to reflect the shape and character of the market, based on what your competitors are doing and what you know about your contractors’ business needs. Without that information, your program won’t be able to achieve its full potential. Done right, however, it can play a crucial role in capturing share of wallet from your chief competitors.