Incentive Programs: A Recession Proof Tool for HVAC Distributors

by | Oct 27, 2023 | Blog


Last year was good for HVAC distributors (even without incentive programs). 


HARDI reports, HVACR distributor members had 12-month sales growth of 24.3% ending in July.


Despite this growth, there is trouble on the horizon. Rising inflation and talks of a looming recession have many HVAC distributors worried.


While the upcoming sales growth numbers may show optimism, future sales are a concern.


Some analysts forecast a 66% chance of a recession is likely in 2023 or early 2024. While not as bleak as the Great Recession, HVAC distributors have cause for alarm.


Rising costs, supply chain woes, and order fulfillment are worries for HVAC distributors.


So how can distributors hope to thrive during the impending recession? Sometimes it’s helpful to look back.


Here’s how one HVAC distributor increased profits during the Great Recession.


66% chance of recession in 2024


Leaning on Incentives Made a Difference


The great recession halted many skilled labor professions. With the real estate bubble in full swing, many industries felt the effects.


Many HVAC distributors felt the pinch. Such were the times for building professionals.


Yet, some savvy suppliers found a way to increase sales during this time. Distributors who could leverage their average buyers found ways to increase yearly revenues.


In fact, one distributor increased revenue over a three-year period by over 200% (more on that in a moment).


By leveraging the power of incentives, you can combat economic challenges. As we enter a new cycle which could end in a recession, this is important to remember.


Incentive Programs


The Program: Who They Targeted and Why


Any incentives program is only as good as its marketing and strategy. To drive results, the distributor focused on incentivizing untapped resources.


This distributor believed in the power of incentives. That was evident by their robust VIP incentive travel program. It has a twenty-year history.


The Problem: the program that rewarded some dealers was alienating others.


Most dealers couldn’t reach the threshold for a VIP trip. Their goal was to incentivize them in other ways. HMI dove into their data using the Pareto Principle.


The Solution: targeting dealers below the VIP threshold using a points program.


They believed they could increase this cohort’s capacity to spend. So, they targeted the middle 60% of dealers in their pipeline. The goal was to incentivize those missing the VIP experience.


Incentive Programs


They thought, with the right rewards, they could stimulate sales growth. Their strategy was to use popular merchandise, individual trips, and one-of-a-kind experiences.


Incentive Programs: Thinking Outside the Box


It’s hard to find a business unaffected by the Great Recession.


The HVAC industry was no different.


A real estate bubble, rising gas prices, and job loss concerned HVAC distributors. Yet, some found a way to prosper in such desperate times.


Success required out-of-the-box thinking that challenged the status quo. The distributor streamlined their incentive programs while motivating their mid-level dealers.


The Goal: increase the spending threshold for mid-tier dealers.


The Result: increased motivation from customers currently missing out on VIP incentive travel.


Incentive Program


Mid-tier dealers loved the opportunity to earn new rewards. It changed their buying behaviors (as you’ll see in a moment).


Participants could also bank their points from year to year. That allowed them to save up for big rewards, which excited participants.


Here are some of the popular rewards participants chose:


  • 60-inch Sony Bravia 3D LED HDTV
  • Apple MacBook Pro 17-inch 4GB Laptop
  • 7-night Alaskan cruise with Royal Caribbean Cruise Lines
  • Body-Solid Bi-Angular Home Gym
  • 5-night stay at the Sheraton Kauai Hotel in Hawaii


Incentive Program Rewards


Incentivizing mid-tier dealers provided ample opportunities for sales growth amidst overwhelming economic challenges.


Big Data: Huge Sales Growth Despite Economic Turmoil


Many distributors felt the squeeze of the Great Recession. While most distributors found unique ways to stay afloat, one distributor flourished.


Using the program and strategy above, they were able to achieve impressive results.


Here are some of the standout statistics over a three-year period:


  • Award-winning participants grew their business on average by 71%


  • The cumulative sales average was 213% over a three-year period


This 213% cumulative average reflects growth after deducting program expenses. This distributor grew their annual revenue by millions during the Great Recession.



Incentive Program Sales


While these results were impressive.


They pale in comparison to the sales numbers between participants versus non-participants.


  • Participant annual sales rose 18.3%
  • Cumulative three-year sales increased 54.8% for participants
  • Non-participants sales decreased 15.2% per year
  • Cumulative three-year sales declined 45.7% for non-participants


incentive program results


To say that this incentive program was successful is an understatement.


It’s proof that it’s not about when you start an incentives program, but how that makes the difference.


Mid-level dealers saved this distributor from millions in losses during the Great Recession.

That was due in large part to the strategy used in their incentive program.


The jury is still out on whether a recession is certain. Preparation is key to success.


One thing is certain. Distributors using well-crafted incentive programs will prosper.


So, that leads us to one question…


Is Your Distribution Business Recession-Proof?


The Great Recession was a drain on many distributors. While all distributors had the same experience – they didn’t have the same results.


Rethinking your incentives strategy could produce better results. With a recession looming, now is the time to start planning.


We’d love to continue this conversation.


Click here to book a call. Together, we can find solutions to help you remain recession-proof.


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