Encouraging Manufacturers to Sponsor a Wholesaler Loyalty Program
By Pat Pelischek
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. Most manufacturers do not want to sponsor a wholesaler loyalty program. However, a well-designed channel sales incentive program can establish common ground and foster a thriving manufacturer/wholesaler relationship, allowing each group to work toward their shared goal: increased sales.
When designing programs for wholesalers, it’s important to keep in mind what they are most interested in: the loyalty of the contractor.
Responding to the Changing Environment
Wholesale distributors are under siege from several fronts and must reinvent themselves to compete in the digital economy. The channels that were clearly defined for years are dynamically shifting due to the disruptive force of e-commerce and its impact on wholesale distributors.
One way to help wholesalers modify their business model is to leverage the loyal relationships established over the years to solve some of these business problems in new ways. Wholesalers can appeal to manufacturers by encouraging sales of 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.
Not only do wholesalers deliver manufacturers’ products to contractors and consumers, they influence the degree to which manufacturers can engage with purchasing consumers. 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) with information about products and likely offering incentives for promoting their brand. 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 will invite their customers in for that training as well. Manufacturers will also do something called a ride along, where they can get in the car with the distributer’s sales people 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 contractor—you might consider product promotions. So for a 30-, 60- or 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 which customers are buying the manufacturer’s product, because they know the manufacturer will then market directly to that customer. However, they can provide the manufacturer with information on 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.
One of the strongest value propositions you can offer for the manufacturer is access to pull-through data. In other words, manufacturers know how much product was sold to the wholesaler, but the pull-through data tells how much product was sold to customers and where. When the manufacturer knows the markets where their product is selling well, and not selling well, they know how to focus their sales efforts.
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.
Pat Pelischek has more than 20 years of experience in developing and implementing contractor loyalty programs with some of the largest building materials wholesalers in the world. As a senior business development manager at ITA Group, Pat prides himself on providing data driven recommendations, actionable reporting and remarkable experiences for the clients he serves and their customers.