BUSINESS INSIGHTS: Loyalty Programs
Win the Contractor, Win the Market
Contractors exert a powerful influence on product choice across nearly all building products segments, and are successful at convincing their homeowner customers to switch materials or brands. Many manufacturers recognize this influence and have structured loyalty programs to reward contractors for repeatedly buying their products.
The contractor is a front-line seller of a manufacturer’s brand and rewarding contractors in a meaningful way is critical to drive increased product sales. Ongoing Principia research conducted over the past few years suggests that contractors are in a position to influence a homeowner’s brand of choice nearly 40% of the time and actually flip the homeowner in nearly 80% of these situations. That’s nearly one out of every three projects, which further reinforces the role and importance of the contractor.
A well-managed contractor loyalty program serves two purposes:
1. Support in marketing the manufacturer’s product lines. Loyal contractors are more likely to engage in brand discussions with homeowners. A strong loyalty program increases satisfaction, drawing contractors away from competitors, thereby increasing market share.
2. Identify usage trends and track spending. A well-designed loyalty program helps track contractor buying habits and increases understanding of which products drive revenue in each sales cycle and marketing campaign. This allows manufacturers to develop effective sales and promotions for products during times when they are most in demand, determine which contractors to target, and how to best influence additional purchases in the future.
The number of contractor loyalty programs is growing, but not all programs are successful nor do they lead to increased revenues. It’s crucial to understand what contractors are looking for in a loyalty program, why they participate (or don’t), and more important, what motivates them to sell more of a manufacturer’s product.
Contractors need to see the program’s benefits and clearly understand how it works for the program to be effective. Knowing the right mix of what to offer contractors in your loyalty program is absolutely necessary to attract and retain this influential customer group. But it’s a two-way street in that a successful partnership requires the contractor to adhere to program guidelines and represent the product brand as the customer’s best option in every sales call.
In return, the manufacturer provides valuable benefits to the contractor such as cash rebates, sales leads and referrals, access to training, and sales and marketing tools including door hangers, post cards, ad signs, custom website creation, TV/radio advertising, estimating software and customer feedback surveys to name a few. And of course, rewards like merchandise and travel.
It has been said that imitation is the sincerest form of flattery. Competition for a contractor’s business has led many pro dealers to develop loyalty programs of their own. Many of these program features and benefits traditionally offered by product manufacturers are being adopted by lumberyards to strengthen existing customer relationships, acquire new customers and shift the focus away from price only. After all, in addition to delivering real business benefits, who doesn’t like free swag or a trip to the Caribbean!