September 19, 2024

By David Gordon, Channel Marketing Group, President

We know you, or your company, is planning for 2025. We also know that many have concerns going into 2025. The question is, “what will 2025 bring?” One of the most cost-effective, best performing, tools in these types of markets can be a loyalty or incentive strategy.

The current forecast is for, essentially, a flat market.

The “go-go” post-pandemic growth days are gone. The past three years have realized slow growth rates. Commercial construction slowed. Residential construction, in most markets, is anemic. Industrial has its geographic areas. And only so many companies are able to benefit from data center construction.

What it means is that in 2025, you need to be intentional in your actions if you want to grow your top line. You need to either:

Grow the “pie” you play in, or
Take share.

You can:

Identify niche markets, or geographies, you can take advantage of
Target key customers
Cast a wide net (the “spray and pray” strategy)
Invest in sales resources

Or a number of other strategies that, at their core, are intentional initiatives.

Research shows that companies that invest smartly during slow growth, or no growth, markets, grow at a faster rate, more quickly, and are perceived to be stronger companies by their customers.

One strategy that is performance-based and is a proven winner, is incentive programs.

These strategies involve customers who essentially “raise their hand” (register to participate) and indicate that they are willing to do more business with you. Incentive programs I’ve developed involve a base investment that includes an integrated communications campaign supported by an administrative platform with 70-85% of the investment based upon performance!

When I’ve integrated these strategies into client marketing programs, we’ve seen growth rates of 15-50%, if not higher if focused strictly on a target audience.

There is a plethora of companies that focus on this space, but few are truly specialists.

One is a new advertiser with ElectricalTrends, ITA Group.

Founded in 1961, and an ESOP for over 35 years, ITA Group focuses on providing incentive and loyalty program strategies for manufacturers and distributors, and works with clients in over 50 industries, including many distribution channels, and brings lots of experience to the table. We’re looking forward to them sharing their expertise with our readers.

We invited ITA Group to share some thoughts:

“Distribution has always been a relationship-driven business, centered on the value distributors create for their manufacturers and customers. However, industry shifts and market changes are compelling distributors to explore innovative ways to add value. In this evolving landscape, a strategic loyalty program backed by expertise has emerged as a key factor in enhancing value for channel partners and ensuring distributor success.

Targeting the Right Customers

The most effective loyalty programs focus on customers who represent the greatest potential for future profitable growth, rather than simply targeting the largest accounts. The goal is to optimize performance by:

Capturing opportunities from customers with discretionary purchasing power
Broadening sales within established accounts
Recognizing top contributors

Strengthening Customer Bonds

A well-designed loyalty program reinforces the connection between distributors and their customers. It incentivizes more frequent orders in exchange for superior service and genuine appreciation of their business. This approach not only increases sales but also has the potential to:

Widen relationships with existing customers
Create more opportunities for manufacturers
Accelerate sales cost-effectively through targeted incentives

Leveraging Data Intelligence

Distributors occupy a unique position in the channel, granting them access to valuable data, including:

Transactional data for every customer purchase
Location of each transaction
Date and time of product delivery
Customer contacts who influenced the transaction

This wealth of data empowers distributors with new capabilities. The information collected through loyalty programs is crucial for both distributors and manufacturers to create the targeted, personalized experiences that customers increasingly demand.

Expert Support for Success

To maximize the potential of loyalty programs, distributors can benefit from expert support in key areas such as:

Developing value propositions for key stakeholders
Implementing appropriate technology solutions
Crafting effective communications strategies
Designing program strategy and rule structures
Creating compelling rewards and recognition systems

By leveraging expertise in these areas, distributors can create loyalty programs that add significant value to their channel partnerships and drive success in an ever-changing market.

A Loyalty Program Designed for the Entire Channel

Key to program success:

Identifying existing customers who could grow their business with you ensures wallet share growth. And because rewards are tiered and unlocked as participants advance in the program, the program guarantees profitability.
Involve, and invest, your entire sales and branch network
Frequent communication. A contractor loyalty program positions distributors to succeed with customer marketing. Distributors benefit from a communications investment that doubles as consistent customer marketing.
Effective program administration dashboards to ensure on-target performance
Appealing awards (for one client, 66% of customers that redeemed points would not have purchased the award they selected without their points.)

But, most importantly, consider the initiative dispassionately by analytically developing a program structure based upon goals and then projecting performance. ITA Group’s data analysis team can recommend ideal customers distributors should target, recommend individual goals, reward types and show projected ROI, ensuring a truly turnkey program.

Do Incentive / Loyalty Programs Work?

Proof points:
- 187% greater purchases by targeted customers vs. non-targeted
- 447% average program ROI over life of program

Additional proof? Check out these case studies:

Growing sales and market share with a targeted customer loyalty program. How a building supplies company grew sales by 56%
A building supplies distributor uses a customer segmentation approach and generates a 275% program ROI

Additional ITA Group insights article:

Take Aways

I spent the first 15 years of my career in the performance marketing industry, developing incentive programs for distributors and manufacturers. CMG has had clients where we integrate an incentive program into their marketing strategy, involve manufacturers, a robust communications strategy, and a focused enhancement to sales management.

When I was in the performance marketing industry, first in Boston and then from 1992-1995, before joining IMARK, coincidentally with ITA Group, I was in every aspect of the business except accounting, operations, and communications because I could estimate numbers but didn’t have patience to get to the penny (thank you accountants!) and I can’t draw a straight line let alone choose colors that complement each other!

Someday I’ll dig through my archives and share some of those programs … and unfortunately those companies have all been sold!

The most gratifying aspect was helping clients identify strategies to drive performance cost-effectively. Loyalty / incentive programs work and, when well-structured, have a significant ROI for the sponsoring distributor and participating manufacturers. Companies view them as differentiators that help them secure clients, capture discretionary opportunities, AND as a “cherry on the cheesecake” to win projects (and yes, pricing needs to be competitive.)

With 2025 appearing to be a “challenging” year, where growth will come from taking share, I encourage you to think outside the box and consider a targeted initiative to take share.

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