Rewards in the Channel: Dealer Incentives
May 14, 2007
By Enrique Burgos
Dealer incentive programs vary from other types of incentive programs in one important way: The recipients are not employed by your company. They resell your products or services. This can complicate the effectiveness of any incentive program.
The key points to consider developing an incentive program for dealers/distributors are:
1. Identify the objectives.
The objective tracks the specific results you want, such as increased sales; it also can measure the steps participants can take to achieve this goal. An example of this would be increasing sales by 15 percent in the third quarter vs. the same period last year.
2. Determine the target.
Identify what target audiences can do to help you achieve your objectives, such as stock more products, increase sales or provide customer databases.
Usually, the top 20 percent of dealers comprises the bulk of your business. Therefore the objective of incentive programs is not only to get the top performers to boost their sales a bit further, but to get average performers to increase their participation with your company.
Many companies want to target the dealer salespeople who actually present the product to the end user. But there is something to consider: dealer managers often resist these programs, fearing that externally sponsored incentive programs motivate their salespeople to act in someone else's best interests. To avoid this problem, it's necessary to benefit the manager as well. Some dealers appreciate incentive programs as a way of providing the employee extra bonus they can't afford.
3. Benefits for dealers.
Dealers and distributors often react more actively to strategies that help them address essential problems, such as improving the training and retention of salespeople, building consumer loyalty, or building sales of a product or service category.
Make sure your program has a component that promotes sell-through, such as a promotion aimed at end users to help the dealers.
4. Structure the program.
After determining the objectives, it's necessary to select the right strategy and methodology to implement the incentive program. These strategies, which do not need to exist exclusively. can be segmented into:
• Open-ended strategy. Motivates dealers to stock or sell more by setting goals above the past year's sales quota.
• Closed-end approach. Distributes awards to the top performers in each volume category or region.
• New product introduction. Budget a small amount per unit of your new-product budget for an incentive program designed to get dealers or distributors to increase their commitment to your product.
• Product-specific programs. Companies offer bonus points for distributors that sell or buy more of a specific product. But you might put in danger the sale of other products with this approach, so your secondary measures might include a requirement to hit an overall sales target.
• Database programs. Offer dealers and distributors a reward for providing customer names for direct marketing or telephone sales solicitation on behalf of your company's product.
• Customer-affinity programs. Many companies simply invite top distributors and dealers to special meetings that blend training, motivation and entertainment. Selection of attendees may be based on a subjective evaluation by top managers.
• Sales/purchase pushers promote sales in a particular season to maximize results. If your business is seasonal, you'll want to make sure you profit as much as possible from the potential business in the strongest sales period.
5. Determine your reward system.
Depending on your objectives and audience, you may use tangible award options, including: brand-name merchandise, retail gift certificates, group incentive travel, individual incentive travel, debit cards, rewards catalogs, and airline mileage programs. Also, awards should be:
• Commensurate with the actions needed to obtain them;
• Available to all who improve their performance;
• In keeping with the image of the company giving them;
• Changed from one incentive program to another
6. Develop the budget.
If you structure your budget properly, the program will cost relatively little, unless performance exceeds your quotas or objectives by a wide margin. Most companies don't mind rewarding dealers and distributors for incremental performance.
A distributing of the incentive budget, should be:
Awards: 70 percent
Shipping: 10 percent
Communication/Promotion: 10 percent
Administration: 10 percent
7. Managing the program.
As with any marketing campaign, you'll need someone in-house in charge. Then, establish whether you want to implement the program on your own. The critical issues include administration, data basing, tracking, communications and award fulfilment. The best choice is selecting a full-service incentive companies who can handle all these functions.
8. Write the rules.
It's necessary that everybody understand the reward structure in the same way, which means your program, must be simple enough to explain in few sentences. The rules should spell out all conditions for participation in the program.
9. Have a promotion plan.
Getting the attention of your audience is a challenge, since dealers and distributors receive offers from many suppliers. Make sure your program is easy to understand and filled with benefits to your target audience. Throughout the program, provide participants with useful information to help them succeed with it.
10. Track the program.
Watch what happens month-by-month by checking your results, and, depending on the results, make adjustments or send out additional information and tips to participants. The great advantage of incentive programs, vs. other types of marketing efforts, is the ability to track results precisely.
11. End the Program
When the program concludes, make sure you have a system in place to quickly celebrate success. People should know as soon as possible when the overall goal is reached and what role they played in achieving it. Make sure your awards are delivered rapidly and with a personal touch.
12. Evaluate and Improve
Look carefully at the results, tracking precisely what happened to sales and other areas that you measured. Isolate the factors that could have affected your program. For the next program, consider changing your measures but continue tracking the old measures as well. This will let you see what happens when your dealers aren't provided incentives, communications, and training on objectives you're attempting to fulfill.
Enrique Burgos is the relationship marketing manager of SEUR, a logistics company in Spain. Visit his blog at www.incentivesandrelationshipmarketing.blogspot.com or check out his posts on S&MM SoundOff.
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