Why contractor loyalty programs empower wholesale distributors

By: ITA Group

What you need to know

Distributor-run contractor loyalty programs benefit manufacturers, suppliers and customers, adding value to the distributor relationship.
Market shifts and challenges are putting pressure on distributors to prove their contributions to business channels.
Distributors are in a unique position to supply manufacturers with data that can improve customers’ brand experience.

Wholesale distributors are facing an evolving economic landscape. The distribution industry has experienced significant disruptions, from supply chain issues to the rise of e-commerce and changing customer expectations.

As the market stabilizes, distributors need innovative ways to add value to their partnerships with manufacturers, suppliers and customers.

Distributors are under increasing pressure to prove their supply chain value, particularly as B2B marketplaces and direct-to-consumer (DTC) models disrupt traditional distribution channels. Many distributors are asking, "How can we differentiate ourselves and drive growth in this competitive landscape?"

Implementing a well-designed loyalty or incentive program is an effective strategy to address these challenges. These initiatives strengthen relationships with customers and manufacturer partners, while providing valuable data insights to drive business growth.

Market disruptions impact wholesale distributors

Today’s channel world is in constant flux from market shifts caused by supply chain disruptions, digital advancements and overall economic uncertainty. Wholesale distributors feel the effects of these macro issues as partners increasingly question what value distributors provide.

Key factors driving change for distributors include:

B2B marketplaces, such as Amazon Business and Alibaba, disrupting the wholesale industry models
DTC markets creating competition between distributors and their suppliers
Mergers and acquisitions creating distribution giants that are difficult to compete against
Macro-economic concerns, such as global market uncertainty and talent shortages, causing unforeseen disruptions

Changing marketplaces are causing the most channel conflicts, pitting traditional retailers (i.e., wholesale partners) against their suppliers. In a trends report by Forrester, two-thirds of survey respondents cited concerns about channel conflict with traditional wholesale partners as a problem associated with digital commerce.

Marketplaces often procure inventory without a brand’s explicit approval, putting wholesalers who must comply with brand standards and terms-of-sale at a disadvantage. The unauthorized products sold DTC often let marketplaces win on price, but not on customer experience or valuable data collection. That’s where loyalty programs can help distributors stand out.

Related: Learn how optimizing B2B distribution marketing strategies can help your organization navigate tricky markets.

Distributor-led contractor loyalty programs add value for customers and manufacturers

As a wholesale distributor, you can use contractor loyalty programs to provide customers with a better experience and to empower manufacturers with essential data. Distributors play a pivotal role between manufacturers, vendors and customers, and when distributor rewards programs are targeted to reach the right customers with relevant reward offers, everyone wins through increased sales.

For customers, an effective contractor loyalty program incents repeat purchases and rewards key behaviors. It also invites customers to build positive relationships with brands, turning into strong emotional connections. Evaluate what motivates customers to choose you over going directly to the manufacturer. Then, build a robust loyalty program around it.

For manufacturers, data is a necessary tool for understanding their audience and tailoring market strategies. But they often don’t have access to that data since it happens later in the channel. The Forrester report found that over two-thirds of brand manufacturers surveyed are disappointed in how much first-party customer data they receive from marketplaces. Because of this, manufacturers want data-driven programs with proven results.

Distributors already own the customer relationship, so you have access to highly coveted information that can be used to inform your loyalty programs.

Your position in the channel gives you sole access to data such as:

Transactional data for every purchase a customer makes
Location of each transaction
Date and time the product was delivered
Each customer contact who influenced the transaction

Data intelligence puts new, considerable power in your hands. Use your existing data to design targeted, high-impact loyalty programs that drive real results.

Targeted contractor loyalty program get real results

To showcase how effective a targeted contractor loyalty program can be, let’s look at how one of our building supply clients used a customer loyalty program to grow market share and increase customer lifetime value.

Brand leadership knew retailers wanted to add a contractor loyalty program, so they asked ITA Group to help build a profitable program. Together, we created a robust program for the entire channel.

chart showing how a contractor marketing program could be designed for the entire channel

ITA Group experts used best practices and made recommendations that would benefit the entire channel, including:

Data analysis

We identified ideal customers, individual goals, award types and projected ROI. Retailers could also target customers autonomously, including award type and custom goals.

Self-funding initiative

The loyalty program was designed to generate customer purchase growth by targeting customers with the most potential and working with manufacturers to help fund the effort.

Tailored technology

A custom web platform allows for personalized views by audience, real-time reporting and purchase tracking, and a simple user experience. Plus, ITA Group manages the program administration so there’s less administrative burden on our client.

The results? Success up and down the channel. The decade-plus program boasts year-over-year benefits, enhancing brand awareness and collecting data they wouldn’t otherwise have access to.

Key results include:

$82M annual sales revenue average
$15M annual average growth margin
447% average program ROI over life of program
187% greater purchases by targeted customers vs. non-targeted

Related: Dive deeper into this client success story, including how the strategy led to a 56% increase in purchases for customers who unlocked the second benefit tier.

Add a contractor loyalty program to gain new levels of success

A strategic contractor loyalty program that’s supported by expertise is the key to adding value for channel partners—and success for you—even in changing markets. The data those programs collect are vital for you, suppliers and manufacturers to make the targeted, personalized programs customers crave.

Now that it’s clear how contractor loyalty programs can provide success in competitive markets, learn best practices to create (or improve) a loyalty program.