Distribution has always been a business of relationships, one that’s focused on the value they create for manufacturers, suppliers and customers. But changes to the distribution industry and markets are requiring distributors to examine how they can add that value in innovative ways. For distributors, competition between other brands and within their channels is fiercer than ever, leaving them working frantically to stay efficient and relevant.
Setting yourself apart starts with an effective distributor loyalty program that benefits your manufacturer and supplier partners and your customers. A loyalty program strengthens existing relationships and utilizes data to provide the necessary insights that empower partners to optimize their channels.
Let’s dig deeper into what market changes are causing challenges for distributors, how distributor loyalty programs alleviate those pain points and why your organization should consider adding (or improving an existing) program to exceed business objectives, regardless of market disruptions.
Market Disruptions Are Impacting Wholesale Distributors
Today’s channel world is constantly in flux from market shifts caused by shipping delays and increased costs, the rise of e-commerce, and overall economic uncertainty. Wholesale distributors are feeling the effects of these macro issues as partners increasingly question what value distributors provide the channel. These trends have been growing since the pandemic, and the Future of Commerce reports the intense pressure distributors are feeling isn’t likely to go away in 2023.
Key factors driving change for distributors include:
- B2B marketplaces, such as Amazon, disrupting the wholesale industry models
- Direct to consumer (DTC) markets creating competition between distributors and their suppliers
- Mergers and acquisitions creating distribution giants that are difficult to go up 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 recent 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.
How Distributor Loyalty Programs Add Value for Customers & Manufacturers
As a wholesale distributor, you can use distributor loyalty programs to provide customers with a better experience and to empower manufacturers with essential data, leading to success even in a competitive distribution space. 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 distributor 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 their market strategies, but they often don’t have access to it since it happens later in the channel. The Forrester report found that over two-thirds of brand manufacturer professionals surveyed are disappointed in how much first-party data about customers they receive from marketplaces. Because of this, manufacturers want data-driven programs that have 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.
See Real Results With a Targeted Loyalty Program
To showcase how effective a targeted loyalty program can be, let’s look at how one of our building supply clients was able to use a customer loyalty program to grow market share and increase customer lifetime value.
Brand leadership knew retailers wanted to add a loyalty program, so they asked ITA Group to help build a profitable program. Together, we created a robust program 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 Loyalty Program to Gain New Levels of Success
A strategic 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 distributor loyalty programs can provide success in competitive markets, learn best practices to create (or improve) a loyalty program.