Whether it’s creating reward programs for distributors or designing dealer loyalty programs, today’s businesses must do whatever it takes to protect their margins.
Margin is extremely important to survive and thrive in business. As Ehab Atalla, a self-made multi-millionaire, rightly said “Know your margins; then focus on growing the business.”
In this blog post we will discuss how contemporary businesses can reward distributors and dealers without sacrificing margins.
Why Are Margins Important for Businesses?
If you watch any business/investment-related reality show (such as Shark Tank or Dragons’ Den), then you must have seen the panelists ask the pitchers about their margins.
If they consider the margins to be low, then they decline to invest even if they like the products, the problems they solve, as well as the pitchers.
Margins ensure a business can cover costs and still make profit. Good margins indicate operational efficiency. Businesses with good margins are self-sustaining, whereas businesses with low margins cannot sustain their operations for long.
As Jeff Rubin, a veteran fuel operations executive said, “In low-margin environments, you’re subject to take drastic measures to secure your business. But when you cut investments that deliver customers, you’re literally telling those customers that you don’t want them to come to your store anymore.”
How Businesses Can Create Reward Programs for Distributors and Dealers without Cutting Margins?
Creating incentive programs for distributors and dealers won’t have to require businesses to cut their margins. Businesses can decide a lot of ways to motivate channel partners and create B2B dealer engagement programs by keeping their margins intact in the following ways.
1. Tiered loyalty programs
Tiered loyalty programs are one of the best margin-friendly loyalty solutions. That’s because when manufacturers run tiered loyalty programs, they reward their distributors and dealers based on performance instead of blanket discounts. For instance, when you create different tiers (let’s say, Bronze, Silver, and Gold) and you place the top performers in the Gold tier, you make the members in that tier feel valued. Apart from that, you motivate the members in Bronze and Silver tiers to enhance their performance and climb up the ladder. That’s a win-win for all.
2. Non-monetary rewards for channel partners
There is no doubt that financial rewards and tangible rewards are great motivators. But there are some things that money cannot buy. Some of those are respect, recognition, reputation, status, trust, loyalty, continuous engagement, exclusive access, and more. Manufacturers must keep that in mind when designing non-monetary rewards for channel partners. They should explore various non-monetary and non financial rewards and incentive programs for distributors, dealers, and other channel partners. Some of the best non-monetary rewards for channel partners are exclusive recognition such as partner of the month/year awards, skill development workshops, training, and certification programs, early and exclusive access to new products and launches, etc.
3. Rebates and credits instead of discounts and price cuts
Manufacturers and businesses can consider rebates and credits instead of upfront discounts and price cuts. The latter two compromise margins and eat into profitability. However, the former duo is linked to performance and offered retrospectively. To give an example, a manufacturer can offer rebates and credits to those distributors and dealers that manage to achieve specific sales milestones at the end of a specific period. Rebates and credits are among the most effective channel partner reward strategies as they ensure that the rewards are directly proportional to the performance and outcomes.
4. Add gamification elements
“How to retain dealers in B2B space without sacrificing margins?” If this question often comes to your mind, then you must explore the power of gamifying distributors and dealer loyalty programs. Adding gamification elements into loyalty programs is one of the most cost-effective ways to make the programs more engaging and addictive. Gamification features such as badges, leaderboards, and milestones can entice distributors, dealers, and various other channel partners to remain engaged and connected on a regular basis.
5. Fraud-proof loyalty programs
Loyalty fraud (rewards programs fraud) is rampant in the B2B space. A report by Thomson Reuters titled “The unexpected cost of rewards programs fraud” revealed that the global fraud losses has grown dramatically over the last decade estimated at USD one to three billion per year. Manufacturers and B2B brands can instill confidence in channel partners by making their loyalty programs fraud-proof. They can use sophisticated technology solutions such as dual wallets to ensure that rewards meant for specific distributors and dealers reach the right hands and there is zero scope of pilferage or human errors.
All In All,
If a business has to cut its margins to reward distributors and dealers, then it sets a wrong precedent from that point itself. It then becomes a losing game for the business and it’s just a matter of time when it will find itself in stagnation, or worse, in decline.
Sacrificing margins is never an option. There are ways to reward distributors and dealers without touching the margins and this blog post illustrates only a handful of effective strategies to do that.
If you are a manufacturer or a B2B brand, then you must consider adopting some of the highly effective strategies to design distributor and dealer loyalty programs.