What is a Distributor Incentive Program (and why should you care)?

A distributor incentive program is a channel partner incentive program designed to incentivize and reward distributors for achieving defined business objectives. Why would you implement an incentive program like this, how does it work, and what industries benefit most from one? Read on to find out and to see live examples.

Why You Want a Distributor Incentive Program

Developing strong partnerships is critical to a successful business if you sell your products through distributors. They are your connection to your end customer, and if they aren't actively promoting and selling your products, your sales will suffer. But it's also important to remember that you aren't the one manufacturer they work with, so you need to think about ways to incentivize your distributors to give more attention to your products.

A distributor incentive program, also called a distributor loyalty program, is a great way to build strong relationships with your distributors and boost your company's and distributors' performance.  

Build Strong Relationships

Loyalty is critical to ensure your success, and you need to implement programs that encourage distributors to stay loyal to you and your products. Distributor incentive programs are designed to support the distributor as much as your company by providing financial and non-monetary incentives to work with you. These programs typically include opportunities for collaboration that benefit both of you, including co-marketing and co-branding campaigns that also help strengthen relationships. 

Boost Performance and Productivity

There are many ways to motivate distributors to sell your products over your competitors, including rewards and rebates. When you understand what motivates them, you can build a program that rewards them and increases sales and revenue for both of you. You want your distributors to do well, so your goals must align with theirs.

How a Distributor Incentive Program Works

Let’s look at how a distributor loyalty program works. There are several components you need to include in your strategy.

Start with identifying the overall goals of the program. Are you trying to sell more of a particular product or product line, acquire new customers, or increase retention rates?  

Next, define the rewards and recognition you will offer. These will be monetary and non-monetary and align with your business goals and what appeals to your distributors. Monetary incentives include rebates and discounts based on volume purchases, product value, or some other performance metric you define. Non-monetary incentives can range from specialized training and education to free merchandise, contests, travel rewards, or access to exclusive events.

To encourage distributors to participate in your incentive program fully, you can implement a tiered program that provides greater incentives and cash rebates the more the distributor promotes or sells your products.  

Finally, you must map out the performance metrics you will track to ensure your program works as expected. You will want to track metrics such as participation rates, reward redemptions, sales growth, customer retention, and program ROI. 

Industries Making the Best Use of Distributor Incentive Programs

Distributor incentive programs are common in industries such as manufacturing, technology, pharmaceuticals, consumer goods, and retail, where a robust distribution network plays a critical role in reaching end customers.

Manufacturing and Distribution

Incentive programs can encourage distributors to streamline the supply chain by tying rewards to efficient supply chain management, such as optimizing logistics and reducing lead times. Improving operational efficiency benefits your company as well as your end customers.

You could also tie incentives to market reach, motivating distributors to expand to new markets or strengthen retailer relationships. This results in a more extensive and responsive distribution network, enabling manufacturers to meet customer demands better, penetrate new regions, and maintain a competitive edge in the market.

Technology and Electronics

In the technology and electronics industry, incentive programs can help drive sales growth. You could offer SPIFFs (Sales performance incentive funds), short-term incentives that reward sales reps on the spot for reaching a specified milestone, like selling a certain amount of a product in a defined period. You can also align incentives such as rebates and exclusive promotions with sales performance. Both can be great motivators, fostering healthy competition among distributors.

Another area where non-monetary incentives benefit the technology industry involves providing top-selling distributors with specialized product training and support to help them sell more products. By promoting product knowledge, companies boost sales and enhance the customer experience, as informed distributors can provide valuable insights to potential buyers.

Pharmaceutical and Healthcare

For pharmaceutical and healthcare companies, distributor incentive programs are instrumental in enhancing market penetration. Your program can incentivize distributors to reach out to new territories and demographics, introducing your products to new markets and driving sales. 

Product education is also critical in the pharma industry, as is compliance with industry regulations. You can design incentives that focus on rewarding distributors who take training that helps them accurately communicate your products' benefits. Misinformation is a common challenge in the healthcare industry, and it's critical to ensure distributors accurately promote your products.

Consumer Goods and Retail

In the consumer goods and retail sector, distributor incentive programs can stimulate engagement with retailers. Distributors can work with retailers on joint marketing programs that promote a more prominent and appealing in-store presence for your brand. Incentives encouraging distributors to achieve the best shelf placement can also be offered, including eye-catching displays to promote product visibility. 

By offering incentives for effective merchandising, marketing, and relationship-building with retail partners, companies can create a more appealing in-store presence. This not only boosts sales but also strengthens the brand's visibility and appeal to end consumers.

By aligning the interests of your company and distributors, an incentive program fosters stronger partnerships, drives sales growth, and contributes to the overall success of your business.

3 Examples of Distributor Incentive Programs

Let’s look at three examples of companies that set up successful distributor incentive programs.

IKO's B2B ROOFPRO Loyalty Program

IKO had a contractor and distributor program in place called the ROOFPRO Loyalty Program, but it wanted to improve the program by increasing the speed and accuracy of invoice processing and reporting. By implementing the Snipp C.A.R.E. hub, Distributors can easily upload bulk sales files and receive rebates using digital ACH or paper checks. Learn more about B2B Loyalty Programs here.

Philip Morris International Incentivizes Frequent Repurchasing

Philip Morris International Incentivizes Frequent Repurchasing. One example is Philip Morris International (PMI), which wanted to encourage resellers to repurchase more frequently, developing brand loyalty. It implemented a program using Snipp's Loyalty and Check platforms where resellers can earn points that can be converted to cash.

Bacardi Boost Loyalty with Bar Talk

Bacardi wanted to grow its share volume by 30% and improve loyalty within its network of vendors (including bars and nightclubs). To do it, it created the Bar Talk loyalty program, a tiered rewards program based on points. Participants earn points by uploading wholesaler invoices to the program portal, which they then exchange for rewards.

See more B2B Loyalty and Channel Incentive cases here.

5 Tips for Implementing Your Incentive Program

You’ve decided that a distributor incentive program is right for your business. As you begin to define what your program will look like, consider these five tips.

Assess Your Business Needs

There are many reasons you might decide to implement an incentive program. The program you design will depend on your ultimate goals. Are you trying to break into new markets and need incentives to encourage your distributors to take on the challenge? Are you trying to build loyalty and retention among your end customers and need your distributors to work more closely with retailers to provide top placement for your products? Once you understand what you are ultimately trying to achieve, you can design a distributor incentive program that helps you achieve your goals.

Design Customized Incentive Structures

Some distributors work harder at promoting your products than others, and you’ll want to design a program that rewards your top performers. A tiered incentive program offers better rewards and perks to higher tiers and encourages distributors to work harder to reach them. Design an incentive structure that matches the goals you want to achieve with the rewards your distributors will want to get. 

Communicate Effectively with Distributors

Effective communication cannot be underestimated in a distributor incentive program. Be very clear about how your program works and the benefits to distributors for participating in it. Offer clear instructions for how they move from one tier to another and how they can cash in their rewards - cash-based and non-cash-based. Keep the lines of communication open, welcoming feedback on your program to ensure you continuously evaluate and improve it. 

Legal and Compliance are Key

Consult with your legal team to ensure your program complies with local regulations. Clearly outline the terms and conditions of the program and address any potential legal concerns upfront.

Look for a Distributor Incentive Solution to Help

You could try to piece together multiple solutions to help you manage your incentive program, but a more effective approach is to implement a flexible Rebate Management Software that provides all the capabilities you need to manage your program. An incentive management solution offers tools for setting up and managing rebates, structuring and managing reward tiers, a portal for distributors to see their status in the program, outstanding rebates and rewards, and more.

Preparing Your Distributor Incentive Program

We've covered all the information you need to know about setting up a distributor incentive program. Keep it in mind as you build a program that supports your business goals and encourages the right engagement from your distributors. 

To brainstorm with a loyalty expert on how to foster and incentivize your distributors, contact us here! Also, read our full B2B Channel Loyalty Guide.