Arguments have been made recently that contractor loyalty programs provide little benefit, if any, to the manufacturers that offer them.  A recent article written by Mark Mitchell suggests there are more negatives to contractor loyalty programs than positives.  Principia has a different view.

Principia has conclusively found:

1)     When executed properly, contractor loyalty programs will enable building products suppliers and contractors to grow more rapidly than firms not participating in contractor loyalty programs

2)     Product knowledge and training were among the highest valued benefits within a contractor loyalty program, while trips and monetary rewards were among the lowest valued benefits.

These results were drawn from the most extensive research to date on the subject conducted in 2015, which included interviews with more than 1,100 contractors and builders to determine not only the rewards offered by such programs, but the effectiveness of these programs in generating revenue and market share for the manufacturers offering them.

While we certainly agree with Mr. Mitchell that industry-leading customer service, knowledgeable sales reps, and online position and functionality are true revenue and share generating hallmarks, we strongly disagree with Mr. Mitchell’s assertion that contractor loyalty programs “were a bad idea in the past, and they are a bad idea today.”

Effective loyalty programs today are not just more sophisticated in the benefits offered to program participants, but in their strategy and execution as well.

Our research detailed a myriad of loyalty program offerings. While we won’t list them all here, we segmented them into 3 major groupings:

  1. Merchandise and Monetary Benefits (including trips)
  2. Marketing and Sales Support Benefits
  3. Training and Continuing Education Benefits

The last two on the list are obviously offering to assist the contractor in managing and growing his business. Interestingly enough, these benefits groupings were also used or redeemed at a higher rate. The programs most effective at engendering loyalty and capturing the largest share of wallet offered rewards from all three groupings, outperforming those offering strictly merchandise and monetary rewards.

To download Principia Consulting’s  brochure on The Best Practices in Contractor Loyalty 2015 report please Click Here.  An overview of findings from the report highlighting the elements of successful contractor loyalty programs is available for download.

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