How To Run A Successful Dealer Incentive Program

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"Motivating our dealers is the key to our success."
These words from the company president changed the entire tone of the sales meeting. Talk of cutting back or eliminating the company’s dealer incentive programs was immediately shelved in favor of ideas on how to use such initiatives to help the company grow.
The president had been through these down business cycles before and knew that eliminating the programs would hurt far more than it would help. Organizations that discontinued or severely trimmed their dealer and distributor programs more often than not failed to regain those relationships.
By keeping its incentive programs intact, the company was sending a clear message that it recognized and valued its dealers' time and attention.

It takes a lot to make a business successful. But when it comes to getting your product to end users, no one is more important to a company than its dealers and distributors. Think of these key players as the oil in the engine-without them, your business simply won't run.
While recognizing and motivating dealers is key in good times, it is of paramount importance in down cycles. You need to keep your sales and marketing efforts rolling, or you might as well close your doors.
One of the most cost-efficient and effective methods for keeping distributors focused on your products are sales incentives. A well-planned and orchestrated program motivates your dealer network with awards that recognize their excellent customer service, clever marketing and outstanding sales performance.
Incentive programs help convince brokers that your products are worth their time and energy. They prove that you're serious and aggressive about your sales and marketing efforts. While other companies may be retrenching, your company has a prime opportunity to expand its market share.
Incentive programs are one of the best ways to establish strong relationships throughout your distribution network. Also these efforts can flesh out the dealers who believe in your products and are eager to work with you.
Perhaps the greatest advantage of running a dealer incentive is that it pays for itself. The resulting sales gains will more than offset your costs.
This booklet provides a clear understanding of how a dealer incentive works and offers suggestions on improving existing programs.

TARGET YOUR AUDIENCE

Anyone who is involved in the distribution and delivery of your product is a perfect candidate for an incentive program. Hence, smart organizations often run multiple programs simultaneously. They may also choose to create a multi-tiered incentive that includes everyone-distributors, jobbers, wholesalers and resellers. When creating and updating the database on your participants, make sure to note demographic information such as age, marital status and gender as well as any data on personal interests. It's helpful to separate the information by region since dealers and distributors usually operate within a specific area.
Ideally, set up a small rotating advisory group of participants to work with the program's architects. This will cut down on problems later on. Interact with your biggest producers on a regular basis, but also be sure to keep an ear open to your entire audience.
Conduct your research as carefully and as thoroughly as you would for a program targeting your customers. In many respects, dealers and distributors are your most important customers.

DEVELOP A STRATEGY

Increasing sales is the ultimate goal of every dealer program. Of course, getting there is the tough part.
Your objectives must clarify exactly what you want your incentive program to accomplish, as well as how you plan to do it. Your goals should be:

Simple and specific
Steer away from broad terms such as "increase sales. "Rather state, "increase sales of software 10 percent between March and June:'

Realistic
Have an ambitious agenda, but compare your goals to past history. If your company has never come close to its objective, make sure you can support why this time will be different. Keep in mind that programs aimed at increasing sales during a slow period won't come close to peak-period numbers.

Measurable
If you can't gauge sales performance in specific terms, it will be difficult to prove the program was a success. Also, you need to be able to compare the program against past and future initiatives.

Well-timed
Programs should be run when they will do the most good. Also, adjust your objectiyes to suit fluctuations in the business cycle.
The objectives will influence the program's structure and rules. Dealers who have participated and won awards for several consecutive years will expect rules consistent with previous campaigns.
If you're trying something different that may eliminate some of these people from the winners' circle, you have two options. You can either have a good reason ready that will convince them to participate, or expect a few to walk away from your program.
Of the two program structures closed- and open-ended-each has its pros and cons. A fixed budget caps the total number of winners. However, they tend to recognize the people who probably would have performed well anyway. Close-ended programs work best for groups of top performers with fairly equal track records.
An open-ended design doesn't put any limit on the number of winners. Dealers tend to respond better to this design. Unlike internal salespeople, distributors can choose whether to participate. If they don't like the odds of winning, they will ignore your program and probably your product.
Tiered incentive programs work especially well with dealers and distributors because they allow administrators to cast a wider net. Also they make it easier to group dealers and distributors by region and performance levels to ensure a competitive balance.
For instance, an insurance company introduced a merchandise catalog with several levels to reward its national network of independent brokers. The opportunity to earn merchandise at several levels throughout the program kept people selling, even when they knew they wouldn't qualify for the upper tier.
As you design your rules and structure, keep these issues in mind:

Give participants time to participate.
Be wary of designs that ask salespeople to cram their sales into a short period rather than promoting consistent performance. Sink-or-swim selling isn't the best long-term strategy. It is best to reward salespeople who can establish relationships with customers and learn their needs.

Short-term, or spurt programs, work well as part of a larger program.
These shorter incentives allow administrators to react to unexpected market changes or to push specific products. Consider mak

Tiered incentive programs make it easier to group dealers and distributors by region and performance levels to ensure a competitive balance

ing sprint programs part of the beginning and end to ensure a fast start as well as a strong finish.
Don't become spurt happy, however. Participants will catch on and may adjust their sales to take advantage of the shorter, more lucrative sprints, instead of selling throughout a program.

Give everyone a chance to win.
The belief that 80 percent of your sales comes from 20 percent of your people is more reality than myth. But what about the remaining 20 percent of sales? Don't overlook the best and most promising of your up-and-coming producers. Motivating this group can push your sales numbers from good to great. Also, these are the top performers of tomorrow.
An auto manufacturer improved its sales nationwide because it reconfigured its dealer program to do a better job of rewarding this group. Upon analyzing the numbers, management found the top people were giving all they had to the program; the much-feared complacency had not set in among this group. However, the data also indicated the best of the middle tier were actually bringing in a higher percentage of new sales in comparison to the top producers. The middle group's overall sales were lower, but they were doing a remarkable job of generating new business. Yet the past program wasn't rewarding this middle tier for their efforts.
Also, consider giving distributors the support they need to run their own campaigns. In addition to promotional materials, this may involve the chance for them to earn extra awards to use to reward their own people.

Track everything.
Throughout the program you should know which dealers are selling which products and how much they are selling. You need this information in order to plan effective spurt programs.
Also, keep a close eye on award redemptions. Don't be afraid to make changes to merchandise awards in the middle of a program. But don't use a bulldozer when a hoe will do. Sometimes a little tweaking is all that is necessary.

The Web provides advantages.
These days, most dealer incentive programs offer some online component. Considering the geographic diversity of the audience and their ease with computers, the web is a natural fit.
The actual per-employee cost of the awards should be the same for online programs as traditional plans. However, online programs save planners money through lower labor and printing costs.
The Internet offers a near real-time environment that includes validation of the salesperson's behavior, processing of the transaction, account statements and award fulfillment. Using a customized Web site, participants can shop from the online catalog and track the status of their awards. Also, they can monitor how they or their team is doing overall.
Such flexibility in awards is a major reason for moving online. Employees have choice, and administrators can see which items are popular thereby enabling them to make changes as needed.
The main knock against Web programs is they are considered too impersonal to be the sole form of recognition. Most planners include a personal note or phone call to the dealer to combat this problem.
In addition to administration and award redemption, the Web can help administrators achieve their business goals. It has become an effective method to train scattered sales forces on new products. Considering the technology available, some training programs resemble the most advanced computer games.
A telecommunications company used the Internet to increase suggestions from its off-site repair network, believing they were a good source for sales opportunities. The field staff would look for holes in existing client systems or be alert regarding comments on the competitors' products. Repair people received points for such leads and even more points for tips that generated business.

PROMOTE YOUR PROGRAM

Planners have a lot of nightmare scenarios. But one of the worst is having a great program that no one knows about.
Since dealers can choose from a multitude of programs, a strong promotional element to your incentive campaign will help break through the clutter and grab their attention. You have to get the word out and keep it going, so make communications a top priority.
Participants should be able to enroll and participate in several ways: mail, Web, telephone and fax. People won't participate if it looks too complicated or time consuming. All these options allow participants to communicate at their comfort level.
If your company has an in-house graphics department, get them involved at the beginning. Also, experienced award manufacturers or distributors should be able to offer their expertise.
When planning your communication campaign, consider the following:

Use teasers to drop a hint about the coming program. Teasers are often accompanied by a gift related to the program's theme or grand prize.

Send an announcement piece clearly stating the rules, objectives, structure, length, awards, etc. Also include contact information for questions or comments.

Design kickoff materials that generate enthusiasm for the program. If time and budget constraints allow, stage a live kickoff at your annual sales meeting or at a trade show that a majority of your participants will attend.

Use promotional pieces during the program every few weeks. Remember, a message has to be delivered several times before it's completely absorbed. The more you reach out to people, the more successful your program will be.

Distribute mailings to update participants on their progress on a regular schedule. Email works especially well for this purpose. Updates are a wonderful opportunity to get in front of participants.

Along with the final standings mailer, send a congratulatory note and a letter from the company president thanking the distributors for their contribution.

BUILD THE BUDGET

The goal is to strike a balance between an award large enough to be motivating and one that fits your budget. A successful dealer program will pay for itself, but you will still need to spend money up front for promotion, awards and administration.
There are a variety of ways to develop a budget. Some planners allot per winner about four percent to seven percent of the base pay of the average participant. Others prefer to figure five percent to 10 percent of the value of the expected sales as the total cost of the program.
In terms of closed versus open programs, the fixed plan allows you to establish a firm budget at the start and is easier to plan financially. One downside to open-ended programs is they tend to generate higher administrative costs, and the total price tag is unknown until the campaign has ended. However, if designed correctly, extra sales generated will more than cover such costs.
Regardless of the method, the majority of your budget-about 70 percent-should be spent on awards. Promotion is next, claiming 15 percent to 20 percent. This figure is a bit higher for dealer programs in comparison to other types of incentives because you have to work harder and spend more to get this group's attention. Administration usually requires about 5 percent.
The remainder of your money goes toward training. This budget line is especially important in dealer programs if you are launching a new product.

EVALUATE THE RESULTS

If you established concrete, measurable goals and tracked your participants' behavior throughout the program, you'll have no trouble seeing the results of their efforts. Detail what worked and what didn't to help those who plan the next incentive. This important analysis will help prove the success of the campaign and point out ways to refine future projects.
Ask the administrators if they encountered any problems and what they thought worked particularly well. Be sure to explore all the intangible aspects of the program. In particular, get their input regarding the objectives of the program, training and ideas for future awards.
If possible, speak directly with recipients to learn what they thought about your dealer or distributor program. If you think they would be more honest responding through an anonymous survey, then make one available to them.

Q. The best dealers ignore my products once they reach the top award level of the program. Any suggestions?

A. Design the program so a participant is never done with it. One option is to offer top brokers a chance to earn extra merchandise in addition to the top-level awards. Since this will be a very small group, make the rewards as personal as possible to increase their appeal.

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Q. A lot of the participants are using my debit card program for groceries and purchases under $100. Is this a problem?

A. The good news: These people are reminded of your program on a regular basis. The bad news: Your program may possess little to no trophy value. It is being lumped with salary and won't hold their attention for very long.
Change the design so distributors regularly have the chance to earn a large lump sum, such as 500 points. Once they see the higher level awards are within reach, they will start saving the points for dream merchandise. Then your incentive will once again be an award program and not a grocery subsidy.

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Q. How often should I change merchandise awards?

A. It depends on your program and participants. If you offer a lot of trendy items, be aware they may not be so hot in a few months. Also, if your program attracts the same people, more frequent updating is necessary. With ongoing incentives, such as a catalog or debit-card program, new merchandise can generate renewed interest.
When trying to weed out less popular awards, be sure to compare merchandise that's on the same level. Keep in mind that early in the program the top prizes may have the lowest redemption rates simply because participants haven't had time to earn them.