Life is all about relationships. And business relationships, just like any other, are no exception. They take work — ongoing communication and a general interest in the other’s well-being.
When you’re relying on dealer networks to be a local face and expert for your brand, it’s in your best interests to help them be successful. They’ll need the best tools and resources to get to know all about your product and how your company wants to be positioned in an increasingly crowded marketplace.
Strategies to Strengthen Dealer Relationships
Here’s a look at one company that has done this very well. Caterpillar Inc. “is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives.”
In the 1980s, their competition was fierce. The Japanese powerhouse, Komatsu, vowed to “encircle Cat” and take over their lead position in the industry. Hitachi, Kobelco, and others also fought to take market shares away from Caterpillar.
Today, the company is worth $118.84 billion. While several factors contributed to its success, they say the biggest reason for its success has been its “system of distribution and product support and the close customer relationship we foster.”
Various Caterpillar leaders compiled a list of seven powerful lessons they’ve learned along the way in a long-form article for Harvard Business Review. These lessons hold true for manufacturers, regardless of their product offering:
- Independent dealers know more about your customers’ needs than you do.
- Never bypass your dealers to sell directly to your customers.
- Put a system in place to answer your customer’s needs before they realize their need.
- Ask how you can leverage your distribution system when considering adding new products.
- Never bypass your dealers when times are good for short-term gain, or turn on them when times are bad to avoid short-term pain.
- Jump in to help dealers who could be doing better.
- Make your relationships with dealers strong enough to withstand telling and hearing the truth — when they’re doing it wrong or when you’re lacking.
Here are some of the highlights gleaned from these lessons that are all geared to help improve dealer relationships:
1. Independent dealers know more about your customers’ needs than you do.
Local dealers have the advantage of getting close to their customers. They can “serve as market information and intelligence sources, as proxies for customers, as consultants, and as problem solvers.”
The only way to take advantage of this local knowledge is by creating close ties and integrating them into your “critical business system.”
2. Make sure to allow your dealers to sell directly to your customers.
Short-term wisdom suggests that companies can make more money by distributing and selling directly to the end user. While that’s true, no matter how big a deal might be, in Caterpillar’s experience, “we’d sooner cut off our right arm than sell directly to customers and bypass our dealers.”
Keeping trust with the dealers you have is worth every small (or large) profit loss. Taking the profit away from your dealers on high-profit jobs erodes the future relationship and costs you in reach and reliability.
3. Put a system in place to answer your customer’s needs before they realize their need.
Caterpillar worked hard to put in an information system that lets them remotely monitor their purchased machines so they can notify a local dealer and make sure any failing parts get replaced before it fails.
Obviously, this works perfectly with products made of parts that will need to be updated and replaced as they wear out, but it’s worth asking yourself how this principle could apply to your product or service.
4. Ask how you can leverage your distribution system when considering new products to add.
A healthy foundation for any company working with dealers is to ensure that “both sides profit from their respective investments in the distribution system.” Understanding where your distribution system can add value and then implementing that system becomes a no-brainer.
Listen to your dealers to learn and accommodate their experience with your distribution system in order to get the best out of the partnership.
5. Never bypass your dealers in good times for short-term gain or turn on them in bad times to avoid short-term pain.
For three straight years, from 1982 to 1984, Caterpillar lost one million dollars a day — $953 million in total. Industry slumps due to a Middle Eastern revolution, and global recession at the same time as the U.S. dollar soared against other currencies, all contributed to a loss of revenue that could easily have devastated the business.
Only a few of us have businesses of that size and caliber. Still, it’s interesting to read about the commitment Caterpillar had to protect their dealers, and when the economy recovered, they were able to recover with intact trust and increased loyalty.
6. Jump in to help dealers who could be doing better.
A commitment to “extraordinary support” has served the company well. Caterpillar is prepared to respond to “any need for training that a dealer identifies, whether it be in planning, forecasting, information systems, marketing, and advertising, or other business function.”
Your dealers’ success is directly related to your success. Whether they need help cutting costs, offering lower prices, or fighting back with an increased marketing campaign, your dealers must be confident that you are in this together.
7. Make your relationships with dealers strong enough to withstand telling and hearing the truth — when they’re doing it wrong or when you’re lacking.
Even if problems creep up that are a result of the dealer’s mismanagement, the first step is to help find a solution that works for everyone. Communicating “fully, frequently, and honestly” is key to making strong dealer relationships.
For Caterpillar, “continuity reinforces mutual trust, limits disputes, encourages sharing of information, and generates larger gains for everyone.” And what causes deep relationships are, in part, nurturing close personal ties. The kind that goes beyond business.
Improving Dealer Relationships With a Rewards Program
While the seven lessons above are foundational in building strong dealer relationships, they don’t touch on improving these relationships with a rewards program. Dealer/retailer rewards programs effectively reach your goals and help keep your products at the forefront of valuable dealer network relationships.
At its most basic, a dealer rewards program lets your partners earn great rewards when they purchase and sell your goods. They’re incentivized to sell on your behalf, and you reach your sales objectives.
With the right rewards program, your dealers will be motivated to buy, stock, and promote your products over your competitors.
Some other ways these loyalty reward programs can encourage dealers to work hard on your behalf include:
- Increasing their year-over-year purchasing
- Interesting them in trying new products
- Grow the number of categories purchased
- Increase the size of transactions
- Boost amount of e-comm orders
- Refine their product knowledge
Not every reward program is created equal. A rewards program offering an annual dealer trip might work well for a large customer, but it may not be feasible to offer that same level of reward to your smaller customers. And they’re the ones that “usually represent your greatest opportunity for real growth.”
If your rewards program has used an annual rebate model based on total sales, it may be time to crunch the numbers again and see if that’s the best fit. Research indicates that monetary rewards cost you more than non-monetary rewards. You may want to develop a mix of reward types to help improve your program’s ROI.
Five Steps to Developing the Best Dealer Rewards Program
There shouldn’t be anything arbitrary about choosing the type of dealer rewards program that will help build good relationships. Your business and sales goals are unique, and so are your dealers’.
Dealer incentive programs can help redefine and strengthen relationships by increasing trust, loyalty, and revenue.
Lift & Shift works with a five-step program to build strong dealer loyalty by:
Defining program goals.
For any rewards program to be effective, it’s crucial to understand the objectives and challenges of your business. And once you’ve defined your goals, you’ll need to make sure you communicate clearly and concisely with your dealer partners.
The more precise your goals are, the better positioned your dealers will be to work towards attaining these goals and receive rewards.
Designing and developing the program.
On the other side of the coin, your dealer rewards program needs to include appealing and attainable rewards that will appeal to a wide range of employees’ appetites.
Even the best dealer rewards program will get bogged in the mire if the technology to manage the program needs to be improved. Collecting sales and customer data and capturing sales will allow you to improve future marketing efforts.
Incentivizing dealers with dynamic offers.
Segmenting sales distribution networks by distinct priorities like region, channel, and products can ensure the focus is placed where it will have the greatest impact.
Keeping motivation and participation high.
Communicating with your dealer network will allow you to customize the type of rewards program they feel best suits their team.
Learning and adjusting along the way.
You can continually improve your program ROI and drive better results by testing the offer type, strength, and duration.
Resources for Improving Dealer Relationships with Rewards Programs
There are endless opportunities to work with experts on developing incentive programs. Still, there are also many resources that you can find to help you get the best out of a dealer rewards program suited for your company.
Incentive Solutions® is one organization that specializes in providing resources for organizations looking to succeed in today’s market. They offer several free downloads to help create better relationships with your partners.
Incentive Program Secrets for Manufacturers
“Being a manufacturer today is tough. There’s cheap offshore competition, an influx of non-traditional partners, and changing customer expectations. But change is an opportunity for growth.”
This e-book will teach you:
- How to align sales, marketing, operations, and R&D incentive programs.
- How to boost “discretionary sales efforts” by applying incentives.
- Which technology platforms will turn your incentive programs into a “rich source of channel data.”
- How to manage your partner program for the long haul.
The BthruB Incentive Program Playbook
“Twenty-five years of experience and the latest in incentive strategy all crammed into this free incentive program e-book! Whether you’re looking to increase channel sales, build B2B loyalty, motivate sales teams, or reward employees, The BthruB Incentive Program Playbook is a must-read.”
This e-book includes:
- A step-by-step outline to achieve sustainable incentive program ROI.
- A how-to to select KPIs, establish your budget and choose the right rewards.
- Make sure your sales reps, B2B customers, and dealers are on the same team with aligned organizational goals.
- Case studies, infographics, charts, etc.
Guide to a Successful Dealer Incentive Program
“Increasing sales across your distribution channel and keeping them loyal to your brand can be tough! But it doesn’t have to be. A dealer incentive program, or revamping the one you already have, can make a big impact on your sales and marketing goals.”
With this e-book, you’ll learn:
- How to increase sales with dealer incentives.
- How to build loyalty, gain more marketing data and stand out from the crowd.
- Marketing insights for B2B manufacturers and distributors.
- How case studies show real client stories growth.
2017 B2B Marketers’ Guide to Successful Dealer Incentives
Loyalty Works offers this free workbook with fill-in-the-blanks spaces that let you set up a customized dealer rewards program that suits your needs.
Chapters in this workbook cover:
- Setting SMART goals
- How to budget program costs
- Introduce the program “with clarity and excitement.”
- Choosing the right incentive technology
- How to measure your investment ROI
- Coalition dealer loyalty programs
- Group travel incentives
Building Relationships with Your Dealers
Of course, creating good relationships with your dealers goes beyond building the ideal rewards program. If your only focus is offering exciting rewards, you may need to include the nuances of how any program is only as good as the communication required to stay connected with your partners.
Just like in everyday life, overcommunicating may not be a bad thing. Regular updates and reports will assure your dealers that their best interests are at the top of your list. Not all surprises are happy, and if there are hold-ups with delivery or supply issues, your dealers should be informed immediately.
Keeping your word goes a long way to building trust between you and your dealers. Don’t make promises you cannot keep — underpromise and overdeliver is as important with these types of relationships as with any others. If you do what you say most of the time, your dealers will have grace for the odd occasion when something goes awry.
Honesty is the cornerstone for healthy dealer relationships (and every other one!) In today’s marketing world, it’s become second nature to exaggerate what you can and will do. If you can discipline yourself to speak accurately about situations, you’ll have a tremendous head start developing the kind of relationship that will benefit your company.
While rewards programs can go a long way towards improving your relationships with your dealers, keeping in mind how you treat the people in your personal life will only serve to set the foundation of great and long-lasting dealer relationships.