How Manufacturers Benefit From Loyalty Reward Programs

Contractors and other industry professionals weigh factors such as price, reputation and availability when purchasing products for commercial or residential jobs. When all things are relatively equal in the buyer's mind, an incentive can swing a product purchase decision one way versus another. But buyers report that the incentives have to be worth their while and that obtaining — and keeping — their loyalty can be a tricky balance of offering enough value to tip the scales in their favor.

James Nowakowski, president of Accountability Information Management Inc. a Palatine, Ill., firm that develops and operates various types of incentive programs for manufacturers, says many contractors find that the effort to enroll and qualify products for these programs is worth the trouble as long as the pay-off is substantial and realistic to attain. “Companies need to be committed to their customers on all levels and that includes customer incentive programs,” says Nowakowski. “It's important to have strong customer relationships, and it all comes down to building loyalty and maintaining trust. Rewarding customers for their faithfulness is part of that relationship.”

The president of a Cincinnati-area commercial contracting firm with more than 100 employees says how he knew nothing about incentive programs until he placed a large order with a manufacturers' representative several years ago. The salesman informed him that his purchase would qualify for thousands of points in the manufacturer's loyalty rewards program, and the president discovered how quickly the points added up. “Once I saw the points collecting, I kept doing it,” he says. “It got to be part of a game.”

The contracting firm president says an incentive program itself isn't enough to warrant purchasing from one manufacturer instead of another; good service and product quality are most important to him. But the incentive program is a “motivator” to specify that manufacturer's products, as long as the prizes are worthwhile. Trading earned points for money or a catalog item, such as a laptop computer, sports tickets or a home entertainment system, is much more persuasive than promotional trinkets.

Nowakowski says program participants essentially “lock in” their loyalty to win prizes. Research conducted by Accountability found that program members increase their business with a manufacturer that has a loyalty program by more than 25% and that loyalty programs are more influential than rebate offers (see chart below).“This loyalty translates into much greater value for the manufacturer over the long run than simply beating the competition on a single job bid,” he says.

For more information on this study contact Nowakowski at [email protected].