Rewarding Loyalty

When the time comes to get the product to the end user, no customers are more important to a business than its distributors and dealers. And because it costs less to keep a customer than to find a new one, today more companies shower loyal dealers with thanks in the form of rewards than ever before.

“It’s so expensive now to acquire a new customer; it’s much smarter business strategy to hang onto the ones you have,” says Michelle M. Smith, vice president of global sales for Bravo Gifts of San Francisco. Incentive rewards stir loyalty by reinforcing a brand, ingraining a buying habit and making customers feel special, appreciated and more inclined to reciprocate with a future purchase, Smith says, “They feel beholden.”

How do some businesses foster a greater sense of goodwill and loyalty with their business customers? Selling Power contacted incentive specialists and their clients to learn how some companies nurture customer loyalty.

CASE I
The company: Carpenter Co., Richmond, VA
The incentive partner: Premium Products of America Inc., Dallas, TX
Carpenter, a manufacturer of carpet cushion and other foam products, competes with other national manufacturers for carpet dealer attention. In 1998, its southwest division seized on the occasion of Carpenter’s 50th anniversary to break through the carpet-cushion clutter. With delectable gourmet foods as incentives, the company wanted to jumpstart the selling season – and thank loyal customers for their support. Guess what? The result was more loyalty.

“It increased our customer base. It made loyal customers of old customers, and made regular customers even more loyal,” says Jack Henrietta, Carpenter’s southwest region carpet cushion sales manager. “We believe strongly in customer loyalty and partnering with our customer. We wanted to reward our customers, small or large, for being loyal to us and allowing us to grow. Even with a minimal purchase you could get an incentive reward.” He says the $1 billion Carpenter is one of the world’s largest privately held manufacturers of car, furniture and carpet cushion and foam products.

Carpenter hired Premium Products of America to create and execute the turnkey program. The goal: To lock in the southwest region’s dealer purchases of Carpenter carpet cushion at the start of the 1998 buying season. The target: About 500 independent dealers free to buy from various cushion manufacturers. The carrots: Dozens of mouth-watering gourmet items laid out on a large, attention-grabbing “menu.”

Via regular mail, a succession of memorable promotions tantalized the dealers. A red firecracker tube loaded with confetti and balloons announced the campaign’s impending start. The colorful, foldout “menu” signaled the contest had begun, thoroughly whetting the appetite of the typical upper-income dealer. A miniature carving board and later, a packet of steak sticks – both branded with Carpenter’s logo – served as extra reminders. Finally, the mail brought a combination magnifier-and-measuring-device to encourage participants to finish big. “You have to promote your promotions,” says Jim Stephens, president of Premium Products in Dallas. “Letters are very easily looked at and trashed, but if you include a dimensional, they won’t throw that away. And it’s very, very inexpensive.”

From the middle of March to the end of May 1998, the more rolls of Carpenter cushion a dealer bought, the more points the customer could redeem for gourmet treats. The menu featured Pfaelzer steaks, seafood and game birds, Edinburgh crystal and finishing touches from Crabtree & Evelyn.

Virtually no one was left out, Carpenter’s Jack Henrietta says. For a minimal shipment, even the smallest customer could snag something, such as a set of steak knives. But a purchase of better-quality product fetched more points for the dealer – and more profit for Carpenter. Of the 500 dealers invited to participate, 251 qualified for prizes, Henrietta says. Not bad, considering that’s up from 156 regular customers. “We picked up new customers, and since then most have stayed,” Henrietta says. “We’re in a growth track and need to increase market share.”

Other results exceeded expectations. Until the incentive effort, the Temple, TX, plant serving the southwest region ran at about 80 percent of production capacity. The program’s goal? To push sales to dealers enough to boost production to 90 percent. The result? An 18 percent increase in sales that drove plant production to nearly 100 percent. “It was a very good increase,” Henrietta says. “I thought it was a very good return on our investment. It was an excellent way to kick off the selling season.”

CASE II
The company: Hunter Douglas Inc., Upper Saddle River, NJ
The incentive partner: United Incentives Inc., Philadelphia, PA
Is a blind a blind? Hardly, says Hunter Douglas Inc., North America’s leading manufacturer of custom window coverings. Despite its dominance of the market, Hunter Douglas moved to stem the flood of competitors by fortifying its distribution channels. But the company wanted to go beyond boosting dealer purchases. The company sought to increase dealer loyalty, plus reinforce Hunter Douglas’ partnership with the fabricators catering to the dealers. Sound like a tall order? Sure, but the company rose to the challenge by launching a travel incentive effort that gives a big lift to sales and to customers.

Since Hunter Douglas first rolled out the “Windows to the World” campaign about six years ago, the program has generated steady sales increases annually. In 1998, results again outdid objectives. Purchases by participating dealers outstripped the goal of 35 percent. The 1998 results sent about 4,200 traveling in 1999, up from 3,600 the previous year, says Jim Mathews, vice president of corporate marketing for Hunter Douglas. About a third of the travelers are spouses or companions whose travel may be partially purchased.

Does the annual program, created and run by United Incentives, do the job? “It’s wildly successful,” Mathews says. “We’ve wondered if there’s an end game. We’ve taken 21,000 people on trips in six years. We’ve made millions of memories and it’s created billions of dollars in business for Hunter Douglas. From our perspective, along with our consumer advertising, it’s a cornerstone of our marketing.”

Hunter Douglas, based in Upper Saddle River, NJ, relies on nearly 30 fabricators in the U.S. to make company products. With only a third of the fabricators company-owned and the rest independent, the fabricators sometimes compete with each other. They used to dangle their own travel incentives programs, sometimes even targeting the same customers. Now, the fabricators all pull in the same direction, rallying around “Windows to the World” as the heart of the Hunter Douglas marketing effort. Fabricators pay the way for their own customers who make the trips.

For the dealers, this vacation is no free ride. In 1998, a dealer customer trying to earn a trip to Madrid or Puerto Vallarta had to buy at least $45,000 of product during a nine-month period. Not just any blinds either: a dealer had to spend a minimum of $15,000 in each of three categories – blinds, shades and shadings. To qualify for Maui or the London-Paris jaunt, a dealer needed to buy $90,000 – or $30,000 in each category. “It’s not easy,” Mathews admits. “They’ve got to work at it. And when November comes, there’s no doubt they’ll buy nothing from anybody else.”

Several years back, Hunter Douglas cast a wider net. The company added an entry-level tier to help expand its customer base. And the lure reeled in many small dealers often overlooked by manufacturers. First-time accounts now make up 10 percent of the trip qualifiers, Mathews says.

Time and time again, the numbers show that the “Windows to the World” program increases customer loyalty. Despite requirements that dealers buy minimum amounts in each category and that they purchase more than they did the previous year, the qualifying number keeps swelling. The first year, about 1,800 dealers and companions traveled, but in 2000 about 4,500 will go, Mathews says.

In unmistakable ways, the group outings cement the dealer’s bonds to the fabricator and to the Hunter Douglas brand. Customers receive promotional mailings imprinted with their fabricator’s name – a system that requires United Incentives to produce 29 different versions of each mailer. On the trip, gifts delivered nightly to each dealer’s room come with a card signed by the fabricator. When possible, a fabricator’s group stays together – in a block of rooms, on tours and at dinners. “When we deliver a travel program, everything we can do focuses on loyalty and maintaining relationships,” says Michael J. Hurwitz, president and creative director of United Incentives Inc. in Philadelphia.

Each year Hunter Douglas debates whether to run the incentive again. But with a slew of competitors calling on dealers, the company invariably decides to deliver an encore. Adds Mathews, “Dealers look forward to meeting each other. They sit around talking about their businesses. That trip is a memory they have forever. They’re bitterly disappointed when they can’t make the trip they wanted.”

CASE III
The company: Max Finkelstein Inc., Long Island City, NY
The incentive partner: Don Jagoda Associates Inc., Melville, NY
Amid stiff competition for dealer attention, Goodyear’s northeast wholesale tire distributor launched an incentive effort that rolled along for good reason. In fact, the “Drive to the Max” campaign sent dealers racing to wholesale Goodyear tire distributor Max Finkelstein Inc. for about 4,850 reasons. That’s how many merchandise awards went to dealers enrolled in a program that took prize winning to the max.

“One of the strongest features of the ‘Drive to the Max’ program was the huge prize structure,” says Rich Entel, vice president of Max Finkelstein Inc., based in Long Island City, NY. “It virtually guaranteed dealers who enrolled to participate that they would win a prize at one or more of the levels.”

The campaign ran like a lottery game. For every Goodyear tire purchased from Max Finkelstein for four months through April 1999, dealers earned a peel-and-reveal instant-win game card – and a shot at one of 4,000 instant prizes. Any of these awards grab you? A three-year lease on a Jeep Grand Cherokee. Trips to Skip Barber’s auto-racing school. Honda ATVs. Weekend getaways. And hundreds of golf bags, mini Mag-Lites, Rolodex personal organizers and multifunctional knives. “The idea is everyone wins,” says Bruce Hollander, senior vice president at Don Jagoda Associates, the marketing services agency that designed and oversaw “Drive to the Max.” “If you participated, you won something.”

In this combination instant-win-game and random-sweepstakes, the winning kept coming. If a game card didn’t win instantly, it qualified for entry into a monthly random drawing. Each month, 200 dealers won sweepstakes prizes. Big awards included a Sony wide-screen TV, a leather recliner, a Makita power tool set and Callaway golf irons.

What’s more, remaining nonwinning entries headed for a second-chance sweepstakes that distributed unclaimed instant-win prizes. “With a program like this, everybody feels they have a chance to win. It’s a lot of reinforcement,” Don Jagoda’s Hollander explains. “The more you sold, the better your odds. There’s excitement to it.” Apparently, no one was left out: Max Finkelstein recognized that its own staff worked extra hard during the promotion. As a reward, when a dealer won a major prize, identical awards went to the sales rep, the sales manager and the warehouse manager involved with the winning dealer’s account.

“Drive to the Max” offered various ways to win. To enroll, a dealer customer placed a required initial order of 100 or more tires. But for every tire in the opening order, a dealer received two instant-win game cards plus entry into an early-bird drawing for a wide-screen TV. In return, Max Finkelstein saw instant winnings early on, too. Of the dealers invited, nearly a third placed initial orders to sign on. “The numbers exceeded all expectations,” Hollander says. Max Finkelstein was “excited from the get-go.”

By covering all the bases, this game hit a home run. As dealers received a steady stream of mailers accompanied by premiums, interest remained high. For instance, the announcement kit included a miniature Jeep Grand Cherokee, equipped with Goodyear tires of course. One month, a stress-relieving squeezable tire arrived. Another month, a packet of golf tees, ball markers and a divot tool came in the mail. “These dealers are busy. They’ve got a lot on their desk,” Hollander explains. “We sent things by priority mail so they came with importance. We didn’t want them to throw it on their desk. We wanted to keep front of mind. If they didn’t respond and get their orders in on time, they’d lose out and Max Finkelstein would lose out.”

Almost-weekly faxes stirred a sense of urgency and excitement. “Fax blasts” kept participants posted on program news, identifying the dealers who won big prizes and urging timely entry of nonwinning game cards into monthly drawings. A toll-free phone line offered prize results and more. And callers to Max Finkelstein offices heard on-hold messages about recent winners and other developments. “The idea was to keep them involved,” Hollander says.

Through prizes and premiums, “Drive to the Max” cemented ties between Max Finkelstein and the dealers, who regularly hear from the reps of assorted other name-brand wholesale tire distributors, too. When possible, premiums and prizes bore the “Drive to the Max” and Max Finkelstein logos – reminders of the wholesale distributor’s appreciation of its loyal customers. The program “was aimed more at retrenchment,” Hollander says. “There are only so many dealers out there.”