Why Foodservice Distributors Need an Incentive Program

Distributors that can entice retailers with an incentive program that delivers high-value rewards tilt the scale in their favor, securing the business of those retailers.

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What goes into the process of selecting a foodservice distributor? Put yourself in the shoes of a retailer and consider what factors could influence buying decisions. With many distributors offering the same brands and similar pricing, what else sets a distributor apart?

The differentiated distributor

Channel incentive programs are becoming distributors’ go-to behavior modification tools to influence the buying decisions of retailers. Distributors that can entice retailers with an incentive program that delivers high-value rewards tilt the scale in their favor, securing the business of those retailers.

Among distributors, the growth in popularity and success of incentive program implementation is multi-layered. There’s a drive to duplicate the success other distributors have had using incentive programs. There is also incentive program technology, making it easier and more cost-effective to customize programs, collect and analyze participant data and measure success and ROI. Distributors can rely on the expertise of external incentive partners to ensure their programs are running efficiently and their value is being accurately measured.

Selecting incentive programs: Factors to consider

As the incentive program space grows, it’s crucial for program operators to discern between program types, as each incentive program is an investment, and the different types are suited for specific goals and groups. Each program type incentivizes retailers in different ways and requires an individual level of investment, implementation and ongoing management.

A distributor’s objectives or goals will shape much of their incentive program, including type, timing of implementation, cost, KPIs, measurements of success and more. Some distributors begin rewards programs to retain loyal customers. During successful sales periods, incentive programs can be used to “fence in” customers as a prevention effort from losing them during less successful times. And, as always, there’s the traditional program implementation objective to boost stagnant or dwindling sales.

Popular programs for distributors

Distributors typically pick between two types of programs -- debit and points. Distributors commonly use debit card rewards for shorter-term programs (about six months). Typically featuring the distributor’s branding, these debit cards can be reloadable, virtual or even prepaid. These debit card incentives offer unlimited choice, unlimited reward potential and simple redemption. Debit programs are successful because everyone understands the value of a dollar. The value is apparent. Debit cards are as good as cash and can meet cardholders’ basic needs, so they are ideal for an audience looking to make immediate purchases.

On the other hand, points programs target audiences who already have their basic needs met and are seeking higher-end items. Distributors utilize points incentive programs for longer-term initiatives, as they require a lengthier investment from participants and program operators due to their potential value.

Funding incentive programs

Cost is a concern for anyone looking to begin a channel incentive program. Distributors have the strategic advantage of multiple funding options for their incentive programs. They can use vendor co-op funds or manufacturer/market development funds (MDF) to subsidize their incentive initiatives.

Vendor co-op funds are a type of promotional money offered by vendors to promote product sales through their retail partners. Similarly, MDF funds aim to help vendors and manufacturers penetrate new markets, create brand awareness and help their channel with sales and marketing activities based on their products. One of the most effective uses of MDF funds is creating a channel incentive program or supplementing an existing one.

Measuring success

There is critical information to gather to prove the value of an incentive program and measure its success. When distributors work with incentive program providers, a lot of that heavy lifting is taken care of.

Not every incentive program provider is created equal. In their search for a partner in this arena, distributors should prioritize program providers that offer key reporting and analytics features. The easier an incentive program partner makes calculating ROI, the more time distributors can spend actually utilizing their program data to maximize their bottom lines.