The FMCG industry is growing at a rapid pace. It is expected to grow at a CAGR of 14.9% by 2025.
While this spells good news, FMCG companies know that the market is dynamic and getting more competitive with new players entering the industry. There’s also competition from digital channels. The only way FMCG companies can thrive in this hyper-competitive industry is through building a robust distribution network. A strong alliance with distributors can help companies reach out to a larger customer base and directly impact sales.
One way to build this robust network is through loyalty programs.
What Are Distributor Loyalty Programs?
Customer loyalty programs are not an alien concept for FMCG companies. However, FMCG companies also need to keep the distributors happy to build customer loyalty.
Research shows that distributors are 77% more likely to choose your brand over competitors and provide more customer data to improve channel sales if they are rewarded. Also, since the distributors are responsible for selling the products to the customers, a loyalty program will nudge them to sell their products over others.
In a nutshell, loyalty programs will help improve distribution, enhance brand recognition, and help build a relationship with distributors and eventually customers.
How Can Loyalty Program Help to Strengthen Distribution Network?
Improve value proposition
Companies can no longer rely solely on convenience and pricing as their value proposition. There is competition from offshore suppliers and eCommerce sites. Companies need to think of alternate ways to demonstrate their value proposition. One way is to empower the distributors to create memorable brand experiences to retain customers. Companies can consider building loyalty programs for customers and distributors to encourage them to go the extra mile. The opportunity to earn a reward will urge the distributors to create impactful and personalised interactions with customers and retain them.
Gather channel data
Channel data is important as it helps companies announce their sales and marketing efforts and supports distributors to sell products more effectively. But given the dynamic nature of data, it’s difficult for companies to gain actionable insights from it. Digital loyalty platforms provide distributors with tools to submit sales claims, attach documents and warranties, and register referrals. Companies can use these tools to monitor partner engagement and identify ways to help them sell more products. This data can also be integrated with the company’s CRM and ERP to gain more actionable insights on improving marketing and sales.
Improve communication within the channels
FMCG companies need to communicate with distributors regularly to update them and keep them invested in the brand. Omnichannel loyalty platforms such as websites and mobile apps help communicate with the distributor networks. Apart from rewarding the distributors, companies can use these platforms to exchange data, update the distributors about new products, conduct surveys, and identify areas of improvement. These tools help bring transparency in distribution channels and keep distributors engaged and updated about new developments.
Forge shared partnership
To create a memorable brand interaction, the company and the distributors need to have a shared vision. Loyalty programs help to do that. Distributors become naturally aligned with the company’s goals when they are incentivised for their efforts. They understand that the company’s win will eventually translate into their win and thus make efforts to grow the business.
How to Build a Loyalty Program?
Typically, companies follow the below process to establish loyalty programs for distributors.
Determine the feasibility of the program and its objective There’s no such thing as an ideal time to launch the loyalty program for distributors. However, FMCG companies need to determine the program’s scope and if it would help them realize their goals. They need to define the objectives, i.e., what they plan to achieve from the program, including building a robust distribution network, and discuss with stakeholders and board members internally to receive support and sponsorship. Once they get approval from the board, they can plan ahead.
Determine the budget To run a successful loyalty program, FMCG companies need to decide on the program’s budget. Companies need to factor in all the expenditures to ensure that it doesn’t impact their revenue. The expenses would involve:
- the rewards,
- the technology and infrastructure required to establish the program,
- the administrative costs,
- vendor costs,
- other costs to make the program successful. Choose the rewards. There are various ways to reward a distributor. FMCG companies can offer rebates to improve the distributors’ profit margins or short-term incentives such as special merchandise or all-expense travel trips or offer remittance or interim redemptions. Decide what reward would work best for the distributors and if the existing technology and budget can support the program.
Implement the program Decide how the program should be implemented and how distributors can access it to redeem their rewards. To streamline the process, FMCG companies can consider using omnichannel platforms that can be accessed via mobile apps and websites. Regular communication encourages distributors to participate more and improve sales.
Measure the outcome and decide the next step Decide the KPIs that will be measured during the loyalty program. This could be sales growth, average order frequency, increase in ROI, etc. Decide a benchmark for these KPIs and regularly measure the distributors’ performance. The program will be deemed successful if distributors promote the products over those of competitors and meet the benchmark consistently. Based on the outcome, the company can decide whether to continue with the program, discard it, or reinvent it to make it more attractive for distributors.
Conclusion
Distributors are the fulcrum of a profitable FMCG company. They are responsible for taking the company’s products to the customers at every nook and corner of the country. Hence, it’s important to engage with them and reward them for their efforts. Loyalty programs are the best way to build loyalty and gain a brownie point over competitors.
To build a seamless and robust loyalty program for distributors and strengthen your distribution network, contact us at Qodenext.
What Are Distributor Loyalty Programs?
Customer loyalty programs are not an alien concept for FMCG companies. However, FMCG companies also need to keep the distributors happy to build customer loyalty.
Research shows that distributors are 77% more likely to choose your brand over competitors and provide more customer data to improve channel sales if they are rewarded. Also, since the distributors are responsible for selling the products to the customers, a loyalty program will nudge them to sell their products over others.
In a nutshell, loyalty programs will help improve distribution, enhance brand recognition, and help build a relationship with distributors and eventually customers.
How Can Loyalty Program Help to Strengthen Distribution Network?
Improve value proposition
Companies can no longer rely on convenience and pricing as their value proposition. There is competition from offshore suppliers and eCommerce sites. Companies need to think of alternate ways to demonstrate their value proposition. One way is to empower the distributors to create memorable brand experiences to retain customers. Companies can consider building loyalty programs to encourage distributors to go the extra mile. The opportunity to earn a reward will urge the distributors to create impactful and personalised interactions with customers and retain them.
Gather channel data
Channel data is important as it helps companies announce their sales and marketing efforts and supports distributors to sell products more effectively. But given the dynamic nature of data, it’s difficult for companies to gain actionable insights from it. Digital loyalty platforms provide distributors with tools to submit sales claims, attach documents and warranties, and register referrals. Companies can use these tools to monitor partner engagement and identify ways to help them sell more products. This data can also be integrated with the company’s CRM and ERP to gain more actionable insights on improving marketing and sales.
Improve communication within the channels
FMCG companies need to communicate with distributors regularly to update them and keep them invested in the brand. Omnichannel loyalty platforms such as websites and mobile apps help communicate with the distributor networks. Apart from rewarding the distributors, companies can use these platforms to exchange data, update the distributors about new products, conduct surveys and identify areas of improvement. These tools help bring transparency in distribution channels and keep distributors engaged and updated about new developments.
Forge shared partnership
To create a memorable brand interaction, the company and the distributors need to have a shared vision. Loyalty programs help to do that. Distributors become naturally aligned with the company’s goals when they are incentivised for their efforts. They understand that the company’s win will eventually translate into their win and thus make efforts to grow the business.
How to Build a Loyalty Program?
Typically, companies follow the below process to establish loyalty programs for distributors.
Determine the feasibility of the program and its objective
There’s no such thing as an ideal time to launch the loyalty program for distributors. However, companies need to determine the program’s scope and if it would help them realise their goals. They need to define the objectives, i.e., what they plan to achieve from the program and discuss with stakeholders and board members internally to receive support and sponsorship. Once they get approval from the board, they can plan ahead.
Determine the budget
To run a successful loyalty program, companies need to decide on the program’s budget. Companies need to factor in all the expenditures to ensure that it doesn’t impact their revenue. The expenses would involve:
- the rewards,
- the technology and infrastructure required to establish the program,
- the administrative costs,
- vendor costs,
- other costs to make the program successful.
Choose the rewards
There are various ways to reward a distributor. Companies can offer rebates to improve the distributors’ profit margins or short-term incentives such as special merchandise or all-expense travel trips or offer remittance or interim redemptions. Decide what reward would work best for the distributors and if the existing technology and budget can support the program.
Implement the program
Decide how the program should be implemented and how distributors can access it to redeem their rewards. To streamline the process, companies can consider using omnichannel platforms that can be accessed via mobile apps and websites. Regular communication encourages distributors to participate more and improve sales.
Measure the outcome and decide the next step
Decide the KPIs that will be measured during the loyalty program. This could be sales growth, average order frequency, increase in ROI, etc. Decide a benchmark for these KPIs and regularly measure the distributors’ performance. The program will be deemed successful if distributors promote the products over those of competitors and meet the benchmark consistently. Based on the outcome, the company can decide whether to continue with the program, discard it, or reinvent it to make it more attractive for distributors.
Conclusion
Distributors are the fulcrum of a profitable FMCG company. They are responsible for taking the company’s products to the customers at every nook and corner of the country. Hence, it’s important to engage with them and reward them for their efforts. Loyalty programs are the best way to build loyalty and gain a brownie point over competitors.
To build a seamless and robust loyalty program for distributors, contact us.
