It’s time to start planning promotional ideas to make sure next year’s sales look better than this year’s.

by Richard Vurva

Face it. If you’re like most distributors, business this year pretty much sucked. 

There are certainly more elegant ways of phrasing it, but none more accurately captures the feeling that distributors have when they’re struggling through bad economic times. The question is, how long will the current downturn last, and can distributors do anything to make sure they recover quickly from a bad year? 

You can’t do anything to change interest rates, employment statistics, global economic pressures and the condition of the manufacturing economy as a whole. But you can begin developing marketing and promotional plans to help position you for better days ahead.

Marketers have a variety of tools at their disposal to promote sales activity, including coupons, product samples, premiums, rebates, contests, sweepstakes and various point-of-purchase materials. Sales promotions aimed at the end-user encourage consumers to make an immediate purchase and can stimulate short-term sales. For example, samples, coupons, price reductions or premium offers can convince a consumer to try a new brand or maintain loyalty to an existing brand. Contests and sweepstakes, on the other hand, create excitement about a company’s products or services.

Sales promotions also provide marketers with a way to respond to price-sensitive buyers who prefer to use coupons or purchase products at a discount.

Some companies worry about becoming too reliant on sales promotions and short-term marketing planning and performance. Critics of sales promotions argue that the sales gains they produce are temporary. Research shows, however, that sales promotions focused on end-users/ consumers have success rates above 80 percent. 

Done properly, sales promotions can generate enough incremental sales to justify the expense of developing and implementing a promotional budget. Done in conjunction with a manufacturer, you may even be able to share the cost of setting up the program.

The types of promotions are as varied and creative as your imagination allows. Promotional plans that have worked for distributors in the past include:

• Award points for every case of lubricant (or similar packaged product) sold, good toward cash or merchandise awards.

• Offer a discount on the next purchase of a particular brand.

• Accumulate points toward free training or service offering.

• When a customer buys a predetermined amount of a manufacturer’s product, they earn apparel with the manufacturer’s (or distributor’s) logo.

• Offer a premium item with the purchase of another item.

Some promotions are product-focused. An example would be a premium offering. Premiums are items, other than the product itself, that you can give as an additional incentive to encourage the purchase of the original product. Say, for example, you include a spare battery or choice of accessory with the purchase of a cordless power tool.

What makes them effective? Premiums complement or enhance the product and drive incremental sales because they increase brand consumption.

Other promotions are designed to increase brand awareness. A direct-mail campaign that introduces your services to prospects is an example of a brand-building promotional effort. So is sponsorship of a local trade show or holding your own customer appreciation event. Although they may not have an immediate impact on sales, brand-building promotions are effective at enhancing your company’s image among a targeted customer base.

Promotional rules of thumb
While the goal of a promotional campaign is to boost incremental sales, there are costs to putting together a successful program. For example, you’ll need to spend money on awards, communications and administrative activities.

Generally speaking, companies should spend from 5 to 10 percent of the incremental sales they receive (the profits the incentive program generates) on an incentive program, according to Incentive magazine. How should companies budget their program costs? Plan to spend between 70 and 75 percent of the cost on awards, 20 percent on promotion and communications, and 5 to 15 percent toward administrative activities (setting up a budget, enlisting vendor support, signing up customers, tracking results, etc.)

Communication is the key to running a successful promotion. Make sure everyone within your organization, including salespeople, customer service reps, operations employees and the warehouse crew, is aware of the promotion. There’s nothing worse than receiving a blank stare when a customer asks someone on your staff details about a sales promotion they heard about through the mail.

Cathy Veri of Marketecture, a marketing consulting company in Detroit, says distributors can get the biggest bang for their buck — especially with new product promotions — by using multiple approaches. She says distributors should include telemarketing, direct mail, field sales and their Web sites to promote new products.

“Doing it on the phone alone or through direct mail only just doesn’t seem to give a new product the liftoff it needs,” she says.

It may not be enough to offer an incentive to the new customer. Veri says distributors should offer incentives to inside salespeople to promote the product over the phone and to field salespeople. Without an incentive, the new product will get lost.

David Gordon, president of CMAGroup, a Raleigh, N.C.-based marketing consulting firm specializing in marketing strategies for distributors and manufacturers, says distributors should focus their promotions on a single segment of their business at a time, especially if they are small- to mid-sized. This ensures focus and is easier for sales forces to support. He also says to make sure manufacturer and distributor goals are aligned. To obtain manufacturer support, distributors typically have to get manufacturer management involved, because most manufacturer sales forces are weak in marketing promotions support.

Aligning manufacturers in your promotional planning effort increases your odds of getting them to help fund the program, either through co-op dollars or market development funds. Sometimes, if the distributor and manufacturer jointly develop a plan to increase sales in a particular customer segment, or even into a specific plant, manufacturers will have discretionary budget dollars at their disposal to help fund the effort.

“Typically, a distributor will get more funds from a manufacturer that way than through traditional co-op arrangements,” he says.

Get creative
Promotions don’t have to be complex to work. In fact, simple can be better. For example, one electrical distributor ran a successful counter sales promotion in which customers received a wooden nickel every time they picked up an order. The nickel carried a dollar value that varied, depending upon which manufacturer’s product the distributor was promoting. After accumulating enough wooden nickels, the customer could redeem them for power tools.

The program worked for several reasons. First, it reinforces the idea that the distributor sells products the customer may not realize they sell. Second, it rewards the customer who picks up orders, saving shipping time and costs for the distributor. Plus, customers who come in to pick something up at the counter rarely walk away without picking up something else too.

Some companies have policies prohibiting employees from accepting awards.

“For that reason, the distributor should get the highest level approval within a company before they ask that company’s employees to participate,” Gordon says.

They could also tailor the awards to fit the situation. For example, an award might offer a discount on the company’s next purchase, or a certificate offering free product or safety training.

Many distributors have had success developing scratch-off card programs. Prizes could include discounts on future purchases or merchandise awards, such as clothing. Scratch-off promotions work as counter promotions, but can also be effective to take to a jobsite, or to urge people to give you a chance to quote on a project.

It’s smart to test a promotion within one city or one customer segment before rolling it out, says Veri. See how it fares, then tweak it before you launch the full program (and scrap what didn’t work).

“You can better your chances of success and catch mistakes without wasting money,” she says.

Planned properly, promotions can reap big rewards. One campaign Gordon developed for a distributor involved a series of monthly mailings. It targeted customers that spent less than $2,500 a month. Each mailing focused on a different value-added service the distributor offered, and included a coupon that customers could redeem for the service being profiled.

“We ran the program for one year,” Gordon says. “Our cost was $30,000 to reach an audience of 1,500 contractors. At the end of the program, we generated $1 million in incremental business.”

This article originally appeared in the September/October 2001 issue of Progressive Distributor. Copyright 2001.

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