Recently, I caught up with a mentor of mine, Jim Micklos from Fusion Marketing, over dinner. As I arrived at the restaurant, he asked me what kind of beer I’d like. I gave my standard reply: “Free and cold.”

Incidentally, that use of the word “free” sparked a great conversation about the state of B2B distributor reward programs. We wrote down tips on how to use a reward program effectively to incent customers and sales teams with the goal of growing a business.

Reward programs have been around in B2B distribution for years, and they are everywhere in the consumer world. From ordering pizza to mobile phone service, all types of companies have reward programs that drive purchase behavior.

I’ve been fortunate to be part of some great distributor reward programs over the years — and some that didn’t deliver the return we thought they would.

Here are three key reward program tips to be successful:

1. Focus on free. Free delivers results. Programs that deliver the best returns give the customer and sales teams something free for achieving the objective. As a general rule, non-cash awards are much more effective than cash awards. When a customer or sales person achieves their goals and earns a great trip or a super cool sound system, it gives them a feeling of satisfaction and strengthens their bond with the distributor. Cash awards, on the other hand, are often used to pay the bills and obligations, and, although that’s appreciated, it’s a feeling that is quickly forgotten.

2. Build a program that grows business. If a reward program isn’t about growth it probably shouldn’t exist. Design a program around one or more of these key objectives:

• Top-line sales growth. The best programs incent customers and sales teams to buy and sell more than they do today. If either knows they don’t have to grow their business to make it, the program becomes more of a baseline expectation versus a reward that grows the business.
• Improving margins. This is tricky with customers, and often has to be presented as a product sell. For example, “Buy more of these (higher-margin) products and get extra points.” It’s easier to accomplish with a sales team, because they know what higher margin products they can sell to make their numbers.
• New product introductions. Incenting customers and sales teams to buy and sell new products improves margins and helps the business. Supplier partners will be very interested in helping companies to sell new products.
• New accounts. Ensure programs don’t give new customers a free car while providing the Jelly of the Month Club reward for existing customers. Existing customers won’t appreciate it. They will move business to someone who does value them.
• Driving new services. Do this by giving extra points for online orders or managed inventory sales, for example.

Please note, programs can be designed to achieve more than one of these objectives. The best programs chose two or three of them. It helps to make the rules easy to digest, and it is easier to focus effectively on a few rather than many objectives.

3. Find the right push-pull balance. The best programs ensure there are no weaknesses in the channel. They offer rewards that get customers excited about buying more of the right kind of products. That’s the pull. The push is achieved by getting sales teams equally excited about selling those same products to their customers. If either side of the push or pull equation isn’t motivated by the program, it won’t deliver the anticipated returns.

Thoroughly research the market before kicking off a reward program. Just remember, leaving sales teams, leadership and customers out of the conversation about programs they are involved in will make it tough to design a program that delivers maximum results.

In many cases, working with an outside firm that specializes in these programs is critical to success. There are a lot of experienced reward program specialists, including Micklos, who can help to build a successful program.

As always, I’m interested in your feedback. Post a comment below or reach me at john@mdm.com.