PITFALL #2

Believing Incentives
Cut Margins

Please select a topic:

 

You must choose
an objective
and make
a plan on
how to
accomplish it…

 

If one of your customers told you that he’d give you $1,000 more business this month than he gave you last month in exchange for a $40 item, would you do it? What if 100 of your customers said the same thing? Would you accept the $100,000 in extra business for $4,000 in incentives or would you say that 4% is to much to give back to
the customer?

There are many reasons to offer incentives and only one not to. Most distributors have the capacity to easily handle more business at little extra cost. Utilities remain the same, you’re already sending a truck their way and have them on the phone. When you increase the dollar amount of the sale, the cost per transaction goes down!

Our clients who extensively track their promotions tell us that margins on customers who earn gifts are higher than on customers who don’t! Also, would you rather have 15% of $100,000 or 0% of nothing? The only reason not to offer an incentive is if you have more business than you can handle.

After a profitable promotion, don’t believe that you would have received the extra business without it. Don’t think that for the first time in 50 years a January was better than a December, or you sold more of a certain product than you sold before because the business “just happened to be there”. Don’t believe that it was only a coincidence that business was up, you ran a promotion and achieved your goal.

Wholesalers who believe this think that the incentive promotion was a liability and reduced their margins. This type of distributor generally cancels future promotions or makes the next incentive so unattainable that it fails. More than likely they will never again see that type of spike in sales. Successful wholesalers see that the promotion created the success and look for new and better promotions. More sales spikes are on the horizon for them!

Incentives when done correctly will increase sales. When sales are written correctly they will increase profits.

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BY DISTRIBUTOR MARKETING MANAGEMENT, INC.
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