A new generation of rewards programs from vendors and distributors are chucking the model of product discounts, co-marketing dollars and free or reduced-price training. Instead, they are enticing their solution providers with vacations, free merchandise and cold hard cash.
A slew of programs recently introduced are offering incentives that have nothing to do with business and instead mirror many credit card rewards programs. The idea is simple: Give the people what they want, not what they may need.
“The people [to whom these programs are targeted] pay attention to programs like these in their personal life,” said Kip Cassino, vice president of research at Borrell Associates, an advertising market research firm in Williamsburg, Va. “They are based on a model everyone already knows.”
Buffalo Technology’s RED Rewards program, for example, pays its participating resellers rewards dollars via a Visa debit card. Money is added to the account whenever the partner sells an eligible Buffalo Technology product.
Such a program gives the partners the freedom to use the money for whatever they want, even for something as mundane as buying groceries or filling the gas tank.
D-Link’s Rewards Program uses a debit card model, in which money is added to a reseller’s debit card each time a qualifying D-Link networking product is sold. The cash value ranges from $20 to $100, depending on the product, according to the company.
And through Cisco’s Partner Rewards Program, partners can earn points for qualified sales of Cisco products and redeem them for a variety of offerings including electronics, sports gear, food and dining packages, wines and spirits, vacations, event tickets or Cisco products. Partners also have a Visa debit card option.
Distributors are getting in on the act.
D&H Distribution has its Incentives Reward Program, which offers rewards based on a percentage of purchases of designated merchandise from myriad D&H vendors. Resellers earn 1 point for every $10 of qualified purchases, and points can be redeemed for merchandise from companies including L.L. Bean, Bass Pro Shops, DeWalt, General Electric, NFL, Northwest Airlines, NASCAR, David Yurman, Bloomingdales and Fisher-Price. The rewards also can be paid into a Visa gift card.
Because these programs mirror many of the rewards programs offered by credit card companies, airlines and retailers hoping to catch the eye—and wallet—of the average consumer, Cassino believes vendors are looking to reap their own rewards in the form of increased sales.
The question is, do such programs really work?
“Absolutely they work,” Cassino said. “These are wonderful programs because they tie the resellers to a product or service for another sales cycle,” as they accrue points or money for each qualified purchase.
Plus, he added, they’re a lot better than a logo shirt.
Cassino also pointed out that rewards programs in general are only as effective as whomever is managing them. A poorly run program will end up costing the vendor or distributor money.
“If it’s not watched and managed properly, a rewards program can actually extend the payables with no penalty,” he said. “Participants could argue with the company about how many points they should have gotten vs. how many they actually received. And until the argument is settled, the invoice doesn’t get paid. By arguing, it allows the invoice to float for another month or two while they figure it out. During that time, the distributor (or vendor) has already given up the goods and, in effect, it becomes a bank.”
But Cassino believes such programs are worth the risk – the vendor or distributor gains mindshare and the reseller receives a benefit for doing what he or she was going to do anyway.
“For the receivers, [a rewards program] is a program they can feel comfortable with because of experiences in their personal lives,” he said. And, he added, it can set the bar for future vendor programs.
“I wouldn’t be surprised if they become a part of the [solution provider’s] vendor [selection] decision process: Who’s got the best rewards program?” Cassino noted.