In the fourth blog on effective Distributor Management, Mark Hollyoake looks at the role of Motivation & Reward planning. Even when organisations enjoy excellent relationship with a distributor, they may be one among many customers in the distributor’s portfolio, competing at customer level with other brands for sales. So, how in these circumstances do organisations get the share of hearts and minds their portfolio deserves?
The first thing many organisations do is throw money at the distributor’s sales force through incentives, bonuses etc, which usually proves an expensive, and and short-term solution.
Motivation & Reward falls into two categories:
- Financial: these are the elements of motivation and reward that result in additional value, uplift either through enhanced profit, discounts and incentives.
- Non-Financial: this includes value enhancing elements – e.g, knowledge, skills, prestige.
There are two ways organisations can influence distributors:
- Organisationally: through providing expertise; it could be category insight, competency development, product or staff development.
- Socially: Provides stability, strong platform to negotiate, shares organisational strategy, engenders a sense of team, ‘belonging’, shares good practice.
When looking to motivate others there are elements that fall into ‘inducement’ – there is a positive upside through the application of the trigger, and a downside or negative outcome when applying the trigger:
- Coercive: Threatening to withdraw from the relationship if the distributor fails to meet agreed performance targets. Beware: this can lead to resentment if overused.
- Reward: additional benefits are offered for the performance of specific accost or functions. This has a much better effect than coercive motivation, however shouldn’t really reward something the distributor is already doing for the margin extracted.
- Legitimate: When referring back to the contractual obligations the distributor has signed up to and agreed with.e.g, stock levels.
- Expert: This is where expert knowledge is offered that the distributor values. However, be sure to drip feed it into the organisation as once transferred it loses its value.
- Referent: Where the distributor gains reflected prestige from handling our brands / products. Allow or sanction the distributor to lever this prestige with other brand owners.
To plan a successful Motivation & Reward Strategy, organisations need to understand which levers they should apply, what changes they are seeking, and be aware of the potential impacts, both positive and negative.
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