7 Best Practices for Building a Contractor Loyalty Program Based on Findings from More Than 1,000 Contractors
May 02, 2024
Professional contractors spend nearly half their revenue on building materials and tools. That greatly influences how they think about their options and make selections when shopping for materials, equipment, and products.
As a building materials manufacturer and supplier, it’s no secret that fostering long-term loyalty is an important part of improving your bottom line. One popular way of doing so is by offering a contractor loyalty program that rewards members for shopping your brand or at your store.
Professionals in the home improvement industry can be a difficult customer base to cater to, compared to other retail customer groups. For building materials manufacturers, in particular, it can be challenging to communicate with them, and they tend to stick to what they know and what they are used to.
In order to make your contractor loyalty program more appealing to industry professionals, it’s important to understand what factors most heavily affect their purchasing decisions and what incentives are most likely to motivate them to try a new brand or supplier — and stick with them.
What is the Current Attitude Among Pros Toward Loyalty Programs?
The response to covid definitely altered the home improvement landscape for a few years, as manufacturers, retailers and contractors dealt with a myriad of challenges, from supply chain issues to labor shortages and delayed shipping.
Brand loyalty fell during the pandemic, with professionals more willing to look beyond their preferred brand to get the supplies and materials they needed to cope with those challenges, according to our HIRI research on Contractor Brand and Supplier Loyalty from the fourth quarter of 2023.
Supplier loyalty was not as affected as brand loyalty was, as contractors tend to favor convenience, proximity, and other similar factors when choosing where to buy building materials and supplies.
Now, post-covid, Pros’ brand loyalty has rebounded to the same levels as before, except for among landscapers. As a group, their loyalty has increased dramatically. They also are more loyal to their suppliers than other sectors within the home improvement industry.
Are Contractor Loyalty Programs Effective?
For better or worse, loyalty and rewards programs are not a very significant factor when it comes to where contractors shop or the brands they choose.
According to our 2023 Contractor Topic Study about the purchase behaviors of both generalist and specialist pros, product quality and cost are the top reasons for both brand and supplier loyalty, with product availability also showing up high on the list. Meanwhile, loyalty programs and rewards were a reason for brand loyalty for only 9% of contractors and a reason for supplier loyalty for only 10% of contractors.
When it comes to trying a new brand or supplier, the top reason is reliability. In general, professional contractors are concerned about switching brands, and more than half would find a different supplier before switching brands.
Among existing customers, product availability is a reason for brand loyalty among only 1 in 4 Pros, while product availability as a reason for supplier loyalty matters for half of Pros, in line with the importance of cost for supplier loyalty.
How to Develop a Strong Loyalty and Rewards Program
Although only one in 10 pros list loyalty programs and rewards in their top three reasons for brand and supplier loyalty, it could be a matter of packaging and positioning the loyalty programs ineffectively to actually serve Pros’ best interests. Many suppliers and brands continue to offer them, and some are doing it particularly well as they iterate upon their contractor loyalty program structure and perks.
The key is having a loyalty program that stands out, one that offers real value to contractors in an easy to understand way, and takes into account what type of rewards are most important to them — along with what other factors impact their purchase behaviors.
Here are a few best practices for building a new contractor loyalty program or improving the one you’ve currently implemented:
1. Know Your Audience and Tailor Your Program Appropriately
The type of loyalty program preferred by professionals varies by trade. That’s why it’s important to consider what type of professionals you primarily cater to, as well as their preferences and pain points.
For example, HIRI found through our market research that remodelers and finishers are more likely to prefer a tiered program — which starts off with a few benefits and grows with spending — while exterior tradespeople prefer average rewards, which are offered once a certain threshold is reached. Tiered loyalty programs tend to have more immediate benefits, which is why they are preferred, on average, among all home improvement pros.
All of the options surrounding cold, hard cash were ranked highest when we asked what incentives would encourage pros to stay loyal to a contractor loyalty program. The least preferred options among Pros include opportunities for winning raffles, receiving event sponsorships, getting additional training and support.
2. Offer Real Discounts as Promos and Rewards
Price is a huge factor when it comes to selecting both brands and suppliers. Pros are slightly more likely to switch suppliers than brands in order to lower their costs. With that in mind, whether you’re a manufacturer or a supplier, you want your program to offer worthwhile financial incentives — enough that it can play into the desire of professionals to find a good price. According to findings in our Contractor Brand and Supplier Loyalty Study, the minimum discount needed to try a new brand or supplier is about 30%, on average, for all contracting companies. For large firms making $2 million-plus in revenue, however, the minimum discount drops to roughly 25%.
3. Large Firms are More Likely to Participate in Programs
That brings us to the next point: The larger the firm, the more likely they are to participate in loyalty and rewards programs.
According to the same study, firms in the $1M to $2M range are the most satisfied with the value gained from these programs. Meanwhile, less than one-half of firms making less than $500,000 annually are currently participating in loyalty programs, and of those professionals, only 25% would describe themselves as “extremely satisfied” with their contractor loyalty program.
This could mean one of two things for building materials manufacturers and suppliers: Either you focus your attention on large firms who are most likely to participate in a program, or you seize the opportunity to connect with smaller firms by conducting custom market research and identifying what incentives you could offer to make them satisfied with your program.
4. Incorporate Everyday Discounts to Encourage Retention
Research shows that the top incentive to stick with a contractor loyalty program is gaining access to everyday discounts on materials and supplies used on a regular basis. That could be a certain percentage of saving each time they shop (like starting with 5% and building up over time), offering free shipping, or giving out bulk discounts and volume discount pricing.
Based on our analysis, the important thing is for contractors to receive those benefits at the time of purchase. Additionally, about 43% of contractors identify cash rebates as a top incentive to remain with a contractor loyalty program, and one-third of home improvement pros desire reward points, similar to a credit card rewards program.
5. Pay Special Attention to Your Rewards Members
Quality customer service and nurturing relationships are already important parts of cultivating loyalty among contractors and tradespeople. These factors tend to be more important to pros when they’re choosing suppliers as opposed to brands. But, in general, contractors do still make purchase decisions based on customer service-related factors.
About 80% list knowledge of the industry as a top channel driver that influences where they shop for supplies and materials, according to our 2023 Contractor Channel Study. According to our results, the personal experience accounts for a third of the top ten drivers of where Pros shop for their materials.
Make sure you train your employees to give your rewards members extra care and devotion, providing suggestions for alternative materials if what they want is out of stock; doing special orders; sharing tips to help contracting companies with marketing; and, in general, being a friendly face and reliable source of information for them. This can bolster the results of your program.
6. Use Successful Suppliers and Brands as an Example for Your Program
Lastly, it doesn’t hurt to consider what other manufacturing brands or suppliers are doing, especially if they’re doing it successfully. For example, Home Depot, Lowe’s, Menards, and Ace Hardware are the retailers whose loyalty programs exceed the expectations of pros, with Home Depot being the top rated supplier.
Home Depot recently rolled out a simple to understand 10% discount for Pros based just on spending qualifications.
And with Lowe’s Pro program, cardholders get a 5% discount; they also can earn back e‑giftcards based on the amount they spend, and they have access to exclusive offers.
If you’re struggling for ideas, you can scope out the big players and what they’re doing in their loyalty programs. Just remember that your audience may be more specific, and it’s imperative that you make an effort to understand your specific customer base in order to modify your rewards and incentives to address their unique needs, pain points, and preferences.
Keeping a Pulse on Contractor Attitudes, Behaviors, and Purchase Drivers
To help you stay up to date with the home improvement industry and general trends among professional contractors, become a member of the Home Improvement Research Institute (HIRI). When your company joins, you and your whole team will gain unlimited access to $1 million worth of research and insights about changes in the home improvement market, channel, and DIY vs. Pro customer.
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