7 Best Practices for Building a Contractor Loyalty Program Based on Findings from More Than 1000 Contractors

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.

Retailers Considered

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.

Top Reasons to Try a New Brand or Supplier

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%.

Minimum Discount Need to Try a New Brand or Supplier

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.

If Currently or Previously in a Contractor Loyalty 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.

Top 10 Channel Drivers

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.

Become a Member

Stay Informed

Sign up for the HIRI newslet­ter to stay informed about the research we’re con­duct­ing, home improve­ment indus­try trends, and infor­ma­tion on our upcom­ing Home Improve­ment Insights Summit.