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For consumer durable goods manufacturers, market research and common sense says professionals are a highly-coveted group of end users since they generally use equipment heavily and therefore must repair or replace their equipment frequently. To build customer loyalty from professionals, many OEMs (original equipment manufacturers) implement fleet discount programs, a.k.a. fleet incentive programs or fleet loyalty programs.

 

There are different types of fleet discount programs, but the general idea behind each one is that the OEM will grant professionals discounts when they buy pieces of equipment in bulk (they are given discounts when building their ‘fleet,’ hence fleet discount program). Sometimes OEMs require professionals to meet certain requirements before they will grant them special discounts, other times a fleet discount program will be given out on a completely pro-to-pro basis. Product registrations, warranty registrations, invoice sheets, and serial numbers play an important role in this pricing strategy as they provide a reliable means of keeping track of which pros deserve the discount.

 

 

Specifically charging pros less money might seem illogical and hard to rationalize for an OEM at first since, as previously mentioned, pros generally make up a valuable part of their end user base and factors such as dealer markup make pricing changes difficult to implement. However, fleet discount programs can and do become well worth it for OEM’s over time - when they lead to them attracting and/or retaining more professionals as a direct result. From an account-based marketing point-of-view, you save money doing this by attracting a smaller number of end users who will each be worth more in the long run, as professional vs homeowner end users are more likely to make repeat purchases.

 

 

Since numbers don’t lie, let’s take a look at an example:

 

A lawn mower manufacturer gets a dozen bulk orders of twenty lawn mowers from pros, every single year. Their lawn mowers sell for $300. From these orders alone, the manufacturer sees $72,000 of revenue a year. Say they decide at some point to implement a fleet discount program, which will grant pros a 15% discount on bulk orders of twenty units. Also, say doing so will attract an additional pro to the manufacturer’s brand every year, starting after the first year, who will from then on make bulk orders of twenty units once a year.

 

 

After implementing their fleet discount program, the manufacturer would see $10,800 less in revenue during the first year, but by the seventh year they would see $11,700 more. After ten years they would see $121,500 more in revenue, from bulk orders of twenty units from pros, than if they were to have not offered pros the fleet discount at all.

 

Obviously, for this strategy to have a positive impact for them, an OEM would have to spend less money on lead generation and advertising for their loyalty program than the amount they receive from implementing it. But you can see from this example how taking short-term losses to build brand loyalty can turn into long-term gains. This example does not take into account the positives it will bring the dealers, i.e. potential increases in power equipment servicing and power equipment parts sales, which will strengthen the manufacturer’s B2B selling relationships. Also, building customer loyalty increases the accuracy with which you can forecast revenue streams.

 

Fleet discount programs are a tactic that OEM’s use to incentivize professionals, who are some of their more valuable end users, to become even more valuable ones. Competition for professional end users in the consumer durable goods space is tough, since professional end users are likely to need to buy products again, and OEM’s who do not offer them fleet discount programs might lose market share to OEM’s who do. In short, OEM’s should sometimes consider charging pros less to sell them more.