When I was a kid my mom would motivate me by giving me an incentive when I did a good job. Of course I worked harder to get the goodies. In her own way, mom was a psychologist; she understood motivation. Incentives work for both employees and customers. Incentives should be viewed as added value for your business or a form of customer service. Any business has both internal and external customers;those that deliver the products and services and those that buy them.
There are many ways to incentivize adults so I decided to give expert, Jason McCallum, Director of Business Development for United Incentives in Philadelphia, P.A. a call and discuss the idea of incentives with him. One of the big questions is, what works the best and where should a business spend their money?
How did you get in the “promotions business?”
I got into this business because of my overall interest in influencing human behavior through marketing. When I was in the film industry I was responsible for managing marketing campaigns for film launches. I took the same strategies and moved to United Incentives, which has a great reputation in the incentive and loyalty industry. I felt it would be a great place to use my previous experience to create strategic marketing programs for brands and corporations.
Many business use some type of incentives but the question always arises, cash or gifts? What’s your take on it?
Many times cash alone isn’t enough to motivate people. Cash can be easily lumped into expected compensation and sustains little if any association with achievements. Non-cash rewards have lasting trophy value and linkage towards achievement, they can motivate specific behavior, establish a unique competitive advantage and increase ROI and profitability. Besides cash has no shelf life; it comes and goes.
Funny you should say that; even people who win the lottery talk about what the money will buy not how much they won. Everyone likes getting gifts.
For companies there’s a difference in the cost of cash and merchandise. For every dollar of cash, the income tax liability for a company is higher. For merchandise the income tax liability is only for the”net tangible value” (NTV) of the merchandise. If an item is valued at $100.00 the actual tax liability is on the NTV, which is around $80.00. The NTV is the value of the redemption less fulfillment, handling and shipping costs. In most incentive programs this runs about 20%.
Points in a merchandise program offer instant gratification. Cash or checks easily lose their gratification value.
If you have an online points program or a group travel program, they become constant motivators. People can continue to peruse the online merchandise catalog and dream about what they will be getting or how they can earn a trip for a vacation experience.This is something they would not readily experience on their own. Think about all the online programs such as those with American Express and Diners Club; people save their frequent flyer miles and rarely turn them in for cash; they turn them in for what the points can purchase.
There seems to be alot of scientific data out there about merchandise incentive awards vs cash.
Recent studies of three major incentive programs, where homogeneous groups were offered either cash vs. merchandise related awards were analyzed; merchandise groups averaged outperforming their cash group counterparts by 70-80%. This study by Ralph Head Associates involved 6500 likely incentive users. Basically a corporation can obtain as much motivation and improved performance from $600.00 in merchandise incentive awards, as they can from $1000.00 cash. Here’s a link to a white paper done by the Incentive Research Foundation, which talks more about the benefits of tangible non-monetary incentives.
How important is it to incentivize your employees or your customers?
Recognition of achievement is more important then the value of the reward. They don’t need to be very expensive, in our online programs we have thousands of reward options that are under $50.00. It’s good to have rewards for everyone. If your want better than average employees you have to reward them for what they accomplish. Typically people achieve more if they are rewarded for what they produce.
Jason, now we’re talking about incentives for our internal customers (employees) as well as external customers.
A company’s sales force and customer service reps are the ones who are interacting with their customers on a daily basis. Motivating these individuals allow companies to get closer to their customers and increases customer retention. We have robust sales incentive and group travel programs for employees.
Does the size of the company matter?
You don’t have to be big to have incentive programs. Incentive programs are a great marketing tool because you’re not paying the majority of the program until the desired behavior is achieved. For example if you want to increase YOY sales by 15% you wouldn’t pay out a reward until your audience hits that benchmark. The rewards would only be a percentage of the incremental increase in sales so the program itself can be self-funding. Incentive programs should be viewed as an investment and if structured properly the ROI is very high. We have great weekend getaway and group travel reward options, travel is one of the best motivators and has the highest trophy value.
This seems complicated, is this something your customers have to figure out on their own?
We have off-the-shelf programs but some of our best programs are custom designed for our clients based on their needs. It is important to structure your program properly and we have the experience and knowledge base from thousands of executed programs to make sure your program performs well in the marketplace. First we ask what the company wants to achieve and then we look at the ways that it might be accomplished. There are many factors involved and the factors are different for each company. We look at our customers as partners; it’s important to discuss, strategize and develop programs with our clients prior to launch and fulfillment so we can structure the most effective program based on their goals.
For more information on this program check out this link: http://www.unitedincentives.com/customer-loyalty/?utm_campaign=Lisbeth-Calandrino-Blog&utm_source=Blog
Lisbeth Calandrino is an award winning author, trainer and blogger. She is author of the book, Red Hot Customer Service, 35 ways to heat up your business and ignite your sales. Lisbeth can provide customer service and sales training using the principles of her book at your place of business or through video conferences.