An Incentive Program Primer
How To Expand Your Services And Offer More Value To Clients
Incentive programs are one of very few tactics within a business improvement strategy that provide a direct correlation between costs and outcomes.
What is an incentive program?
Incentive programs are systematic internal or external campaigns that require specific actions on the part of a specified audience that produce measurable outcomes achieved through integrated motivational strategies.
The official definition above, provided by the Incentive Marketing Association, sounds more complex than it is. Incentive programs are designed according to proven motivational strategies to reward specific groups for achieving documented, measurable goals.
Some examples of incentive programs are:
• Sales incentives or contests (Achieve your sales objective and win!)
• Loyalty programs (Buy 10 coffees and get the 11th one free)
• Safety programs (Break our accident-free-days record and the team celebrates)
• Sweepstakes (No purchase necessary: enter to win!)
• Gifts-with-purchase (Buy this washing machine and get a free set of towels)
• Training programs (Earn rewards as you pass each level of online education)
• Service awards (Length of service, such as five-year, 10-year anniversaries, etc.)
• Attendance programs (Awards for perfect attendance at work)
• Wellness programs (Achieve set goals in a structured program and earn rewards)
• Frequency programs (Frequent flier miles, hotel stay rewards)
• Corporate gifts (Gifts sent to customers on their birthday, holidays, etc.)
• Performance improvement (Set and achieve specific performance goals such as reducing accounts receivable, customer service measures or manufacturing cycle time)
What’s in it for my customers?
Many studies have proven the effectiveness of incentive programs. One in particular by the Aberdeen Group that looked at best in class sales management practices (defined as organizations in the top 20 percent of their industry) found that:
• Best in class firms are 47 percent more likely to recognize that sales growth is often a team effort, and that
• Non-cash incentives are an ideal way to motivate and reward supporting cast members
• 75 percent rewarded the entire account team for sales, growth and customer service
• Best in class firms are using public recognition 29 percent more often in motivating their sales forces
• 84 percent of sales reps in best in class organizations achieved quota (vs. 55 percent of the industry average and 15 percent at the bottom)
• Top performers are 31 percent more likely to consider non-cash (tangible) incentives as a “must have” in the reward mix
• 59 percent have evolved sales contests from pure metrics to key tools used to drive and monitor behaviors and outcomes
Who’s doing it?
The Incentive Federation reports these findings:
• 74 percent of U.S. businesses use non-cash incentives to motivate employees
• Programs include sales, channel incentives, loyalty, employee and customer gifts
Incentive programs are not limited to the sales organization, as shown in the list of example programs. They are just as effective for non-sales employees and consumers.
How are they doing it?
Many corporate executives who want to take advantage of the benefits that incentive programs provide are often surprised to learn that their marketing team or ad agency is not versed in incentive program design. A distributor can partner with an incentive professional to provide that expertise, or can gain that knowledge by taking the Principles of Results-based Incentive Program Design course offered through the Incentive Marketing Association. Distributors will then be able to guide clients through the 10-step process. Find the IMA curriculum here.
10 Steps To Design An Effective Incentive Program
These steps were developed by the Incentive Marketing Association:
1. Establish Objectives: Identify three to five goals or objectives that are a) measurable, b) attainable and c) simple to understand and communicate.
2. Analyze the Audience: The entire workforce is most likely not the intended audience. Determine which group has the ability to impact the desired change. Will you involve the audience individually or in teams?
3. Fact Finding and Involvement: Be aware that external factors may also impact results. Involving representatives from the participant audience in this phase will help to identify actions necessary to achieve the desired results. This is also the step where you decide which elements you will measure.
4. Rule Structure and Budget: There are a variety of effective structures for incentive programs. Open-ended (where all who qualify can win) have benefits that differ from closed-ended (where only the top performers win), and there are places where each make sense—or you may wish to structure a program that uses a combination of both. The rules must be fair to all participants. Setting the budget requires identifying fixed costs and getting the best estimate possible for the award budget based on program expectations. An incentive professional can help you with this process. The rule of thumb for program spending is: 80 percent rewards, 10 percent promotion, five percent administration and five percent training.
5. Select Rewards: This is another step where it is beneficial to include participant representatives in the planning process. If the employee is not motivated by the rewards you choose, the program is not going to be effective. Likewise, the reward must be commensurate with what you’re asking of the audience (i.e. working overtime on a project for six months to earn a $10 gift card is probably not going to work). Like any promotional product, an effective incentive:
i. Is appropriate for the goal (it’s “worth it” to the participant)
ii. Reinforces the brand values of your organization
iii. Offers “trophy value”: something they’ll remember
iv. Creates excitement among participants
6. Communicate the Program: Decide how you will announce and launch the program. Will you use social media, email or other internal announcement? Is training necessary? How, and how often, will you communicate throughout the program? How will you announce results and reward achievers?
7. Operate and Track Results: Results measure and track outcomes; process measures and tracks actions that lead to the results. Based on your rule structure, choose two or three outcomes or process measures that will allow you to gauge the success of your program.
8. Fulfill Rewards: The more immediate, the better. A formal presentation with peers can be as meaningful as the reward itself. Make the redemption process as easy as possible for the recipient: what information is required? Will the recipient receive order confirmations and shipping notices? How will you handle customer service?
9. Evaluate and Measure: Include quantitative (that which can be counted) and qualitative (opinion or perception) measures—both can be valuable in evaluating program success. Document outside factors that contributed to the outcome, as well as any unintended consequences of the program. Calculate return on investment based on your budgeting process, weighing fixed and variable costs against the performance improvement or other gains achieved as a result of the program.
10. Celebrate Success! Celebrate publicly: often the recognition is as important as the reward. Publicize internally and in appropriate external channels. Will you plan a banquet or awards dinner? Do you have support from the highest level? Will your top executive be on hand to recognize achievers?
Who can help?
When your customer is ready to discuss incentive programs, there are several types of professionals whom you can call upon for more information. Performance improvement companies and other incentive firms provide turn-key programs and reward vehicles. Your incentive manufacturer’s representative can also be a valuable resource. Find the right partner by contacting the Incentive Marketing Association at www.incentivemarketing.org.
When you’re looking for research or studies that support the use of these programs, visit The Incentive Research Foundation at www.theirf.org to access the latest information.
In any industry today, sales reps need to provide much more than just terrific products at a fair price. Salespeople who are succeeding in today’s environment are also finding new ways to help their customers to improve their businesses. Incentive programs are an excellent way to expand distributor services while adding value to the client relationship.
Barb Hendrickson is president of Visible Communication, a firm that helps companies become more visible in their marketplace through effective communication strategies such as content creation, inbound marketing, social media strategy, reputation management and more. She has spent more than 30 years as a manufacturer’s representative for brand name incentive merchandise and promotional products, and is past president of the Incentive Marketing Association. Hendrickson is also the author of It’s NOT About the Money: 10 steps to designing effective non-cash incentive programs that retain employees, engage customers and improve business.