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Outside the Box: Incentive Building Blocks: Rewards

If there is one thing I've learned from all my years in the incentive business, it's this: Rewards matter.

They matter because a big piece of the motivation puzzle is the need to emotionally engage participants, and rewards are arguably the single most important tool for capturing the hearts and imaginations of salespeople at all performance levels. Rewards are a key incentive building block, and it is critical sales managers think carefully when choosing incentive program rewards.

Many studies have shown tangible rewards and trips are better motivators than cash. A University of Chicago study found salespeople working toward a non-cash incentive had a 38.6 percent performance uplift (versus no incentive), nearly double the performance of salespeople working towards a cash incentive.

According to Scott Jeffry, Ph.D., the reason for the extra effort has more to do with psychological than economic theory. Incentive program participants ask themselves, "How hard will I work for this particular award?" Especially if a reward is considered a luxury or a "splurge," salespeople will work harder to earn the item of their choice "guilt-free." If we take that a step further, salespeople will work even harder for the right rewards.

While the nature of your sales channel and budget will be the biggest factors in your decision as to what rewards to offer, there are several things to remember when choosing:

• Know your audience. Age, gender, and channel demographics will play a role in reward selection.

• Don't cheap out. Salespeople are smart, and they know when a rewards budget is too low. Rewards should be commensurate with the performance.

• Understand perceived value. Include items such as large plasma HDTVs, luxury individual travel, and laptop computers which will give your program a positive glow.

• More isn't always better. Sometimes a focused group of 15 to 20 high-perceived value rewards is better than 200 lower-value awards.

• Mix it up. To keep your salespeople's interest, change the rewards offering every few years. Be sure to keep the budget consistent, though.

It is no cliché to note there are more reward choices available today then ever before. One of the reasons is that new Web-based technologies have dramatically expanded the award categories available for incentive programs, adding new levels of personal travel and experiential rewards.

Another is that new and different retail products manufacturers have jumped into the incentive products business to expand their sales. So more then ever, the range of electronics, optics, timepieces, jewelry, computers, and lifestyle merchandise is broadly expansive. Let's take a look at major reward categories:

Group travel. Still the premier reward choice, group travel drives performance because it engages potential winners with dreams of beautiful and exotic locales. Add to that the camaraderie and relationship-building inherent to group travel, and it's obvious why this reward solution is always a winner.

The downsides to group travel are that you will typically be limited to rewarding only your very top performers due to the cost factor, and younger performers (Generation X and Millenials) appear to value personal travel opportunities over hobnobbing with management.

Individual travel. One of the fastest-growing reward categories, individual travel includes hotels nights, cruises, experiential rewards, and sporting destinations (skiing, golfing, fishing, etc.). Individual travel options can be seamlessly included as choices in merchandise collections. We have seen incentive travel rise to 20 percent of reward redemptions in the past year.

Sports travel. Really a category in itself, a variety of providers bundle individual or small group packages of airfare, hotel, and meals around top sporting events, including the World Series, Super Bowl, NASCAR races, PGA golf tournaments, and more.

Experiential rewards. In the same way Orbitz changed the travel industry, new technologies are making an ever-expanding number of experiential rewards available on incentive web platforms. These can include extreme sports (kayaking, mountain biking, white-water rafting, scuba diving, etc.), movies, theater, concerts, and museum visits.

Other creative vendors offer the chance to relax at the spa, in a hot-air balloon, or at a cooking school. Even shark chasing and jet fighter battles are among today's edgier experiential rewards.

Merchandise collections. Carefully warehoused and ready to instantly ship for maximum participant satisfaction, merchandise reward collections (typically ranging from $20 to $10,000-plus) are the backbone of the incentive industry. Why? Because they offer a wide range of awards to meet the needs of a diverse audience. Today's collections, from companies like industry stalwart Hinda Incentives, include thousands of rewards of tangible items, plus expanded individual travel and experiential rewards.

Other providers tap into vast databases of retail items (such as Amazon or national travel services) to offer award collections with millions of rewards that are handled on a drop-ship basis. Ask your incentive vendor to explain the pros and cons of each approach.

Plateau rewards. When participants are offered a choice of 15 to 20 very high-perceived value items at five to seven plateau levels, they are able to quickly and strongly attach to a handful of choices that provide a powerful and emotional motivating force. The plateaus also serve to drive performance up the ladder as top performers strive for the next step. Make sure you specify only the highest perceived value rewards—and include electronics, which will always be the leading redemption category.

Gift cards. Gift card offerings have grown significantly during the past five years, and most national retailers offer gift cards. Some incentive companies have bundled gift card solutions and online shopping at a variety of brick-and-mortar and online retailers. Due to their similarities to cash, gift cards are not an ideal choice for sales incentive programs. That being said, gift cards are an excellent solution for program promotion and recognition in amounts under $100.

Socially conscious rewards. The newest reward category is led by Chicago's Helping Hands Rewards, which "serves as a conduit and a catalyst between social purpose businesses that produce merchandise and incentive companies." From gourmet brownies to spa gift sets, utilizing products manufactured by social purpose businesses creates added value for the sponsoring company and the recipient, while giving back to the community.

One final thought on tangible rewards: The luxury products market is in a down cycle as individuals and families try to conserve financial resources. In this economic environment, I suspect salespeople will use cash for basic necessities over luxuries. So while it may be counterintuitive, now is the time to offer tangible rewards, experiences, and luxuries that salespeople can get excited about and work hard to earn without having to feel guilty.

Now, more than ever, think hard about your rewards offering. Provide new choices to grab your sales channel's attention, and focus their efforts on earning fantastic tangible and travel rewards that can enhance their lifestyles.

SMM columnist David Chittock is president of Incentra.