Making the Case for Travel (Part II): Extended Version
September 12, 2008
Weighing the pros and cons—plus ROI pointers
By Izabella Iizuka
Editor's Note: Part I of this story (available at www.salesandmarketingmanagement.com/travel1) analyzed the challenges and opportunities of using travel as a reward in incentive plans. In Part II, we take a deeper dive, analyzing individual versus group travel, as well as providing some pointers for sales managers who are trying to determine the return on their incentive investment.
A properly designed incentive plan starts with the company’s desired business outcomes, because that's what determines the structure of the program itself—its duration, the type of reward, the time of year it is conducted, etc. So the first step in any program is to ask yourself, "What do I want this program to achieve?"
Do you want to increase total sales or sales in a specific sector or for a specific product? Do you want to incentivize a certain layer of your sales force? Do you want to promote teamwork or individual performance?
Once you are clear on what you want to do for the company, you should focus on what you want to do to incentivize your team. One thing's for sure: Money shouldn't be the reward. According to a May 2005 study from the Incentive Federation entitled "Survey of Motivation and Incentive Applications," 65% of executives believe incentive programs featuring travel and merchandise rewards are more memorable than those using cash, while 57% think bonus payments are often regarded by employees as something they are "owed."
While merchandise is a perfectly legitimate reward option in an incentive program, travel rewards are among the most popular choices, both for the manager creating the program and the people competing in it. To minimize the financial impact, companies can pay for the incentive travel program with a percentage of incremental sales rather than through a fixed budget.
In addition, travel rewards generate excitement among many different groups of people—from the winner, to the colleagues the winner tells about the experience, to the ones who almost made the award and need to continue believing they can get it next time.
That's key to a good travel-based incentive program, according to Ira Ozer, vice president of business development for Meridian Enterprises. "Ideally, the program structure should be 'open ended,'" he says, "so that everyone who achieves their stated 'stretch' objective—such as increasing sales X% above their quota—gets to go on the trip.”
If it's financially impractical to send everyone who hits the goal, it’s important to avoid having the same people always win the reward time after time. "If the same people always win, the reward becomes an entitlement, not an incentive," says Bob Dawson, chairman of the Incentive Research Foundation and vice president of sales and marketing for Custom Design Marketing. "That can create problems with retention, since 'the middle' will be turned off after repeated frustrated efforts and will eventually look for other opportunities.
"The efforts of candidates who almost made it should be acknowledged, and the program should make it possible for them to make it next," he continues. "Tiered incentive programs may help incentivize the middle because it makes some kind of award achievable. However you tailor your program, it all must be within reach."
Ozer agrees. "If the middle 60% think they won't make [the reward], they won't engage in the incentive program at all," he says.
So now that the program goals are established and the structure is set, it's time for the next decision—do you reward your top performers singly or as a group? The following list of advantages and disadvantages should make your choice easier:
Group Travel Pros
• Properly structured programs can have a high impact on morale and loyalty for those who receive them.
• They offer top management an exceptional way to mingle with key audiences in a relaxed way.
• They can become an important recruitment tool.
• They have particular value with channel partner programs because of the ability to meet and get to know dealer/distributor salespeople, as well as company principals.
Group Travel Cons
• They require getting people out of their offices at the same time.
• They require expert planning using travel suppliers and venues with demonstrated experience in creating or hosting motivational events. In other words, this is a job for an experienced meeting planner, not a beginner.
• They carry the highest cost of most award categories.
• Safety and security issues have to be considered.
Individual Travel Pros
• Thanks to the advent of gift certificates and cards, individual travel awards have become almost a staple in the award portfolio of many organizations.
• Individual travel rewards have high appeal and perceived value among almost any demographic group.
• Dozens of travel suppliers and incentive companies offer different types of individual travel programs—some including only the airline or the hotel, others including nearly complete packages.
• Some programs offer special enhancements that add to the sense of personal touch, such as in-room amenities, notes from management, pillow gifts, etc. Some of the suppliers can offer personalized communications and gift certificate packaging to maximize presentation.
Individual Travel Cons
• There is no real opportunity for team building and developing camaraderie.
• After returning to the office, team members are less likely to talk about their individual experiences than they would be if they were shared with co-workers. This results in a shorter and less intense "buzz factor" in the office.
• Individual travel is more likely to be remembered as "vacation time" and thus is less likely to evoke memories of the corporate and personal goals achieved.
The Bottom Line
There are a variety of ways to determine the effectiveness of an incentive program, and many of them work for any type of program (even if they aren't travel-oriented). But don't wait until the end of the program to think about it; the key to calculating ROI is to establish objectives that are highly focused and can be measured. In other words, the program should be set up with an eventual ROI process in mind.
"The more targeted the incentive travel program, the easier it will be to measure," Dawson says. "It should be possible to develop specific goals for hard measures such as sales, revenue, market share and productivity.
"It's also important to support the incentive program on an ongoing basis if the effectiveness of the program is to be demonstrated. Programs that are in effect during a single sales cycle miss the opportunity to incentivize the middle for next time, and may result in the perception that the company is not serious about it."
One of the challenges of calculating ROI is placing a value on "soft returns" such as customer loyalty, customer satisfaction, and employee loyalty and satisfaction. Even within the company, perceptions vary as to what incentive travel programs actually accomplish. Corporate planners tend to believe more than winners that incentive programs can increase revenue and sales, identify top performers or induce loyalty.
Even where ROI cannot be objectively measured, there are ways to guarantee that your investment will have a positive effect on your company. "Consider integrating training within the incentive program," Ozer suggests. "Most companies have difficulty getting people to go through training and measuring the ROI of training."
Training is an expense that can be mitigated if it is shared with a well-planned travel incentive program. "Fundamentally, training is a leading indicator of success, not a result," Ozer adds. "Training leads to increased sales, more profit." Since those are the main goals of any incentive program, you can reap double benefits from your program.
On that subject, you may want to check out a report from the Incentive Research Foundation entitled "Determining the Return on Investment of Incentive Travel Programs." It presents an excellent, easy-to-use calculating tool for measuring the ROI of incentive travel programs (for more information, visit www.theirf.com).
Among the bottom-line oriented and motivational attributes are increases in revenue and sales for a company as well as identification of top performers. The goals of strengthening the company’s reputation and fostering both customer and employee loyalty can also be measured numerically, as are other accomplishments—such as shifting effort to a specific product or service, directing business to a specific sector within the company or reducing absenteeism.
Measuring softer, intangible objectives is much more difficult and may require surveys. These include excitement to keep salespeople motivated, providing networking opportunities for successful people and allowing winners to provide feedback.
"That's why it is important that corporations first determine the objectives that are truly important," Dawson says, "then review the specific attributes that compose that objective and finally determine the appropriate tool for measuring the degree to which the objective is being achieved," Dawson says.
"If designed and implemented with creativity and excellence, incentive trips provide memories that last for a long time," says Ozer, "therefore delivering continuous performance improvement benefits for the sponsoring company well past the program earnings period—and thus, significantly boosting the return-on-investment of this type of incentive program."
As important as analyzing the positive results, however, is the ability to detect where your program failed. If you didn’t retain your best salespeople and the program didn’t incentivize some people, you might have to make some adjustments for the next sales cycle.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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