Making the Mark - 1999 Incentive Survey

By Paul Nolan & Vincent Alonzo

A new survey of incentive merchandise and travel users reveals a simple yet powerful message: incentive programs are both highly effective and cost-efficient

In the advertising industry, few things are more powerful than user testimonials. With the release of a resoundingly positive new survey of incentive merchandise and travel users, the motivation and incentive industry now has its own impressive user endorsement.

The survey, which was conducted among all levels of American business, revealed important insights into the effectiveness and efficiency of using merchandise and travel to motivate. Highlights of the findings include:

• More than 80 percent of merchandise and incentive travel users responding achieve established goals with their incentive programs. This holds true for sales and dealer incentive programs as well as consumer promotions.
• 65 percent of respondents report that they consider cost versus the desired result when designing motivation programs, while 62 percent look at profitability. In short, users consider incentive merchandise and travel to be cost-efficient and effective, a double whammy that goes a long way toward boosting the bottom line and improving quality.
• 82 percent of the respondents report using merchandise and/or incentive travel as sales incentives; consumer/user promotions is the next most popular application (66 percent), followed by non-sales recognition programs (61 percent) and dealer incentives (48 percent).
• 69 percent of the respondents strongly agree or agree with the statement: "Travel and merchandise awards are remembered longer than cash payments."
• 65 percent strongly agree or agree with the statement: "You can build a more exciting and memorable program around travel and merchandise than you can with cash."

The survey was the second phase of an industry overview sponsored by The Incentive Federation, an alliance of incentive product manufacturers, industry suppliers and associations.

In the first phase of the study, released in 1997, it was determined that American businesses spend $23 billion annually on merchandise and travel for motivational use. This second phase was designed to determine users' objectives, practices, costs and results, according to Howard Henry, Incentive Federation executive director.

"We found that users are very professional in their approaches to planning and conducting incentive programs," Henry says. "We now better understand their objectives, average costs, preferred sources and how well they evaluate motivational programs."

What can other premium and incentive users and those who don't currently use merchandise and travel to motivate learn from these findings? "My father always told me the best way to learn how to play shortstop was from a good ballplayer," Henry explains. This diverse group of survey respondents provides first-hand experience and fresh insights that are invaluable, whether you're new to the industry or a motivation veteran.

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Sales gets the bulk of incentive attention
Sales is king in terms of the number of programs that incorporate merchandise and incentive travel, as well as reported success rates

Fully 82 percent of the respondents report using merchandise and/or incentive travel as sales incentives. The next closest category is consumer/user promotions, in which 66 percent of respondents say they use merchandise and/or travel to motivate. Non-sales recognition programs follow closely behind (with 61 percent of respondents using merchandise and travel in these programs), while 48 percent report using merchandise or travel in dealer incentive programs.

Incentive sales programs also ranked highest in terms of success rate. The respondents also report 88 percent of sales incentive programs that use products and/or incentive travel come within 10 percent of their goal. This statistic is made even more impressive with the discovery that sales programs have on average the highest percentage increase set as a qualifying goal--21.2 percent compared to 19.3 percent for consumer programs and 18 percent for dealer incentive programs.

All three categories--sales incentives, consumer/user promotions and dealer incentives--recorded success rates above 80 percent.

• Potential damage to a company's image is not a factor in getting approval. Only 15 percent of all respondents listed it as a concern.
• Only 22 percent of respondents listed the ability to identify verification criteria as an factor in deciding to run a program.
  

Success rate

Percentage of incentive programs that achieve established goals
Dealer programs	83.1%
Consumer/user programs	83.7%
Sales programs	88.3%

Average percentage increase set as the qualifying goal
Sales programs	21.2%
Consumer/user programs	19.3%
Dealer programs	18%

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Getting approval
There are few surprises when it comes to what merchandise and incentive travel users consider when creating programs and ushering them through the approval process. Cost and profitability top the list of key decision factors respondents pay attention to.

"I'm not sure this is much different than what the customer evaluates in other types of marketing efforts apart from incentives," says the Incentive Federation's Howard Henry. "Marketers simply hope to stay within their budgets and reach their objectives."

The rise of non-sales
According to the survey respondents, for some non-sales employees, the number of programs staged annually far exceeds the number of consumer, sales and dealer incentives combined.

On average, companies run four to five consumer, sales and dealer programs each year. However, each year production employees are offered 20 programs; office employees participate in 14 programs; and R&D staffs are the target of nine programs.

One reason for the growth in non-sales programs is recruitment and retention problems many companies are experiencing. "Unemployment rates are so low right now that incentives have become a crucial element of many companies' recruitment and retention strategies," says one incentive company executive. "Offering incentives and recognition awards creates a culture that employees will be reluctant to leave. These programs have become an essential part of doing business."

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Dealer programs lead spending
The average per-person cost of dealer incentives exceeds the amount spent on awards for consumer and non-sales programs. It is also significantly greater than the per-person budget for sales programs aimed at internal sales staffs.

Incentive Industry experts don't find this surprising. Says one: "Most dealers have a choice of several manufacturers products to sell. These organizations have to compete with each other to attract and maintain the dealers' loyalty. Companies that sell through an internal sales force don't have this problem". "Some dealers can have dozens of manufacturers offering them incentives. That's a lot of clutter to break through, so it's not unusual that companies will spend more on an award to motivate a dealer sales network. The award has to make a big impression and that's expensive."

Essentially, this executive likens the relationship between a manufacturer and a dealer or distributor to that of a tenant and a landlord. "The dealer actually owns the distribution channel. The manufacturer is really just a tenant in the channel," he says. "Just like anything else in life, the power lies with the owner."

Another cites another, strictly economic reason for the disparity.

"Most dealers usually have a higher income than internal salespeople. Therefore it would make more sense to offer more expensive incentives to them. The amount spent on incentives is dependent on the participant earnings and income level. It's skewed that way." 

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Setting goals

Program objectives--overall
Increase or maintain sales	84%
Build morale	65%
Build customer loyalty/trust	51%
Increase market share	51%
Build employee loyalty/trust	49%
Improve customer service	49%
Create new markets	44%
Foster teamwork	42%
Develop contacts	40%
Demonstrate concern for workers	32%

Consumer programs Build customer loyalty/trust 49% Increase or maintain sales 40% Increase market share 37% Improve customer service 31% Create new markets 30% Dealer programs Increase or maintain sales 61% Increase market share 41% Build customer loyalty/trust 31% Improve customer service 29% Build morale 26%

Sales programs Increase or maintain sales 80% Build morale 48% Increase market share 40% Create new markets 36% Build employee loyalty/trust 34% Non-sales programs Safety 62% Build morale 61% Build employee loyalty/trust 49% Foster teamwork 43% Demonstrate concern for workers 36%

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Communication breakdown

Methods used to promote incentive programs
Mailing to customer/employee	62%
Company newsletter	50%
Memos (internal or external)	48%
Company/dealer sales meetings	48%
E-mail	44%
Word-of-mouth	38%
Voice mail	37%
Bulletin boards	30%
Pre-show announcement	24%
Store displays/signs	24%
Employee reviews	24%
Trade advertising	23%
Consumer advertising	23%
Lunch room displays	22%
Internet (Co. home page)	21%
Intranet (LAN)	14%
Union meetings	8%

Sponsoring Organizations
"A Study Conducted Among Current Users of Merchandise and Travel Items for Motivation/Incentive Applications" was sponsored by the following members of The Incentive Federation:

• Association of Retail Marketing Services
• Incentive Magazine
• Incentive Manufacturers Representatives Association
• Incentive Marketing Association
• The Motivation Show by Hall-Erickson, Inc.
• Potentials Magazine
• Promotion Marketing Association
• Promotional Products Association
• SITE Foundation

Methodology
This project was conducted by Ralph Head & Affiliates Ltd. Marketing, a Morris Plains, N.J.-based research company. A series of focus groups with incentive users were conducted in New York and Los Angeles to identify terminology, issues and considerations that were deemed important by users of merchandise and travel incentives. A questionnaire was developed from the information gathered and mailed to 4,000 executives. The names were drawn from two sources: the mailing list of Incentive magazine and the current attendees list of The Motivation Show. A total of 475 were returned for a response rate of 12 percent. Returns came from all regions of the U.S. The Mid-Atlantic and Midwest regions had the best response rate of 28 percent each. The West had a 17 percent response rate followed by New England with 14 percent, the Southwest at 9 percent and the Southeast with 4 percent.

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