Positive survey results and new merchandise show an industry on the upswing
Companies have been spending more on their incentive travel programs as we close 2016, with strong growth compared to 2015. Incentive's 2016 Travel IQ survey indicated that the largest incentive programs, with budgets of $1 million or more, grew from 8.1 percent last year to 13.7 percent this year. Overall, about four out of ten (38.2 percent) of respondents say they’re increasing incentive budgets. This, while less than 10 percent (9 percent to be exact) are planning to decrease their budget for incentives. And for more than 11 percent, the growth has been sizable: their incentive travel budgets grew by at least 10 percent.
Brands go big
The benefits of including merchandise in non-sales employee recognition, engagement, safety, and wellness programs is significant. Non-sales programs have many more participants and they’re just as motivated by brand-name merchandise as salespeople.
In fact, U.S. employers spent $3.2 billion on incentive awards for non-sales employees, compared to $3.7 billion for sales staff and $2.8 billion for dealer-channel programs in 2015, according to the “Incentive Marketplace Estimate Research Study,” by the Incentive Federation. If points-based incentive programs, which generally offer merchandise awards, are included, another $8.1 billion was spent on non-sales employee programs, compared to $8.3 billion for sales and $6.3 billion for channel sales.
The study found that 84% of U.S. businesses used non-cash rewards to recognize and reward key audiences in 2015 –up 74% from 2013. Those same businesses spent $90 million on these types of incentives, a significant increase from $77 billion in 2013. And when it comes to brand names, the Incentive Research Foundation found that almost 70 percent of events are now incorporate some sort of brand experience.
Incentivizing employees, customers and partners with brand name merchandise has long been an effective and valuable method to motivate, reward and recognize these stakeholders for their contributions. According to Ron Eliakim, vice president of strategic sales and partnerships at Montreal-based Rideau Recognition Solutions, brands are important because people are already familiar with them and so, a certain level of trust is already established when people see a recognizable household name or logo. “Brands are important because people want quality and in today’s world, I don’t think brands have ever been so prevalent because of the Internet and social media where comparative shopping is right at your fingertips,” he says.
Brand recognition also plays a role in the overall recognition experience and as Eliakim points out, that’s across all demographics. “Everyone will respond well to a well-known, trusted brand because they know that it’s quality and they know they can call customer service.”
However, Eliakim also notes that brand name merchandise need not be top of the line in order to achieve the desired effects. Every industry offers a range of products at different price points so that companies that opt to purchase brand name merchandise as incentive giveaways don’t have to worry about breaking the budget. “Mid-range brands can be very powerful, even though there are also outstanding brands that are much more expensive,” Eliakim says. “But all brand names hold the same quality and trust perceptions and that’s why they deliver more retail and brand equity, which go a long way into delivering a rich emotional experience for the recipient.”
Merchandise over cash
Incorporating merchandise (as opposed to cash) into rewards programs is very much by design. While there’s no denying the value of cash as an incentive tool for employees, dollars do not typically have the long-lasting and beneficial impact of branded merchandise rewards. “Cash incentives all have a very strong role in a company’s compensation structure and very few people are going to trade away the bonus system for merchandise, but cash incentives are part of a company’s compensation structure,” says Moravec. “Non-cash incentives are part of the a company’s recognition structure. What are you going to remember longer? A $25 check or a $25 tangible item?”
The value of cash is certainly concrete, but it doesn’t deliver the emotional return of a branded merchandise reward. That is, cash is typically deposited into a checking account and used to pay bills or buy other necessities, at which point, the reward is as quickly forgotten as it was spent. Moreover, employees tend to view cash awards as income. But with branded merchandise rewards comes more value-add, both for the employee as well as for their company. “The most impactful way to spend money on reward and recognition programs is not on cash incentives, but on branded merchandise,” says Scott Plybon, vice-president of IMRA.
Employees will strive to earn a branded item that they perceive as a luxury good because their hard work cancels any need to rationalize spending on an indulgence that they probably would not otherwise buy for themselves. By putting what’s otherwise viewed as unattainable within reach, branded merchandise has a higher perceived value among employees thereby making these rewards unique and more meaningful than simple cash incentives.
“Part of the underlying principle of incenting behavior with branded merchandise is that it be aspiration merchandise,” Moravec points out. “Well-known merchandise and brands are perceived as high-value and they drive added motivation for employees to achieve the desired result in order to earn that type of merchandise. The value of branded merchandise incentives is that employees either view it as a luxury item or simply as something they would like to have, but shouldn’t really spend money on.”
Yet, the merits of branded merchandise incentives don’t stop there. Unlike cash rewards, branded merchandise also has trophy value or bragging rights. So while employees are not likely to show or even boast about a cash reward to friends and family, they will exhibit new, brand name goods and proudly relay the story of how they earned the item, which also creates a lasting memory and continuously positive link to the company. “The degree to which a reward is seen as valuable makes the desire to continue performance-enhancing behaviors all the more likely,” Plybon adds.
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A study by the Incentive Research Foundation’s (IRF) “2016 Trends in Incentive Travel, Rewards, and Recognition” uncovered several distinct directions in the industry. It indicated more spending on incentives and a greater focus on creating exceptional, experiential rewards.
Drawing on its own internal research and other sources, the IRF isolated 10 general trends that have shaped the industry in 2016 and beyond. The trends are:
* Budgets are up…and so is oversight
* Cash is not necessarily king
* A shift in incentive travel destinations will affect planning
* Merchandise and gift card programs lean toward luxury
* Recipients want authentic experiences
* A changing talent pool
* Integrating technology
* CSR is a given, not a goal
* It’s all about presentation
* Success is in the details
* Accommodating rising F&B and rooms costs was the biggest change to program budgets in 2016.
* Very few planners are reducing the number of rooms and length of their program; continuing the trend.
* Since 2013 the trend has been for more planners to move from domestic to international locales than vice versa.
* Covering air costs with 46% of planners now covering all air-related costs.
* Lead time to book an incentive travel program now averages well over a year.
* Organizations predominately use 12 months or more to qualify participants to earn an incentive travel program.