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Incentives Power Booster
By: Donna M. Airoldi
Issue: 2010jan
Discover How Incentives Can Enhance Promotional Programs (And Win Over Clients Too)
Companies’ budgets have shrunk in the past year and will likely increase only moderately in 2010. Your clients are still placing orders, but perhaps for fewer items, or lower-priced products. There’s a way, however, to regain this lost business and even increase your sales during these tough economic times—with the use of incentive programs.
Research increasingly shows that incentives, especially those that use noncash rewards, have a significant impact on improving overall business value, from employee engagement to customer satisfaction to the bottom line.
“This is a good time to make sure your clients are not wasting operational funds,” says Michelle Smith, CPIM, vice president of business development for O.C. Tanner, a Salt Lake City employee-recognition provider, and a board member of the Incentive Federation. “They could miss out on significant savings by not taking advantage of incentive programs.”
Added Value For Clients and Distributors
The biggest benefit of using incentive programs during a down economy is that they can help an organization save money, in both tangible and intangible ways. They can boost sales, improve employee engagement, improve customer service and satisfaction, reduce absenteeism, increase employee retention, improve safety records and reduce insurance costs—all of which affect a company’s financials.
Incentive programs have been shown to lift employee performance by up to 44 percent, according to an Incentive Research Foundation report, and a recent study by Towers Perrin found on average companies that highly engage employees saw net revenue grow 19 percent compared to a four-percent decrease for companies with low engagement.
They’re also good for strengthening the distributor-client relationship. “Promotional products consultants who understand incentive-program dynamics can add tremendous value to their relationships with their clients, even by being the facilitator who puts the client in touch with other companies that may do the design of the program or its communications,” says Karen Renk, CAE, executive director of the Naperville, Illinois–based Incentive Marketing Association (IMA). “And they’ll certainly be involved in award choices. I’ve never seen an incentive program that doesn’t utilize promotional products.”
Sean Roark, CIMP, vice president of Houston–based Promo Pros, agrees: “Nine out of 10 times I talk to people about a program that is much bigger than the prospect thought they were getting involved with because I’m able to show them the value of the program. The greater the impact and success of the program, the greater the likelihood of [a client] renewing the program.”
Roark has seen incentives go from 10 percent to 60 percent of his total business during the past three years. “Companies have been cutting back [on promotional items], but some of those same clients are increasing their incentive programs because they’ve seen how well they work.”
For distributors interested in learning more about incentives, IMA is launching a promotional products strategic consulting industry group at The PPAI Expo. “This will give distributors the ability to develop incentive tools that are most helpful to them,” says Renk.
The organization also is offering its Selling Incentives primer at The Expo again this year, where participants can see if incentives fit their business models. And, in mid-2009, IMA launched an Incentive Professional designation, “which is a very good credential for consultants to earn as it will demonstrate to clients that they have [reached] a certain level of expertise in incentive programs,” says Renk.
Health Means Wealth
Corporate wellness programs are especially popular right now. A delegation from the Incentive Federation even traveled to Washington, D.C., in October to lobby members of Congress to include tax-favored status for wellness and safety incentives in the healthcare reform legislation.
“The cost associated with poor health in the United States is astronomical. It impacts turnover, absenteeism and insurance premiums,” says Smith, who was part of the delegation. “There’s a 3.65 to 5.8 return on investment for every dollar invested in smoking cessation, weight loss, stress control and cholesterol reduction programs. They help the company, they help the employee, and they have a very strong cost-benefit ratio.”
A defense contractor found out that employees who complete the profile for its wellness program are more likely to participate in it, says Tom Miller, president of distributor The Miller Company (UPIC: MIL0006), a Colleyville, Texas, distributor. Last year 15 percent of employees filled out the profile during a fourth-quarter promotion for the program. “[The contractor] wanted to increase those rates, so we created an incentive where participants who filled out the entry form received a $25 closed-end gift card, giving them the opportunity to choose from a variety of cards to redeem for merchandise. So far, 18 percent had signed up in October alone. We’ve already gotten a greater response in just one month than for the entire quarter last year. The client is thrilled,” says Miller.
Michael Emoff, CEO of Dayton, Ohio–based distributor Shumsky (UPIC: Shumsky), helped create a wellness coalition last year in the Dayton and Miami Valley region for companies with the common goal of getting their employees healthy. Using Shumsky’s signature Boost Rewards program—which uses a points system, a common mechanism for incentive programs—participatants are awarded points for various actions related to improving their health, such as attending the gym or participating in the local Heart Walk sponsored by the American Heart Association. They then accumulate points to redeem for desired merchandise. “Adoption rate for the program was 40 percent when the incentive started. It’s now 85 percent,” says Emoff.
Savings Through Improved Safety
Another popular program type is the safety incentive. Targa Resources, a large midstream natural gas energy company headquartered in Houston, Texas, also employs a points-based incentive program to improve its safety record. “Employees earn a certain number of points for each action that leads to safety in the workplace,” says Promo Pros’ Roark, who runs the program. “If everyone on a team has no accidents, they all get additional points. This encourages people to be more accountable. Instead of laughing when they see co-worker Larry about to fall off his ladder, they’ll run over and warn him,” not only because they want a safer workplace, but because they also really want to accumulate enough points for a new TV, or some other desired merchandise reward.
The safety program cost just under $500,000 and saved more than $1.5 million. “The average worker’s compensation claim is $30,000,” says Roark. “Auditors looked at the reduction of accidents and incidents of claims, the cost to replace an injured person and the drop in insurance premiums due to fewer claims, and calculated that the value of the program was three times the investment.”
Learning To Listen And Say Thanks
Recognition programs, which are a type of incentive, are a great way to thank employees and show value and appreciation, especially during tight economic times when companies are forced to downsize, freeze or reduce wages, and ask workers to take on additional work. They’re also difficult to cut once business turns around.
“With layoffs, you also want to make sure the people who are staying are not too traumatized by what’s going on. The recognition helps make them feel more secure in their jobs,” says David DeGreeff, MAS, president of Houston, Texas–based Flagship Promotional Services (UPIC: Flagship).
Length-of-service awards are one way to build loyalty and reduce turnover. Merchandise awarded can be pre-established for each level, or employees can be given points to use to pick a product. “Spending a bit of money on a service program is a better ROI than continually training new people for jobs,” says DeGreeff.
Employee-of-the-month and on-the-spot programs, when workers are given immediate rewards for established above-and-beyond actions, are affordable ways to recognize employees and can help set examples for other workers of what constitutes great customer service or job performance. Awards can be as little as a $5 Starbucks gift card.
Even adding an employee idea program, where workers get to choose merchandise for making cost-saving recommendations, can reap tremendous benefits. A medical facility in Florida facing closure when a major industry in the area closed saved $3.6 million by asking its workers for cost-cutting suggestions, which turned into an additional $3.5 million saved because “after people started feeling engaged, they didn’t call in sick as often, turnover went down and fewer costly temp workers were needed,” adds O.C. Tanner’s Smith.
Help Prepare Clients Now For the Turnaround
You also want to make sure you retain your top performers to help you gain market share, despite the economic conditions, and to better prepare you for when the economy takes off again.
“A lot of companies are taking advantage of competitors who may be struggling or exiting the market,” says Smith. “You want to recognize salespeople who have their ears to the ground and who will be the first to hear about who lost a piece of business that you can pick up. Additionally, good talent is still very much in demand, and employees are keeping score. If they feel the company is taking advantage of them, top performers will be out the door and working for a competitor as soon as the market improves, which is just when you need them most.”
Smith says that recognition should start from day one and recommends onboarding programs, which often include a training component and branded merchandise to help employees connect with their new employer. “Turnover is expensive, and research shows that four percent of employees leave their jobs the first day; 65 percent make the decision to leave in the first month,” she says.
10 Tips For Selling Incentives To Clients
Getting clients to loosen their purse strings can be tough even in good times, but here are 10 suggestions culled from experts in the field to help you convince clients to use incentive programs even in tough times.
1. Recognize that incentives are about changing or recognizing behavior, and are not about the merchandise. They’re motivation tools. “Award choice should be the last part of conversation,” says Renk.
2. Offer a business solution and know what you can accomplish. “Demonstrate how you can help clients reach a goal and solve a business challenge,” says Miller. “You need to show what results can be gained from using an incentive program. A client doesn’t want to spend $100,000 to save $50,000.” Industry research and case studies can help sell your program.
3. Calculate return on investment. “A lot of promotional products are hard to justify how effective they are, especially if for an event. But with an incentive program, it’s easier to get the ROI,” says DeGreeff. “How many people did you have to replace this year? Where there fewer missed work days, fewer accidents? Those figures are easily available to you.”
4. Start with existing clients. “Your odds are better of being successful,” says Emoff. Adds Renk, “That relationship is based on trust and good service, and can be leveraged to say, ‘Introduce me to the HP person so I can talk to them about whether their staff is meeting objectives.’”
5. Use brands. “Brands are inspirational and will inspire employees to work harder,” says Mike Landry, national sales manager for Tumi’s special markets division. “We’re trying to modify behavior, and what’s more apt to do that, a generic product or a brand? The brand wins that battle every time, whether it’s a Tumi bag or a Movado watch. The iPod is a perfect example. There are a dozen MP3 players on the market and only one iPod, but everyone calls them iPods.”
6. Use products to communicate the program and tie into the incentive’s theme. “Offer items that are useful for hitting benchmarks, such as water bottles, jump ropes, scales or pedometers for wellness programs,” says Smith. High-end products work too. “Our silhouette duffels are great to take to the gym and dovetail nicely with wellness programs, which we’ve seen an increase in,” says Landry. “The product has been extremely popular this past year, with demand up for both our $115 and $300 models.”
7. Find a good partner in the incentive arena. “Align yourself with people who know what they’re doing and are willing to share knowledge with you,” says Roark. “They can provide fulfillment services, warehousing and software to run programs. I may make only 20 percent instead of the 40 percent I might get for promotional product sales, but the annuity value of incentive programs is extremely high.”
8. Be prepared to take on more work to run the program. “Do not offer a turnkey solution if you’re not prepared to turn the key,” says Roark. “Know that the person you’re dealing with at the client company is overworked, under budgeted and understaffed. Don’t make things more difficult for them or they won’t buy it.”
9. Practice what you preach. “Put an incentive program in place in your own company,” says Emoff. “To sell something and understand it, it helps if you’re doing it and believe in it.” You can also use the program to demonstrate the ROI to prospective clients.
10. Take advantage of industry organizations, such as the PPAI, IMA, IMRA, the Forum for People Performance Management and Measurement, and other industry organizations, which have a plethora of research data and case studies on industry best practices. “The more promotional products distributors are involved in this industry and doing it correctly, the better our personal relationships with clients.”
Donna M. Airoldi is a Brooklyn, New York–based freelance writer. She’s a former executive editor of Incentive magazine, and was the founding editorial director for TravelMuse.com.
PrepareForCrosscheck.com
dmairoldi@yahoo.com
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