The Caveats of a Digital Point Based Award Systems

Point based award systems have been in the incentive industry starting in the fifties.  In those days all the rage was issuing paper checks worth thousands of award credits or points that were redeemed for merchandise awards out of physical catalogs.  These ubiquitous points’ schemes now permeate the marketing world in all sorts b2b as well b2c programs. 

With advancing technology these software incentive management tools offer an ever increasing number of features and mechanisms for “limitless options in one simple solution,” designed to free you up and make all your incentive programs worry free!  Really?

The web is full of these systems, some very sophisticated, and it seems that every full service awards company has their own.  As new software companies spring up with the next “digital points system for the ages”, one seemingly better than the next, we think it is important to let you know that with these, the devil is indeed in the details.  And in the planning and design phase these details are critical to cost and how effective the program will be.  Before you decide on a points based system, remember the phrase Caveat Emptor, or let the buyer beware.  Here are just a couple of important details to be aware of.

Value you ascribe to a point.

To be frank, points based systems were originally invented to hide the price of the

merchandise awards.  At the time they were substantially higher than retail and by using thousands of points for an item, it was difficult to determine the actual value of that item.  With the advent of online merchandise portals it is relatively easy for your participants to determine the real value.  By simply dividing the value you determine the item to be from an online search by the number of points necessary to redeem for the item value per point is readily available.  Take the time to do a random check of items offered to see if they are competitive.  If experience is a guide….you will find that most will not be.

How and when you pay for the points

Whether you pay for the points when you issue them (most suppliers love this approach) or when they are redeemed, opens up a can of worms called “breakage” or “non-redemption.” Regardless of all the mumbo jumbo provided by the supplier, including the scare tactic of which way does or doesn’t have income tax liability, it is typically not in your interest to pay for these points on issuance….period!  We will be happy to consult with you on this particular subject if the facts are being distorted.

The complexity of your point earning rules structures

With any of these systems it’s relatively easy to download a list of participants and the

points earned for a program part.  But we have not seen one system that will take your various raw data that combines to determine how many points were earned based on the specific rules and do those calculations.  That tedious and time consuming chore is up to you.

Buying more features than you need

You don’t need a sledge hammer to crack a walnut.  All of these systems have many more features than you will ever use.  In a survey we did of customers a few years back, the average company that had multi-featured systems used less than 25% of them.

Who controls the award portfolio in your system

This is a critical point often overlooked in the buying process.  Most of these suppliers have come to realize that the profit in selling these systems is in the awards, not the software. 

They often give away the software at cost or for nothing to be able to sell the awards.  When they control the awards piece they control the ongoing profitability.  This is often at the expense of your participant where only a portion of your overall program budget gets to them in awards.  And wasn’t that the idea in the first place?

There are many more caveats that you should consider when you’re in the process of implementing a points based award system.  There’s not enough space to enumerate them here but we would be happy to discuss them with you.  Just let us know.

For more information on Ultimate Choice Inc.’s products or services or other white papers please contact us at Ultimatechoiceinfo@cox.netultimatechoiceinfo@cox.net