Research: Gift Cards Better Than Cash for Employee Wellness

 

When it comes to promoting healthy behaviors in workers, managers should keep their cash and reach for gift cards. That was the finding by a team of researchers at Brigham Young University, who found that gift cards were far more likely to motivate participants in a workplace wellness program to successfully complete their challenges. 

Published online at Management Accounting Research, the study was conducted by BYU researchers Bill Heninger, Steve Smith and David Wood. It tracked an institution that rewarded workers who completed a six-week wellness challenge, giving participants a choice between a cash bonus on their paycheck, a gift card or a material reward of the same value. Approximately 60 percent of participants selected cash, 30 percent chose gift cards and 10 percent selected the tangible reward.

While cash was the most popular choice, the most effective choice turned out to be gift cards. According to the findings, those who selected gift cards were approximately 25 percent more likely to complete the challenge than the participants selecting other rewards, taking into account all other factors.

"You would presume that when people pick the reward type that is the most appealing to them, it would have the most motivational power," Smith said in a statement. "But that wasn't the case. Employees choosing to be rewarded with gift cards actually reaped the greatest health benefits.

The findings add more evidence to the assertions long held by leaders of the incentive industry that gift cards are a more effective incentive than cash. The authors suggest that the gift cards might have proved more effective because they strike a balance between flexible and specific when it comes to entertainment or fun. 

"People keep mental accounts," Wood explained. "If you work and make $10, that's your work money. If you find 10 bucks on the ground, then that's free money. You might go out to lunch with the free money, when you normally wouldn't with your work money."

Gift Cards Can be Used to Achieve Various Corporate Objectives.

 

Gift cards are used to attain many corporate objectives According to ongoing research done by the Incentive Research Foundation, following is a list of the main reasons given by companies using gift cards

 

Primary Objectives for Using Gift Cards	Ave. % of Responses
Recognize individual or team performance	75.5%
Boost morale	57.9%
Increase or maintain sales	46.4%
Build employee loyalty/trust	35.7%
Build customer loyalty/trust	32.9%
Improve customer service	31.4%
Foster teamwork	25.7%
Improve safety/reduce accidents	25.4%
Start/maintain business relationships	15.7%
Improve employee health/reduce insurance costs	14.5%
Create new markets	11.4%
Other	3.6%

 

 

If you want a truly successful recognition or incentive program, be award neutral in your decision of what awards to use in your program.  When you provide the awards that your people want, they work harder to achieve your objectives in order to attain them.

How the Pandemic Year Changed Employee Recognition

 

The pandemic has made it very difficult to manage teams and individuals for improved performance.  In the virtual world that sprang up almost immediately out of necessity, it became harder to measure employee’s needs, celebrate successes and make employees feel valued.  At the same time, HR professionals agreed that taking steps to maintain a strong culture that included frequent recognition was paramount.  

And it’s starting to look like the virtual work week, in all or in part, will be a future reality as many companies seem to be moving in that direction with hybrid models of remote work and office time combined even when it’s safe to return to work. 

It might be beneficial to take a look at how businesses have shifted their recognition strategies to meet these future challenges.  As employees continue to work in new and unfamiliar environments, it is critical to find new ways to inspire improved performance while maintaining a strong feeling of connectivity to the company. 

The marriage of clear communications with an ongoing recognition effort can be a differentiator in achieving results.  As it has been from the beginning of the recognition industry, thoughtful and meaningful communications set up the performance you’re trying to achieve and recognition reinforcement can then turn that performance into a habit.  It will help build a more engaged and effective work-home environment. 

In recent surveys the Incentive Recognition Federation (IRF) has noted the following changes in recognition over the pandemic: 

Increased Purchases of Gift Cards and Merchandise

The IRF showed a 26% increase in the use of gift cards in workplace incentive programs since the pandemic started. They noted that: 

“Gift cards, especially, allow for high levels of flexibility, creativity, efficiency and speed when used to motivate important audiences during the pandemic.” 

Much of this was due to incentive travel programs, corporate meetings, and other business events being canceled and replaced with gift cards and merchandise.  The IRF industry outlook for 2021 reports an overall predicted net increase of 33% for gift cards and 24% for merchandise. The average value of a award ranged from $160 to $225. 

Awards Benefited a Wider Audience 

The IRF reports that lower-priced merchandise and gift cards proved to be effective motivators to broader audiences during the pandemic, and many incentive program owners are applying the lessons learned in 2021 and beyond.  For example, in place of expensive travel programs or special events being attended by only a top tier performing group, the size of the top tiers is being reduced and gift cards and merchandise are added at second and third tiers.  The same or fewer budget dollars are allowing for a wider audience.  

During recovery, it might be necessary to rebuild morale, engagement, trust and collegiality, and these are behaviors that the majority of employees must observe to move the needle. Incentive and recognition program owners may be identifying and rewarding many new behaviors that will reestablish new corporate cultures. Many of these efforts could involve smaller, frequent rewards on a larger scale. 

The mainstay of the incentive travel industry has been the high-end sales and distribution programs favored by executives, many of whom attended these trips as hosts.  But by their nature only the top 5% to 10% of their employees were earning the awards.  The middle 60% of producers were often forgotten, which is a distinct missed opportunity especially as companies work to recover and rebuild when every employee needs to give the incremental effort.  Showing all your employees they are appreciated is at the core of what drives performance. 

Expanding Digital Delivery 

More and more companies took advantage of the digital delivery option of awards for obvious reasons.  The IRF reports that many lessons were learned about the power of virtual engagement. 

“Digital options enable immediate, coordinated, trackable delivery of rewards regardless of geographic location, and groups of employees can receive their reward at the same time, such as during a virtual meeting. Digital delivery can also increase control, enhance reporting, and reduce overall administration time for program owners.” 

The IRF is encouraged by companies’ focus on maintaining a positive corporate culture and keeping workers motivated during the pandemic. IRF officials feel that bodes well for incentive and reward use this year and beyond.

Gift Cards Are Fun Money

 

The 2020 IRF Academic Review offers some interesting peer review research of articles found within the employee engagement industry regarding employee incentives and recognition programs.  Some of the significant points this year that could help inform you on the design and execution of successful programs include: 

• Gift cards have the potential to capture most – and perhaps all – of the well-known benefits of non-cash rewards. Program awardees categorize gift card awards as “fun money.” Many employers find gift cards easy to give and to administer compared to choosing specific tangible gifts or rewards. 
• The greater sense an employee has that a reward they receive is separate from their salary or wages, the greater improvement they showed in their performance. 
• Researchers found that workers classify non-cash, tangible rewards as distinct from monetary compensation, suggesting that delivering non-cash rewards is more likely than cash to result in improved performance.
• Gift cards continue to be widely used as awards, with median gift card amount remaining at $100 
• For many employees, it has become the soft rewards of work such as culture, relationships, trust, and purpose, education and direct management that matter most to them. 
• 94% of executives at top performing firms are strong supporters of incentive programs and consider them a competitive advantage 
• Companies conducting analysis on how programs change behavior increased to 44%, compared to 25% in 2019. 
• While it’s always difficult to establish direct casualty, most organizations measure results based on correlations. Metrics for tangible benefits include decreased staff turnover, increased productivity, sales, revenue, safety, market share, gains in customer satisfaction, and customer acquisition
• Even more difficult to measure, metrics for intangible benefits that include employee satisfaction, collaboration, and impact on company culture 
• Designers are structuring programs with a wider reach, with the goal of each participant receiving recognition or rewards of some kind, rather than exclusively rewarding just top performing program participants.

Do Employee Merchandise Awards Cost So Much More than Gift Cards?

 

Actually that’s sort of a trick question; the actual cost of a merchandise item doesn’t cost more than the actual cost of a gift card.  If you spend $50 on one item and $50 on a gift card, you’ve spent the same amount.  Your budget hasn’t changed.  What is definitely true is that the value of a gift card can change appreciably depending on when and where you use it and be worth more than what you paid for it.  In fact, most of the gift cards given over the Holiday season are used to purchase merchandise items on sale after the holiday season…often when the value can be double or even triple depending on the item.

From a recognition planner’s viewpoint, gift cards will have the effect of increasing your budget, where merchandise can actually decrease it.  Merchandise award companies need to start to develop their list or catalogs of merchandise awards long before clients will ever be buying or redeeming for them.  They will maintain pricing for a certain period, but after that period they have been known to raise them to cover increased costs, and thus increasing budgets.  As merchandise awards are also burdened with shipping and handling to the individual, their pricing is already higher by between 10-15%.

Take advantage of natural market downward price pressure during several times of the year.  When you use gift cards it will have the effect of increasing your budget by 50% or more, without increasing your cost.

Gift Card Usage as Employee Awards

How and why did gift cards become the dominate employee award in corporations today?  First because they are ubiquitous and people of any age group or ethnicity love them, and two because they provide the best value and choice of any other award.  Following are some of the ways they are used and why incentive planners like them so much.

How Are They Used?

• To recognize performance 70.2%
• As sales incentives 48.6%
• As business gifts 29.3%
• As non-sales recognition awards 30.4%
• As spot rewards 30.4%
• As years of service awards 47.6%
• For consumer promotions 14.9%
• As safety awards 9.9% • As dealer incentives 9.4%
• Wellness programs 6.6%
• To start/maintain business relationship (referrals) 6.1%

 Why Do Incentive Planners Like Them?

• Ease of administration
• Broad audience appeal
• Redemption & flexibility
• Perceived value Cost effectiveness
• Lasting appeal
• Backend ROI Tracking

Click here for a one page flyer on our five delivery methods to use gift cards in your company.

Why Gift Cards are More Compelling than Cash as Employee Awards

 

Executive responses to a recent Incentive Federation study on employee incentives showed that merchandise and travel are more compelling than cash as employee awards.  And specifically in the merchandise category gift cards were the most popular awards. 

The reasons most incentive planners feel why gift cards are more effective were listed as:

1. Trophy value: Gift card purchases are more memorable – they create a lasting reminder of achievement.

2. Viral value: Employees tell each other how they redeemed gift cards.

3. More discrete: It’s polite to mention non-cash awards.

4. True gift perception: Gift cards are not viewed as part of compensation.

5. Universal benefits: Gift cards combine the benefits of merchandise with the benefits of cash.

6. Guilt-free spending: Recipients don’t feel guilty treating themselves.

7. More likely to improve work performance: Studies show that cash doesn’t improve work performance – gift cards do.

8. Family support: Because the participant’s family is involved in selecting awards – they’re more likely to support the participant’s goals.

9. Pleasing loved ones: There is a strong motivation to earn an award for one’s significant other

10. Long-term positive feelings toward organization: Gift cards reinforce positive associations with sponsoring organizations.

To review the entire research click here.

2020 Employee Gift Card Research

Gift cards remain the most popular employee award to use in incentive and recognition programs.  Not only are they most sought by the employees themselves, over 75% of industry professional rated them as effective or extremely effective awards. 

Following are other interesting points from the 2020 research recently completed by Incentive Magazine:

• 55% of the companies surveyed use the physical cards, while 39% used both physical and electronic.
• Gift cards are most often used by companies for sales incentives (55%) followed by business gift (49%) service awards (46%) and employee recognition and engagement (45%)
• About 2/3 of the companies purchase their gift cards directly from the retail brand, while 1/3 from incentive suppliers or gift card resellers

Company Budgets

Ave Spend Per Participant	% Spent
Less than $25	10%
$25 to $49	20%
$50 to $99	18%
$100 to $149	16%
$150 to $199	5%
$200 to $499	15%
$500 to $999	8%
More than $1000	8%

Compared to Cash Awards	%
Equally as Effective	39%
Less Effective	9%
More Effective	29%
Do Not Use Cash	20%
Not Sure	3%

Compared to Gifts	%
More Effective	59%
Equally Effective	28%
No Not Use Gifts	5%
Less Effective	5%
Not Sure	3%

While many companies still purchase individual brands directly from the retailers, studies have shown that when your employees are given the option, most would rather choose which gift cards they want.

Make the most of your gift card program

(Excerpted in part with permission from National Gift Card Corp.’s white paper “Getting the Most Out of Your Gift Card Program,” www.ngc-group.com/blog/industry-news/getting-the-most-out-of-your-gift-card-program)

When gift cards are referred to as “the reward of choice,” the description comes with solid research. A study by the Incentive Research Foundation (IRF) and the Incentive Gift Card Council (IGCC) found that U.S. businesses spent $22.7 billion on cards for employee incentive and customer loyalty programs. While more than 59% of businesses rely on non-cash rewards, a full 87% of those companies are using gift cards. 

Data from the company's perspective includes: 

• 60% of companies using gift cards favor them for ease of administration
• 59% cite broad audience appeal, 52% for redemption and flexibility
• 48% appreciate a gift card’s perceived value over cash rewards
• More than 75% of gift card program owners believe they “are among the most effective of all rewards – especially in driving loyalty and engagement.” 

Data from the recipient's perspective includes: 

• The largest share of respondents – 44% – say gift cards, not cash, are their favorite award type
• They appreciate the redemption flexibility gift cards offer: the ability to redeem them in a brick-and-mortar store, at an online retail site, or via a phone order.
• Recipients find gift cards have greater and longer-lasting impact than cash rewards
• More than 79% of the study said they remembered what they purchased with their card
• More than 79% linked that positive memory of the gift back to the people or company that awarded it.

Electronic gift cards are increasingly popular. Through codes delivered via e-mail and mobile devices, they allow for immediate rewards, offer a variety of redemption choices for issuers as well as recipients, and are an environmentally friendly way to deliver awards.

Purchasing gift cards

Sending employees to purchase gift cards at retail locations or “card malls,” while appearing on the surface to be an easy purchase decision, can actually cost a company more than it may realize.  In addition to travel time while it takes only a minute or two to activate a single gift card at a retailer’s point of sale (POS) terminal, the task multiplicity of activating and verifying a large quantity of cards (not to mention dealing with various denominations within the purchase) takes much longer, and could be prone to error.

The grossed up average hourly wage of the above, amortized over the volume of the cards purchased can be substantial.  It can easily amount to over 10% of the purchase.  Other cost considerations would be lost time productivity, actual travel costs, and in particular safety and security concerns.  

Consider using a third party B2B gift card provider to do your gift card sourcing. According to Sales and Marketing Management Magazine (July, 2013), “you get client support, fulfillment services, budget control, cardholder support, and more.” By using an outside source

Most card providers perform this service for fees added to the face amount of the cards purchased.  Ultimate Choice provides this service without fees.  

Choosing a card or cards

You can find almost any gift card imaginable.  So what gift cards should you use?  Do you want to offer just one or two cards, or more?  How many different cards should you offer?  Many companies avoid the entire issue by using an open looped bank card that can be used to make purchases anywhere the card is accepted.  But these cards will have fees as high as 10% of the value especially for lower denominations, and are very difficult to use when combining them with other forms of payment…an occurrence that happens more often than expected. 

In our experience the best motivation for your employees will come when you offer them any card that they want.  If you want them to perform, let them have what they want, instead of what you want them to have.  Using a B2B card provider will do just that.  There are many to choose from.  In your selection process, please include Ultimate Choice, we think we offer the best solution at the absolute best price. 

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

Gift Cards Compared to Cash

Every year Incentive magazine conducts their “Gift Card IQ” research.  One of the questions surveyed was how effective gift cards are compared to cash.

Following is a recap of that research and a comparison of those same questions to 2015.

Question	2016	2015
Gift Cards are More Effective than Cash	40.6%	33.9%
Gift Cards are Equally Effective as Cash	34.3%	40.3%
Gift Cards are Less Effective than Cash	9.8%	3.4%
Do Not Use Cash Rewards	15.3%	22.4%

There was a time, not so long ago that cash was considered king in the recognition and employee engagement field.  Today it is almost non-existent.

Here's just a few of the over 500 gift card brands that we use in our systems:

If you are sourcing your gifts cards and want to view a gift card system that has $ for $ pricing with NO FEE and allows your participant to redeem for over 500 of the most popular brands of gift cards in the country, Ultimate Choice could be the answer.

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

  

How Effective Are Gift Cards As Recognition Awards?

According to recent research on gift cards published by Incentive Magazine 97.6% of all incentive users reporting felt that gift cards were effective, very effective or extremely effective.  Actual research results were:

The diversity of today’s workforce demands something different from the same traditional merchandise awards that were used for their parents and grandparents.

Total Effectiveness of Gift Cards as Employee Awards	% of Responses
Effective	17.6%
Very Effective	48.85%
Extremely Effective	31.2%

By any measure, gift cards are the most effective recognition award for two simple reasons:  

• They provide the greatest choice and value for the award winner
• Unquestionably they give the client the most cost effective means to recognize performance  

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