How Does Your Incentive or Loyalty Program Measure Up?

 

Executives want to know what they can expect in return for investing in an incentive, B2B, channel or loyalty reward program. That is a fair question, and one that the incentive industry have had trouble answering succinctly. We can pull from dozens of published case studies and examples, but these are best-case scenarios and not necessarily helpful in setting a minimum expectation — we need a baseline.

The following results come from research conducted and published in the Sept 2021 edition of Sales & Marketing magazine showed some things that could be foundational for program baselines.  Respondents for this survey included program owners and managers from sponsoring brands, as well as design strategists and program directors from companies that provide incentive solutions.

Q: What Kind of Results Can you Expect from Your Incentive Program?

• ·          9 out of 10 Programs Achieve 5-10% Year over Year program lift

o   2/3 of well-designed programs achieve greater than 10% incremental lift

• ·       82% of programs increased retention by 5-10%

o   Half of the expert respondents cited greater than 10%

• ·       90% of the programs achieved ROI’s 2:1 to 4:1

o   One in three of well-designed exceeded a 4:  ROI

With these findings, what is the reason that so many companies implement their own non-cash incentive programs without the assistance of industry design strategists and specialists?  In our opinion the reason is the vast majority of incentive reward companies are devoid of great strategists.  It simply costs too much money to keep them when they have such a difficult time being competitive.  Today you are more likely to have a seasoned veteran of industry calling on you charged with selling you just the “prizes”, which is where most of the budget is.   

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.

Incentive Research Federation Study on Incentives in the Tech Industry

A recent study conducted by the Incentive Research Foundation found that the top performing technology firms are twice as likely to use employee reward and recognition programs as a competitive advantage over competition.  Top performing firms were classified as those that demonstrated more than a 5 percent increase in revenue or stock price in 2018. Of the 118 technology companies reviewed, only 49 organizations made the cut. 

Other findings of how these companies use reward and recognition compared to average performers include: 

·       22 percent are more likely to structure their programs with the goal of reaching each participant versus only recognizing the top performing participants.

·       25 percent are more likely to look to outside partners for expertise on the best ways to recognize and incentivize their program participants.

·       They spend an average of $6,833 per person for their sales incentive trips, while average firms shell out an average of $6,000 per participant.

·       21 percent are more likely than those at average performing firms to use financial metrics as program qualifiers.

·       They spend about 6.7 percent of participant income in annual spend for rewards and recognition.

·       They award a value of $4,292 on average to their top performers and $2,685 to their average performers in award points, merchandise and gift cards.

·       20 percent are more likely to offer a top performer sales award, with 23 percent of them having that award include a group trip.

·       13 percent award a variable versus fixed number of winners.

·       14 percent have their awardees earn automatically on predefined goals versus committee selection intervention.

·       9 percent are more likely to include achieving 100 percent of the predefined goal to qualify for a trip versus requiring their sales people to exceed their goal. 

·       19 percent are more likely to provide simple rules for their program. 

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

Effective Design Patterns for Employee Recognition Programs

Based on research from the Incentive Research Foundation, the majority of top performing companies in U.S. (those with the highest revenue growth, customer satisfaction, and employee satisfaction) are now using non-cash awards as a competitive advantage.  Based on this, the IRF analyzed several years of relevant research to identify the most noteworthy design elements that make these programs effective. The study looked at the design patterns of two main incentive type programs, employees and sales.  This post looks at the design patterns for employee programs.

EMPLOYEE RECOGNiTION AND REWARD PROGRAMS

Non-Core Job Roles

Organizations increasingly ask employees to take on additional roles and responsibilities that fall outside of their primary job duties (running innovation teams, increasing personal wellness, training other employees, increasing productivity, learning new techniques, etc.).  As these non-core roles do not typically fall under traditional compensation systems, companies are seeking non-cash recognition to award employees for this new engagement. 

Setting Program Objectives: Focus on Goals

Fifty years ago non-cash award programs were targeted primarily at two behaviors: safety and years of service.  Businesses now have a wide range of primary objectives with  their employee rewards programs aimed at achieving those objectives:

·       84% improving morale

·       58% improving productivity

·       48% improving customer satisfaction

·       41% recognizing years of service

·       28% promoting innovation

·       23% promoting wellness

·       14% promoting safety

·       9% rewarding training completion

·       8% promoting cost control

Determining Who Gets Rewarded: Reach is Key

The two key design priorities for these programs, by far, were making sure a program rewards the right people.  This was followed by a focus on ensuring the programs make recognition a part of the day-to-day activities.  These programs have shifted over time away from rewarding just the truly exceptional performance to as many solid-performing employees as possible…motivating the middle 80% to reach to improved performance.  

Developing Rules Structures: Goal-Driven

Of the top companies reporting, 68% used individual goal based earning schedules with awards earned at goal attainment.  In addition, 67% used top performing structures for individuals, 58% for team performance and 55% use discretionary awards.  39% of companies still use service anniversary milestone programs and 34% use nominated structures (person of the month etc.)

Top performing companies were significantly more likely to have goal-driven programs and significantly less like to have service anniversary programs. 

Measuring Effectiveness: Leverage Multiple Metrics

Research shows that top performing companies leverage analytics more than their average performing counterparts to measure program effectiveness. The top three performance metrics used were:

·       73% used productivity

·       49% used retention

·       49% used employee satisfaction

Funding the Program: Bottom Up

Most companies use bottom up budgeting and form total budgets from a % of participant income.  The exact budget % varies greatly by organization size and focus of the program. A small % of the budgets are developed top down by executives determining a budget number based on prior year spending adjusted by overall financial performance. 

On average, employees can expect to receive between $150 and $170 in non-cash awards on a annual basis.

Supporting the Program: Reach Outside

The study reports that the vast majority of businesses (two-thirds of more) use suppliers for awards and almost half look to suppliers for expertise in the best ways to recognize or motivate participants.

Program Consolidation: Key Design Pattern

42% of the companies have a consolidated program across the company but more than half the top companies having multiple programs. 

Determining Awards: Mix it Up

The most prevalent types of awards in employee programs are:

·       71% Gift cards

·       38% Merchandise

·       36% Travel

Over 80% of companies use more than one award with many using three to four types.

Administration: Investment in Tech and Communications

The research indicates that top performing organizations allocate a significant portion of their budget to design and operation (estimated at 49% of the total budget on average.)  As two-thirds of the respondents put program communications into broader companywide communications, some the estimated 49% may be a part of companywide budgets. 

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

Collection of Compelling Research on Employee Recognition

Over the last few years we have collected many quotes on statistics about employee recognition and employee engagement.  Taken as a whole they seem to be formidable evidence that employee recognition is a valid business strategy.  Viewed one at a time most of these would require additional facts to determine if employee recognition was a valid way to improve engagement.  Viewed collectively however they certainly make a valid argument why your organization should consider employee recognition.

Here are a few of those quotes tats that we feel have merit when considering a program for your company:

“Career opportunities, recognition, and organization reputation are consistently top engagement drivers.” (Aon Hewitt, Trends in Global Employee Engagement)

“The number-one reason most Americans leave their jobs is that they don’t feel appreciated. In fact, 65% of people surveyed said they got no recognition for good work last year” (Gallup, Tom Rath and Donald Clifton, How Full Is Your Bucket? Positive Strategies for Work and Life)

“Organizations with recognition programs which are highly effective at enabling employee engagement had 31% lower voluntary turnover than organizations with ineffective recognition programs.” (Bersin by Deloitte, The State of Employee Recognition)

“Only 14% of organizations provide managers with the necessary tools for rewards and recognition.” (Aberdeen Group, The Power of Employee Recognition, 2013)

“60% of Best-in-Class organizations stated that employee recognition is extremely valuable in driving individual performance.” (Aberdeen Group, The Power of Employee Recognition)

“41% of companies that use peer-to-peer recognition have seen marked positive increases in customer satisfaction.” (SHRM/Globoforce Employee Recognition Survey)

“46% of senior managers view recognition programs as an investment rather than an expense." (WorldatWork, Trends in Employee Recognition)

“Being able to track the effectiveness of engagement and recognition efforts can help organizations better align engagement with business objectives and improve performance.” “43% of Best-in-Class organizations have access to metrics on recognition efforts, compared to 18% of All Others.” (Aberdeen Group, The Power of Employee Recognition)

“Companies with strategic recognition reported a mean employee turnover rate that is 23.4% lower than retention at companies without any recognition program.” (SHRM/Globoforce Employee Recognition Survey)

In 2013, “67% of Best-in-Class organizations have a formal recognition program in place, compared to 58% of Best-in-Class organizations in 2012.” (Aberdeen Group, The Power of Employee Recognition)

"In those environments where opportunity and well-being are part of the culture, strong manager performance in recognizing employee performance increases engagement by almost 60%." (Towers Watson, Turbocharging Employee Engagement: The Power of Recognition From Managers)

"Organizations with the most sophisticated recognition practices are 12 times more likely to have strong business outcomes." (Bersin by Deloitte, The State of Employee Recognition)

"Peer-to-peer recognition is 35.7% more likely to have a positive impact on financial results than manager-only recognition."   (SHRM/Globoforce Employee Recognition Survey)

"Praise and commendation from managers was rated the top motivator for performance, beating out other noncash and financial incentives, by a majority of workers (67%)" (McKinsey Motivating People, Getting Beyond Money)

"Organizations invest in recognition in a big way – spending roughly 1% of payroll on recognition activities." (WorldatWork, Trends in Employee Recognition)

"When companies spend 1% or more of payroll on recognition, 85% see a positive impact on engagement."  (SHRM/Globoforce Employee Recognition Survey)

"In those organizations in which individual employees or teams are recognized, the entity’s average core for employee results was approximately 14% higher than in organizations in which recognition does not occur." (Bersin by Deloitte, The State of Employee Recognition)

"Recognition is an important psychological need. Employees who know that they will receive recognition for acting on the brand promise will have a strong incentive to do so". (Gallup, State of the American Workplace)

"Our research finds that those organizations with the most mature employee recognition approach are 12 times more likely to have strong business results" (Bersin by Deloitte, The Employee Recognition Maturity Model)

"When asked what leaders could do more of to improve engagement, 58% of respondents replied “Give recognition.” (Psychometrics, A Study of Employee Engagement in the Canadian Workplace)

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