How Much to Spend on Recognition Programs?

We are often asked how much should be spent on average per recipient in a recognition program.  While there is no hard and fast answer to that, the incentive industry for years presented a formula to clients that were based on the employee’s income and duration of the award program.  If they were trying to motivate the individuals to achieve a outcome that
was quantifiable  based on profits, then the recommendation could have been 5% of income for the period if it was long term (9-12 months) and 10% of income during the program is it was short term (3-4 months). 

Recognition programs that couldn’t be quantified were simply budgeted based on what the company thought they could afford, nothing more.  The more emphasis the company leadership placed on the importance on a culture of positive reinforcement for employees who performed well, the hire the budget per employee.

This dichotomy is one of the single most important differences between incentive programs designed to produce results, and recognition programs that were designed to improve employee satisfaction.  However, drawing a line from satisfied employees the company’s bottom line results has always been difficult to do so it has always been difficult to determine a spend rate for it.

The 2015 Incentive Magazine Gift Card IQ survey asked their respondents how much they budgeted per employee for their recognition programs.  The results were as follows:   

$ Spend Per Recipient	%
Less than $25	11%
$25 to $49	28%
$50 to $99	22%
$100 to $149	17%
$150 to $199	4%
$200 to $499	8%
$500 to $999	5%
$1000 or more	5%

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

Increased Spending on Incentive Gift Cards

After experiencing double digit growth in gift card funding for many years, the Mercator Advisory Group (a payment and consultancy research firm) reports that dollars loaded on retail gift cards declined by 9% in 2015.  However, over the same time frame the report stated that the only segment that had an increase in the dollar load was Employee and Channel Partner Incentives.

The report stated that gift cards as awards for employee and channel incentives remained “easy to deliver and effective.”

It was suggested that the decrease in the retail segment was due to retailers focused on convincing shoppers to favor merchandise with discounts and sales. The retailers steered customers toward buying goods.

 

This news is not surprising to us as we have seen a marked increase in spending on our gift card products.  The gift card segment of the recognition and incentive business has increased exponentially over the last couple of decades.  This was driven by both clients and participants alike.  Clients want a more cost effective and simple way to recognize performance, and participants want the ability to choose the award that suits their own lifestyle. 

The combination of clients increasing the spend on the gift cards and the recipients being able to take advantage the discounts and sales by the retailers, is a definite win-win for incentive and recognition participants.  In addition the value of the merchandise received through gift cards far and away exceeds the value of traditional award merchandise that some companies still use to motivate their employees and channel partners.  

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

Gift Cards and the Recognition & Incentive Industry

Recognition and incentive awards have been used in business from the early 1900's.  They started to become prevalent during the depression when companies had to find a way to motivate performance and recognize years of service at work. In those days they used mainly watches, rings and jewelry.




As the incentive industry grew, the number and types of awards grew as well.  Merchandise of all types and price points and travel were the mainstay of the industry up through the late 1970's.  Then, gift cards were introduced and the awards industry was changed forever.  Even though most traditional award companies did not want to offer gift cards as options, (the profits on gift cards were substantially less than the traditional awards)  program participants demanded them.  Today to stay competitive, award companies have to supply gift cards.

Gift cards have grown to over $125 billion in 2015.  And most companies that have award systems for employees or customers use gift cards for a variety of objectives.  Incentive Magazine in their Dec 2015 issue showed the top reason for using gift cards in programs were:

Used in Incentive Programs	2015
Recognize performance	61.9%
Sales Incentives	45.7%
Business Gifts	34.7%
Service Awards	33.5%
Non-sales recognition awards	25.4%
Consumer promotions	22.0%
Start/maintain business relationships	14.5%
Dealer incentives	9.8%
Safety Awards	7.5%
Spot Awards	26.0%
Wellness Awards	12.1%
Other	4.6%

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