Premium Incentive Overview
The business of premiums and incentives has undergone a sea-change in the last five years, driven by a renewed emphasis on target marketing, customer loyalty, employee retention, and measuring the return-on-investment of marketing.
Suddenly, this 100-year-old plus business has entered the limelight as organizations increasingly seek ways to achieve business objectives by engaging critical audiences, both external and internal.
Here’s an overview of key trends and critical issues in the business and what you as a buyer, either end-user or agency, need to know.
Key Trends
Key market and demographic trends are having a substantial impact on why and how companies motivate customers and employees. Used as part of campaigns to get attention, communicate a message, break through the clutter and reward and recognize, premiums and incentives represent an important part of the external and internal marketing arsenal.
In order to achieve your performance objectives, an incentive program has to cover 10 key steps (See 10 Steps to a Successful Program and Incentive Program Gap Analyzer), only a few of which directly involve the award itself. So the best partner will understand your business objectives and how specific behaviors by specific audiences can help you achieve them.
It is important that the incentive company you choose is knowledgeable and aware of key industry trends, best practices, what’s hot, and that it can create and adapt customized incentive programs for your company (online and offline), fulfill those incentive programs with brand name/quality awards, and provide you with customer support and service to make winners feel special.
Current market trends:
1. Major new focus on internal marketing.
Companies are beginning to recognize in increasing numbers the role their employees play in delivering the brand. Corporations have discovered the power of premiums and incentives to break through the clutter and engage their internal as well as external audiences.
2. Increased focus on targeted, permission-based marketing.
Companies have shifted enormous resources from mass-marketing to target-marketing, and to getting consumers to sign up to receive information, preferably by e-mail. Targeted, one-to-one marketing requires incentives to both attract people and keep them loyal and willing to accept e-mail and other direct marketing. Incentives can play a key role.
3. Increased use of ad hoc recognition awards and gifts for employees.
More and more concrete research (See Our Favorite Industry Resources) demonstrates the impact of properly structured recognition programs. There is a growing recognition of the science and sophisticated issues underlying incentive and recognition design.
4. Increased appreciation by clients for award presentation.
As companies better understand the value of recognition and rewards, their understanding of the need for proper presentation, personalization, etc., creates demand for boutique-type fulfillment companies who can make sure it’s done right. How awards are presented is considered a key best practice by the National Association of Employee Recognition.
5. Increased use of gift cards.
There is a growing use of gift cards in incentive programs. Convenience, ease of use and administration, plus the range of 'choice' can make gift cards the solution for awards programs. Steps can be taken to make sure your gift card program is perceived as recognition and not compensation.
6. Growth of online incentive technology.
The ability for the Internet to provide real-time results and return-on-investment tracking is driving a revolution in the measurement and implementation of incentive programs. The technology has helped transform incentive programs into highly measurable target marketing programs with an unprecedented level of measurability. Often overlooked: the communication, training, and engagement power of online incentive programs.
7. Sarbanes-Oxley has put focus on accountability.
Corporate executives feel more pressure than ever to account for their activities, and no where is the pressure growing faster than in the sales marketing world. Companies need to keep accurate tracking and justification of their marketing expenditures and incentive programs need to demonstrate measurable solutions in order to provide rationale for further development in this area.
8. Loyalty programs proliferate.
In the old days, loyalty programs were a novelty and fairly infrequent. Today, they are part of an effort to get a target audience to engage and pay attention to a message. That, coupled with the ease with which point of sale and customer relationship management systems can manage customer and prospect data, marketers have a powerful reason to invest in identifying people willing to listen.
9. Businesses have a new respect for the role of rewards and recognition.
A decade ago, the use of noncash awards was reserved mainly for the sales and marketing organizations, with little application in the employee arena. Today, managers actually prefer non cash awards when it comes to achieving specific goals, according to two separate surveys recently published on the use of noncash awards. Go to http://www.incentivecentral.org, Incentive Federation 2005 study.
10. Perceived value is key.
One of the key reasons cited for using noncash awards (especially merchandise) is the ability to communicate a message and break through the clutter to build a lasting bond with a target audience. The more value you want to convey, the more you want to consider brand names.
Critical Issues
Now that premiums, incentives, and rewards and recognition have become such an important part of the marketing arsenal, it’s important to take them seriously. Because, while research provides compelling proof of the impact of incentive programs (See Top 10 Most Valuable Resources), it also suggests that these programs, like any marketing technique, can backfire if not properly planned. We have provided a longer article on the “10 Steps to a Successful Program.” In the meantime, here’s a list of critical issues to look for when planning a program.
1. Strategic planning. Many people in business prefer to shoot from the hip rather than develop a formal plan with goals, measurable objectives, with strategies, plans, etc. Strategic planning takes more time up front, but the discipline pays off in more measurable results.
2. Rules structure. No matter what the audience of your program—consumers, salespeople, channel partners, or employees—the qualifying structure is critical to make sure people have attainable goals and there are no loop holes.
3. Award selection. The awards you select are similar to the media you choose for your advertising; they make a major statement about your organization and its understanding of its target audience. If the program involves consumers, you also have to consider government regulations, and you always want to choose suppliers you can trust to deliver the right awards on time to the right people, even if redemption occurs long after the program began.
4. Communication and training. Remarkably, many incentive programs overlook the powerful communication and training opportunities afforded by incentive programs, which tend to foster a higher level of engagement than almost any other type of marketing program. Make sure you take full advantage of your incentive program not only to tout the awards but also the skills and attitude people will need to win.
5. Measurement. One of the great benefits of incentive programs? Measurability. Yet, surveys have shown that less than half have any formal results measures. You can get more mileage out of your programs by taking advantage of the fact that they usually involve a highly defined audience with built-in tracking of behaviors, so you can usually find out whether in fact people changed their behaviors.