In this our previous articles, we’ve covered:
- What incentives are
- The concept of behavior modification
- Incentive rewards vs. employee recognition
- ROI of incentive programs
- Training and orientation
- Incentives for independent sales reps, employees, and customers
- Customer loyalty programs
- Incentive delivery mechanisms including prepaid debit cards, reloadable debit cards, virtual debit cards, and merchandise & travel
- What to look for (and what to avoid) in a bank
- Designing an incentive program
- The ins and outs of web portals
- Working with an outside management partner
- The cost of incentive programs
- Incentive tax implications
- Issuing incentive payments to independent salespeople
- Successfully launching a program
That’s a lot of information, and you deserve a pat on the back for absorbing all of it. But before we wrap up, we want to take the time to offer some closing tips and best practices when it comes to running a successful incentive program.
While not exhaustive, the following best practices are things that we’ve found to be important across the board for our clients over the years. Whether your company is large or small—and regardless of what industry you’re in—the following tips should be helpful in maximizing the potential ROI of your incentive program.
Ready? Let’s take a look.
Be Consistent, but Keep Things Fresh
We know, we know—that’s contradictory advice. But hear us out on this one.
On the one hand, consistency is a key factor in determining the success of your incentive program. If you communicate your rewards clearly and keep your program consistent, you’ll have a much better chance of reaching your goals than if your program is perceived as inconsistent or poorly put together.
What does this look like in practice? One area we see incentive programs falter is the delivery of rewards. When a program first launches, reward recipients might receive their incentive within a couple of weeks. But a year into the program, things have begun to unravel. Now, when an employee or independent sale rep submits a request for a reward, it takes two months for them to receive it due to corporate complacency. In the meantime, they end up calling customer service or sending a frustrated email asking why they haven’t received their reward yet. This literally creates the opposite of brand affinity, as it creates more work for the person in question and also gives them the impression that your organization doesn’t have it together.
We’ve also seen companies institute massive rule and program overhauls in a way that alienates program participants. It’s normal to make small changes to incentives and rules as you go, but completely rebuilding a program from the ground up tends to present some major challenges in terms of retention and program participation. This is one reason to ensure that you go to the trouble of thoroughly designing your program and laying everything out ahead of time. The more work you put into planning things prior to launch, the less likely it is that you’ll need to overhaul your program later.
All of this being said, remember that staying consistent doesn’t imply being monotonous. It’s a good idea to keep things fresh. If you’re using a web portal, you can add new merchandise and travel options on an annual, quarterly, or even monthly basis. These sorts of changes can be a good thing, as they give you a reason to remind program participants of the rewards available to them.
Take the Stairs
If you’re the sort of person who’s trying to stay in shape and work in 10,000 steps per day, you’ve likely heard that it’s a good idea to take the stairs. We’re giving you the same advice here. Well, sort of.
All joking aside, we recommend implementing a stair-step approach to your incentive program. What does this mean? Essentially, a stair-step approach implies that the higher a program participant’s sales numbers go, the more they’ll be able to earn in terms of rewards. This isn’t just linear, though. We’re not simply saying that more sales should equal more rewards. Instead, higher tiers of sales should correspond to higher tiers of rewards.
For example, say that a salesperson manages to sell 10 products in a year. If so, they’re entitled to $100 in rewards. But for the next 10 products that they sell in that same year, they receive $150 in rewards. And if they manage to sell an additional 10 products, they’ll get $200 in rewards for that final ten. This can continue on to whatever degree seems reasonable based on your goals, budget, and organization.
The implications of this are huge, and we’ve seen it work incredibly well for our clients. With a linear 1:1 reward program, there’s less and less incentive for a salesperson to sell more once they’ve reached a certain threshold. They’ve worked hard, they’ve gotten their rewards, and the fact that the year is coming to a close does nothing to motivate them to work harder. With a stair step reward program, though, the opposite is true. The more they sell, the greater their incentive to break through to the next reward level. This can be extremely effective toward the end of the year, when salespeople will push themselves to reach the highest reward level possible before things reset on January 1st.
This tactic isn’t just highly effective. It’s also easier to implement than you might think. With an online reward portal, all of this can be automated. You won’t have to worry about manually calculating these sorts of rewards for each and every employee, which makes this strategy even more viable.
Spin & Win
Gamification is a great way to get people excited about something. People like to have fun and turning something into a game is a great way to make it fun. Not all audiences and demographics respond well to gamification, of course, so it’s important to know your program participants and act accordingly.
Setting up random rewards in a “spin & win” format can create major excitement and anticipation—especially if there’s large variance in reward amounts. For example, the average reward could be something like $100, but amounts could vary from as low as $25 to as much as $10,000. If hitting a certain sales threshold allows your program participants the opportunity to potentially earn that $10,000 bonus, you’ll find that some of them will work harder for that chance than for a guaranteed (but significantly lower) amount.
Keep It Simple
We’ve laid out a lot of different strategies for setting up incentive programs. But while there are certainly plenty of varying approaches that you might take to setting up and running a program—much of which is determined by the needs of your organization and the type of audience you’re targeting—we can safely say that all of these programs should have one thing in common. They need to be simple to understand and participate in.
This may sound like obvious advice, but you have to remember that your program participants are busy people with a million different things floating around in their minds. If your program’s website is confusing, or if the rules seem complicated, they’re simply going to ignore it. If you send out an email that’s thousands of words long and asks them to jump through a dozen hoops in order to get their rewards, they’re probably not going to participate in your program.
The easier it is for participants to take part in your incentive program, the better. Similarly, the more automation there is on your end, the less work there will be, and the less room for error in the long run. Automation is your friend and using a web portal is a great way to automate things.
Communication is Key
As you’ll recall from the Behavior Modification article , the purpose of an incentive program is to modify the behavior of your target audience. But in order to modify the behavior of your employees (or customers, or independent sales reps), your target audience needs to know what your program is, what’s being offered, how to participate, and when they’ll receive their rewards. And they can’t know these things if you don’t communicate them.
This may sound like an obvious statement, but we’ve seen companies running incentive programs where communication was an afterthought at best. Program participants were confused about how the rewards on offer actually worked, and some people had the impression that the program was derelict or defunct. By communicating regularly with your target audience, you’re keeping your incentive program top-of-mind and ensuring that they stay motivated to participate.
We’ve found that monthly is a good frequency for sending out notifications and updates, although quarterly might be an option in some cases. There’s one caveat here, though. More communication isn’t always better. At some point, the law of diminishing returns starts to apply. And beyond a certain threshold, you’ll likely find that your email open rates decline significantly. Sending out emails every single day, for example, is unnecessary for making announcements relevant to your incentive program. They’ll be packed with filler, and people will ignore them. Then, when it comes time to make an important announcement—such as something related to new merchandise on your web portal, or new rules for the program—you’ll find that most recipients fail to open the email.
Simply put, communicate clearly, concisely, and regularly—but not so frequently that your program participants start to tune you out. Keep an eye on your email open rates and adjust your frequency accordingly.
Make It Worth Their While
As we discussed in an earlier article, different employees are motivated by different things. Some employees just have a solid work ethic, while others work harder as a result of positive feedback and customer interaction.
People in sales, meanwhile, tend to be driven primarily by earning potential. Sure, salespeople are motivated by other factors, too. But at the end of the day, sales is a tough and exhausting job. People don’t do it just because they love interacting with customers, or because they like to travel (as many regional sales reps are required to do). They do it because their potential for earnings is virtually unlimited.
With that in mind, an effective incentive program targeted at salespeople has to be perceived as worth their while in order to be effective. If the rewards aren’t commensurate in their minds with the amount of time and energy that they’ll have to expend to achieve a specific sales goal (and to participate in the program), then they’ll be unlikely to take part.
Much of this has to do with the value of your rewards in comparison to the value of the items being sold, along with the amount of time involved in closing a sale. For example, offering a $10 reward per sale to a sales rep at a car dealership with the aim of incentivizing them to sell more of your company’s luxury car model isn’t going to work. This may sound obvious, but we’ve seen some grossly mismatched incentive programs over the years.
The opposite of this is true, too, of course. It’s certainly possible to over-reward program participants. By spending too much on rewards relative to the total revenue generated will simply cut into your return on investment.
The key here, then, is balance. Your goal is to find the sweet spot. You want a reward amount that creates optimal levels of motivation and participation on the one hand, while simultaneously maximizing your ROI on the other. If you can find that balance, the likelihood of your program being successful increases exponentially.
Remember the Incentives vs. Recognition Distinction
Employee Incentive Rewards Vs. Recognition Awards article considered the differences between incentive rewards on the one hand and recognition awards on the other. It’s important to keep this distinction in mind when designing your program. So let’s review.
Incentives are used to modify behavior. In this sense, they’re almost always forward-looking. You’re setting clearly defined goals that you want your employees to hit and rewarding them once they hit those goals.
Employee recognition awards, on the other hand, are more backward-looking. More often than not, recognition awards aren’t something that employees are actively working to achieve. Maybe the details of such an award aren’t even announced in advance, and receiving the award is a surprise for the employees involved.
Even when recognition awards are forward-looking in the form of an announced competition, they’re still different from incentives. Where incentives are made available to everyone, recognition awards are by definition limited to a specific number of employees. Think of it this way: While an incentive reward might involve paying out a specific dollar amount in the form of a prepaid debit card to any employee who crosses a specific sales threshold, a recognition award might be given to the top 3 salespeople at your company.
What are the consequences of this? Incentive rewards motivate your whole team. Everyone stands a chance (in theory, at least) of receiving the incentive, and the performances of other people in the organization has nothing to do with their ability to receive the reward in question.
With recognition awards, though, things are different. When the award is first announced—say at the beginning of a quarter—everyone has an equal chance of winning the award. But toward the end of the quarter, only the top handful of salespeople will remain in the running to win. Maybe your top six or seven salespeople all stand a legitimate chance of ending up in spots one through three at the end of the quarter. Meanwhile, the other 20 or 30 salespeople on your team are way too far behind. So, what happens? While the handful of people at the top will all work extra hard to either pull ahead or maintain their lead, the rest of your team doesn’t receive any extra motivation. They’re totally out of the running anyway, which means they have no reason to work harder at the end of the quarter.
So, what’s the takeaway here? At the end of the day, incentive rewards and recognition awards both have their advantages and disadvantages. That’s why it’s so effective to use them in combination, and we recommend doing so whenever possible. But regardless of which type of program you’re launching (or if you’re launching both at the same time), the important thing is to be clear on the differences. That way, you’ll be able to clearly communicate the nature of your program to its potential participants.
Focus on Your Goals
We’ve talked throughout this article about the different ways you can design, implement, and run a successful incentive, rebate, or loyalty program. Want to boost customer satisfaction? Incentivize your customer support team. Need to increase sales of a particular product via third-party dealers? Create an incentive program for independent salespeople. Looking to reward your customers without using discounts and coupons? Offer them a product rebate.
Whatever it is you’re looking to accomplish—be it higher sales, happier customers, or whatever else—incentive programs are highly effective tools. But in order for them to work, you have to be clear on what your goals are.
You’d be surprised at how often we’ve seen incentive programs in place without any clear goal in mind. Companies will regularly launch incentive programs without a solid sense of what they’re trying to accomplish, and this leads to an inability to really measure ROI. It’s not enough to simply say that you want to increase sales, either. In order to help you design the right program, your incentives partner should challenge you for answers to questions that ferret out the real goal of the project. How much do you want to increase sales? What are you spending on the incentive program? What does success look like to you? What sort of opportunity cost is involved in launching and running the program? Meaningful answers to these questions are goal-dependent. The clearer your goals are from the beginning, the easier it will be to measure success every step of the way.
We should also stress here that understanding goals isn’t simply a matter of laying out numbers in a spreadsheet. Remember that the ultimate objective of any incentive program isn’t simply the achievement of certain sales numbers or customer service feedback scores. Rather, the objective is behavior modification. Whether we’re talking about employees, independent salespeople, or customers, you’re not just trying to reach certain benchmarks—you’re trying to modify the ongoing behavior of individual people.
Keeping this reality in mind is essential if you want to actually do things like increase sales or customer lifetime value, because it’s human behavior modification that’s going to result in the ROI you’re looking for. This means that your incentive program has to actually speak to the people you’re looking to motivate, whether it’s a sales team, a customer support team, your customers, or someone else. If you’re conscious of what’s going to motivate a particular audience, you’re much more likely to design an incentive program that delivers the results you’re looking for.
Do Your Homework
In one sense, incentive programs are quite simple. You’re looking to modify specific behaviors in order to achieve certain goals, and the necessary reward mechanisms don’t have to be complicated.
At the same time, though, an effective program can be quite complex. There are a ton of moving pieces involved. If you don’t invest enough time up front in planning your program ahead of time, it’s highly unlikely that you’ll reach the goals you set out to achieve.
With this in mind, it’s important to do your homework before jumping in and launching an incentive program. First, you’ll want to identify the key players involved in your program. This can include independent salespeople, department heads, employees, managers, administrators, and anyone else with a role to play. Next, you’ll want to define your goals as discussed above. From there, you’ve got to set reasonable expectations for your program. And lastly, it’s essential that you create a detailed timeline leading up to program launch.
All of this requires a lot of time and dedication. An incentive program isn’t something you can pull together overnight. By giving yourself time and space to do your homework, you’ll be setting yourself up for success.
Don’t Overlook Security
Unless you’re an IT security specialist, you’re probably not an expert when it comes to data security. Starting at the top, let’s define the most important aspect to remember: The safety and security of your participants’ personal data must be your #1 priority. If personal data is breached, you and your organization could be in serious trouble. But don’t fear, there are a few common safeguards to remember. That said, we’re not going to cover everything about program security here, but we want to highlight a few important aspects to consider.
First, make sure that your server is running a modern operating system, and is managed by a proven third party with demonstrated success in network security. This server should come bundled with common sense security features such as a firewall and virus scanning. The web portal itself should be running modern code with common safeguards against hacks, code injections and other attacks.
Second, consider the data that you want to encrypt on the database. At a minimum, you’ll want to encrypt your participants’ Social Security numbers and passwords. You’ll likely want to consider encrypting their home addresses and phone numbers as well. This is the most sensitive information. What does encrypting mean? It means that even if your server were breached somehow, the offending party would have almost zero chance of decrypting (read: understanding) the encrypted data. In fact, encrypted data should also mean that program management also won’t be able to see this information without an advanced developer and a security key involved.
Finally, don’t forget the security of offline data as it’s equally important. In fact, in recent years, it’s become more common for our clients to prefer a purely online, server-based information flow. What does this mean? It means that reports aren’t downloaded or emailed to individual workstations, they’re simply accessed securely online. Payment files are handled securely with SSL APIs rather than downloading and re-uploading. This advice might sound somewhat counterintuitive, but the rationale is this: Most servers are more secure today than individual workstations. And considering how many workstations are now portable (laptops and tablets), the entire machine could be stolen and all of the data would be exposed.
This is a very high-level overview of security. Typically these incentive programs aren’t major targets for attacks, but you’ll want to just be mindful that your IT team and your management partner are paying attention to security.
Be Careful When Choosing a Bank
Finding a bank that’s willing to work with you on an incentive program can be a challenge. Most banks don’t offer the sorts of services you need. For this reason, it can be tempting to jump on board with the first bank you find that’s reasonably priced and ready to move forward with your program.
But as we mentioned in that same article, this would be a huge mistake. We learned the hard way that there are some seriously questionable “banking partners” out there. That’s why it’s essential to check references and ask tough questions before entering into any sort of an agreement. If you get a bad feeling from a bank, there’s probably a good reason why. Trust your intuition here. And if you get a bad reference from one of the bank’s past clients, it’s better to walk away and look elsewhere.
Ultimately, you want to find a banking partner with lots of incentive experience and strong references. If you can find a bank that fits the bill from the very beginning, you’ll save yourself a lot of potential headache down the road. Remember, it is your brand that will bear the burden of any misfortune.
Work with a Management Partner
Working with a management partner talked about the advantages of working with an outside firm to design and implement your incentive program. While this isn’t absolutely essential, we highly recommend it—especially if this is your first attempt at creating a program.
Why work with a management partner? There are a few reasons. First, as we mentioned above, incentive programs are complex. There’s a steep learning curve involved. If you’ve never run a program on your own, going from zero knowledge to successfully implementing your first program is going to be challenging.
Secondly, an outside firm can save you quite a bit of money. While you might be tempted to run a program on your own under the assumption that you’ll be able to cut costs, this is rarely what ends up happening. You think you’ll save money by keeping things in house, sure. But in reality, the number of unanticipated expenses quickly grows… and before you know it, you’re spending much more than if you’d simply gone with an outside firm to begin with. Remember that a dedicated incentive firm will have practices and efficiencies in place ahead of time that can translate to cost savings. Plus, they won’t be making the sort of costly first-timer mistakes that you’ll be prone to making.
Lastly, there are a ton of roles involved in running an incentive program. You’ve got to think about sales, creative, administration, customer service, financials, and more. Do you really have the staff to dedicate to these tasks? Can you afford to distract your existing team members with these added responsibilities? If the answer isn’t a resounding “yes,” then an external firm is probably the better choice.