There’s no reason to simply limit your reward options to cash, though. In fact, we would argue that only offering cash incentives to your employees is a major mistake. While you might think that cash rewards would be the most desirable for recipients, the data actually shows that merchandise and travel provide greater employee satisfaction and lead to higher ROI.

We’ll take a look at incorporating merchandise and travel into your incentive program, examining the relative advantages of merchandise and travel over cash, how to implement merchandise and travel into your incentive program, what items to offer, and some tips on how to leverage the power of these incentive types to their fullest. We’ll also discuss how powerful these types of incentives can be when it comes to strengthening brand affinity.

Cash or Merchandise and Travel?

Before we go any further, let’s address the elephant in the room. Why are merchandise and travel actually desirable when compared to cash? Does it make sense to even think about offering them?

On the one hand, there’s no question that merchandise and travel rewards are more “fun” than simply receiving a debit card. A flat screen TV? A romantic Alaskan cruise? Those are exciting prospects. A debit card that you might end up using for groceries and gas? Helpful, yes. Important, yes. But fun? Not so much. 

Still, conventional wisdom would dictate that the average person prefers a cash reward to a merchandise- or travel-based reward. It’s understandable to be a little skeptical of how these kinds of rewards might be received by employees, especially in comparison to cash offerings. The odds are good that you self-identify as someone who would take the cash if given the option between the two. And in fact, a study conducted by Hein & Alonzo and featured in Incentive magazine confirms the likelihood of this. When asked whether they would prefer $1,500 in cash, a travel reward worth $1,500, or a merchandise reward worth $1,500, 79% of respondents say they’d prefer the cash.

Why, then, would anyone opt to go with a merchandise and travel-focused incentive program rather than simply issuing prepaid branded debit cards to their employees? What advantage could there possibly be, especially when nearly 8 out of 10 employees clearly indicate they would just prefer cash rather than a cruise or a TV?

As we demonstrated early on in this article , incentives can be complicated. Not because of anything inherently complex about incentives, of course. In fact, we’ve shown time and again that incentive programs can be incredibly simple to implement. The complications arise, however, because incentives must be designed to fit with human behavior. Human behavior can be anything but straightforward.

While 79% of people might claim they prefer cash to other forms of rewards, the numbers change significantly when we look at how people actually respond once they’ve received the reward.

In a study published in the Journal of Economic PsychologyShaffer & Arkes presented three groups of respondents with three separate options. Each group was given the same base scenario: They’re a new college graduate at an entry level job, and they’re about to receive an end-of-year bonus reward. In this hypothetical scenario, only about 50% of employees are receiving the reward, as the other 50% failed to qualify.

Group 1 is told that they will be receiving a cash bonus worth $1,500 after taxes. Group 2 is given the option to choose from among 5 luxury merchandise and travel rewards, including a big screen TV, a cruise, and a top-of-the-line home audio system. Group 3 also gets to choose a reward, but is given a much more mundane, utilitarian selection, including a washer and dryer set and a one-year supply of gas. The participants in groups 2 and 3 received no mention of a cash bonus and weren’t given the option of choosing cash over a tangible reward. However, they were told that each of the items on the reward list was worth approximately $1,500.

Each group was then asked to rate how satisfied there were with their bonus on a scale of 1 to 7, with 1 being extremely dissatisfied and 7 being extremely satisfied. The cash group rated their satisfaction as a 5, while groups 2 and 3 both rated their satisfaction as a 6. Groups 2 and 3 then were presented with a cash option and asked how likely they would be to choose the cash instead of the tangible reward on a scale of 1 to 7 (1 being extremely likely to choose the cash, and 7 being extremely likely to choose the merchandise or travel reward). Group 3 (the utilitarian reward group) gave an average response of 4 (meaning they had no preference between cash and merchandise or travel), group 2 responded with a median preference of 2, meaning they were very likely to choose cash over a tangible reward.

Consider for a moment what this means. Even though group 2 was measurably happier than group 1, they would still choose cash if given the option. This means that particularly when it comes to luxury rewards, people may only be more satisfied with their reward outcome if they’re not also given the option of cash. If they are, they’re much more likely to take the cash than the tangible reward—even though it will result in them being less satisfied than someone receiving a cruise or a new TV.

The data doesn’t stop there, though. It’s not just about employee preference, after all. Return on investment is important, too. So, which option results in better ROI?

Given that merchandise- and travel-reward options would seemingly be more complex to offer to employees than a simple prepaid debit card, one might conclude that the ROI for these options is bound to be lower. In fact, though, the opposite is often true.

A marketing executive at Goodyear Tire & Rubber wanted to determine which form of incentive would result in a better ROI with salespeople. He designed a sales incentive program for managers and sales associates at 900 stores nationwide. The stores were then divided into two groups, with the stores evenly distributed between the two groups according to annual sales so as to ensure that data wouldn’t end up skewed according to preexisting sales trends.

The sales incentive was targeted at a specific type of tire. Group 1 was given a monetary reward for every 12 of these tires they sold, while Group 2 received a merchandise or travel reward of the equivalent amount for every 12 tires sold.

The results were astonishing. Group 2 (the merchandise and travel group) outperformed Group 1 in terms of sales by a margin of 46%. And when it comes to actual return on investment, the numbers were just as staggering. The ROI for Group 2 came out to 31%, indicating that the program was well worth it for Goodyear. Meanwhile, the Group 1 ROI wasn’t just less than group 2—it was actually negative. In fact, the cash incentive group ended up with an ROI of -20%. In other words, the program was a complete failure for Goodyear. (We almost never see a negative ROI scenario, so don’t let this third-party case study scare you from cash incentives.)

But if you had asked these employees beforehand whether they’d prefer cash or merchandise and travel, guess what? Chances are good that about 80% of them would have responded “cash.”

The bottom line here is simple: While it may be true that many employees would indicate that they’d prefer a cash reward over travel and merchandise, the reality is that the latter can result in better employee satisfaction, better sales, and better ROI. Without a doubt, there’s a strong argument to be made for offering merchandise and travel rewards to your employees.

How to Implement Merchandise and Travel Programs

After seeing those numbers, you might be eager to get started with merchandise and travel options for your company’s incentive program. But if you’ve never done it before, the whole prospect can feel a little overwhelming.

First, you’ll want to set up an online portal. Just as with any other incentives option, you’ll want to ensure that your portal is customized and branded specific to your needs. This is where your employees will log in to claim their rewards, and it’s a good opportunity to reinforce and strengthen brand affinity.

A popular way of formatting an online merchandise and travel rewards portal involves using a points system. Rather than receiving cash in exchange for meeting a specific outcome, employees get a certain number of points. These points can then be accumulated and redeemed via the web portal. Aside from being fun—everyone loves to rack up points—this is also a helpful way to discourage your employees from thinking in terms of cash. Remember, people will think that they’d prefer cash, and that it would make them happier than a merchandise or travel reward (even though it wouldn’t, on average).

Your online portal can be regularly updated by your incentives provider. This can happen on an annual or quarterly basis, or even monthly. The addition of new merchandise or travel packages to your online portal makes for the perfect opportunity to remind employees about the program and get them excited about new reward options. Plus, when it comes to electronics and technology, if you aren’t regularly updating your options, they’ll quickly become outdated and undesirable.

Aside from giving your employees the ability to rack up points and exchange them for rewards, there are other options available to you. One popular approach involves offering periodic merchandise- or travel-based bonuses. This can take the form of a monthly drawing that all employees stand a chance of winning, or a quarterly bonus for your top sales performer. Whether you decide to structure this bonus reward as monthly, quarterly, or even annually, and regardless of whether it’s merit-based or purely a matter of luck, the idea is the same. Your aim is to give employees an additional chance to win and keep the rewards program fresh with tangible prizes they can visualize. We’ve often seen this exact approach as extremely effective in combination with a traditional cash-based program.

What to Offer

So, you’re ready to set up an online portal. You’ve potentially found an incentives provider. And you want to get things rolling. But what exactly are you going to offer as rewards? What tangible items will you make available in your web portal?

We’ve been managing these types of programs for years, and here are the items that consistently perform the best for our clients (in no specific order):

  • Tablets and smartphones
  • Home theater systems
  • Small appliances
  • Fitness and sports equipment
  • Jewelry and watches
  • Housewares
  • Laptops and computers

This short list is far from exhaustive, though. Your company’s employee demographics should dictate what you offer. If an item proves to be unpopular with employees, consider swapping it for something else. And, of course, it never hurts to get feedback from your employees and channel partners on what sorts of items they’d be excited to receive.

When it comes to travel, you want your getaway options to be all-inclusive. This means airfare, hotels, event tickets, and so on. Often, we even suggest including a prepaid debit card to handle incidentals. The following is a short list of the most popular travel packages that we’ve seen (in no specific order):

  • New York City
  • Asheville, NC
  • Las Vegas, NV
  • Miami, FL
  • Napa Valley
  • San Francisco
  • Alaskan cruise
  • The Masters
  • The Super Bowl
  • Golf Resorts in CA or FL
  • Disney World

As with the merchandise above, this list isn’t meant to be exhaustive. You can tailor your destinations and travel options to your employee demographics, as well as what part of the country (or world) you’re in.

If you’re thinking of incorporating monthly or quarterly giveaways into your merchandise and rewards incentives plan, there are a couple options available to you. If you’re running a relatively small company and have a limited budget, these giveaways can be relatively inexpensive items. This option might also make sense if you opt to offer a monthly bonus or giveaway, as the sheer frequency of the offering might make high-dollar items unaffordable.

That being said, we’ve seen our clients achieve greater success with a combination of lower-frequency giveaways and higher-value items. It can be difficult to get your employees excited about a low-ticket item. However, you’ll find that there’s a certain amount of natural anticipation and office chatter that will form around a bigger giveaway. It makes sense, then, to at least consider the possibility of giving away a more expensive item on an infrequent basis, rather than regularly offering things like low-value gift cards.

In the past, our clients have had success with the following giveaway items (in no particular order):

  • Big screen TVs
  • Large appliance packages
  • Build-your-own electronics packages
  • Caribbean cruises
  • Design-your-own dream vacation packages
  • Prepaid debit cards (seriously)

Typically, we’ll design a standard online catalogue of anywhere from 25 to 50 items and getaway options for our clients. Less is more. For example, it’s better to have the best 65” TV rather than three different 65” TVs of varying quality.

Additionally, you’ll likely find that certain items are a major hit with your participants while others fall flat. That’s to be expected and shouldn’t be any cause for worry. As mentioned earlier, you should be updating your product and travel offerings annually, quarterly, or even monthly. Always remember that your catalog isn’t set in stone, and don’t be afraid to swap out new items for those that are unpopular within your company. Your goal is to generate excitement and ultimately to change employee behavior—and you can’t do that with merchandise and travel options that no one’s interested in.

Inspiring Photos and Testimonials

In our experience, one of the most powerful and useful aspects of offering merchandise and travel to employees is the opportunity for photos and testimonials.

When you reward your employees strictly with prepaid debit cards, you’ll rarely have an employee come tell you about an experience that the debit card made possible. Sure, maybe they used it the other night when they went out to dinner—but they’re probably not going to take pictures of their meal and show you the next day. (Unless they’re young and you happen to follow them on social media.)

But it’s completely standard behavior for someone to snap a ton of pictures on their cruise, take selfies while on vacation in New York, or even post a quick photo of their new high definition audio system on social media. Particularly when it comes to travel, you can leverage your employees’ positive experiences as a means of further incentivizing other employees. 

This can take many forms. One option is to incorporate a photo gallery into your web portal that highlights past vacations taken by participants who earned travel package rewards. Another highly effective approach is to include a brief written testimonial and a picture or two from an employee in your company’s email newsletter. This gives you a chance to plug your rewards program in a very tangible way. It’s likely to spark conversation between your employees, and anyone who’s won such a trip will effectively be doing your program promotion for you. When it comes to merchandise and travel incentive programs, satisfied employees are often your best form of advertising.

Brand Affinity

In the same vein, merchandise and travel can create affinity for your brand or company like nothing else. This is especially true when it comes to travel offerings.

To maximize the potential reward when it comes to increasing brand affinity, it’s important to include spouses, partners, and families as part of your travel reward offerings. This provides the opportunity to demonstrate to both your participants and their families that you value their relationships and collective well-being. You’re going out of your way to facilitate an experience that will create lasting family memories. Your participants’ spouses/partners also will quickly become fans and lifelong supporters of your company and brand, even as your participants’ brand affinity grows as a result of the trip.

Even more so than with a prepaid debit card, merchandise and travel will keep your brand top of mind for your employees and their family members. Every time one of them tells a story about a trip they took, they’ll associate the positive experience with your brand. And when someone asks how they managed the trip or why they decided to take it, they’ll likely mention your company in a positive light. The same goes for showing off a merchandise reward to friends. When the neighbors come over to watch the game on Sunday, your company will be credited for the new widescreen TV hanging on the wall.