Cash incentives have frequently been the easiest way to reward employees.  With many of the current market challenges, merchandise and points programs are one of the best tools available to lower your budget and still keep the motivation alive in your division.  The below information from Alex Palmer comes from ManageSmarter.

A door closing on cash bonuses may open a window for non-cash incentives 

By Alex Palmer

A new study reflects the major challenges faced by companies relying on cash incentives to motivate employees in this economy.   And, according to experts, these challenges are driving many employers to look at non-cash rewards, including merchandise, to boost employee performance during these tough times. 

As stock prices fall and earnings decrease for many U.S. companies, employers are reevaluating their traditional bonuses and cash incentive plans, according to Deloitte Consulting LLP. In its study, “Retention Strategies During Difficult Economic Conditions,” released in mid-October, of the 151 companies surveyed, 59 percent expect their annual bonus and incentive plans to pay out below target, with 11 percent expecting no payout at all. 

“In this market, many companies are carefully evaluating ways to motivate and retain their valued employees, as financial results and compensation values are plummeting,” says Michael Kesner, Deloitte Consulting LLP principal and leader of Deloitte’s Executive Compensation service line. 

Over half of these companies (53 percent) are planning to adjust their plans next year, by modifying performance targets or changing performance measures in response to the economic conditions. 

These adjustments reflect how sensitive cash-based incentive plans are to economic circumstances. While the survey does not explicitly examine which alternatives to cash incentives are on the radar, it does indicate that a number of “other retention strategies” are also being explored, such as implementing or expanding flexible work programs, as 59 percent of companies are considering. Other Deloitte experts agree that non-cash rewards are attracting corporate interest.

“In general what I’ve been hearing from clients in the industry is that yes, as companies are cutting their merit budgets and cutting back [cash] incentive plan pools…they’re definitely looking at, ‘Are we using non-cash incentives as much as we can?’” says Greg Stoskopf, a director with Deloitte Consulting’s Human Capital practice. He cites incentive merchandise and days off as two non-cash options that may entice employees and employers alike, and emphasizes that companies must be sure that whatever incentives they use fit the preferences of the workers. “Say I work on a project and I get something that’s tangible at the end; there’s something about that tangibility that helps to make up for what the award might not have in [monetary value].”

While Stoskopf describes such an increased interest in non-cash rewards as going “hand in hand” with the decrease in earnings, others emphasize that these non-monetary awards should have been used all along.

“It’s not that these are new rewards that nobody’s ever heard of,” says Steve Kerr, former chief learning officer for GE and Goldman Sachs and author of Reward Systems: Does Yours Measure Up? (Harvard Business Press). “As long as we’re hurting from the economy, people are going to be extremely receptive to ways to attract and retain and excite people without going to [cash] that they don’t have… The non-financials are powerful.”

Kerr taught a workshop in early November to managing directors from Goldman Sachs on “Managing Without Money.” He says the benefits of non-cash incentives hold in good times and bad, but sometimes it takes losing the option of using cash for these truths to be embraced.

“It’s like anything else. When people are feeling good, they can lose track of things that are important,” says Kerr. “You want rewards that are reversible, available, performance-contingent, and financials usually don’t work because they’re limited, while non-financial awards are in a sense magic: they’re inexhaustible, they create their own supply.”

I really think there is great insight to this.  When you look at the percentages between Incentive travel and Rewards Merchandise, you might get a better look at how you should reward your employees.

Did you know that there are leagues for this sport?  4 color process boards are the most unique.  There are really 2 levels of quality on these.  When doing the inexpensive corn hole sets, you will be more likely to need repairs.  However, for large projects the price starts in the $90 range.  You need to order higher quality pieces if you intend to use these in a carnival setting or as a game for free tastings.  Depending on quantity and artwork, the better Baggo sets fall in the $150 to $225 range.

For samples on any of these items, please forward us a shipper number.  Samples are memo billed with a 30 day return policy.  We can not guarantee what logos will appear on random samples.

Regarding the prices, these are all retail prices and your price could be as much as 25% less depending on total order quantity and artwork requirements.

I recently came across the article below to find out how apparel played a roll in the incentive industry.  What surprised me most was how large the gap had grown between the use of incentive merchandise compared to Incentive travel.  Please review the article and offer your feedback.

NEW YORK, January 8, 2008 – An increasing segment of the apparel industry is generating incremental sales and taking advantage of the valuable visibility offered by the corporate market for incentives, rewards, and recognition. Leading players within the apparel industry now include Polo Ralph Lauren, North Face, The Timberland Group, T.J. Maxx, Marshalls, & HomeGoods, and many others. In addition to incremental sales and profits, the benefits of this marketplace also include increased product and service visibility when they are featured in corporate rewards, incentive, promotion and recognition programs. While many companies often give away products for promotional tie-ins, others have realized that this is a valuable profit center. 

Why the interest in the corporate marketplace? Travel and merchandise incentives, rewards, and recognition now represent a $46 billion industry, according to the Incentive Federation’s 2007 United States Incentive Merchandise and Travel Marketplace Study. Approximately $32.7 billion was spent on merchandise incentives and $13.4 billion on incentive travel in 2006. Companies whose products are featured in external and internal marketing programs and promotions get extensive visibility aimed almost precisely at the same audiences they are trying to reach in the retail market, making them valuable target marketing opportunities. 

“The incentive industry is booming,” says Frank Katusak, Incentive Federation Board Chairman. “What’s particularly exciting about the results—besides the dollar figure—is that incentive end user executives view incentives as an investment rather than a cost because they can quickly and easily measure the financial return of these initiatives.” To put $46 billion into perspective, Katusak offered these two points for comparison. It is 1) more than the global profits for the top 18 electronics manufacturers (Sony, Sharp, Samsung, etc.) and 2) more than the sales of GlaxoSmithKline, Novartis, Roche, AstraZenca, Merck or Abbott Laboratories. 

Key findings:

·        Thirty-four percent of U. S. companies used either incentive travel or merchandise incentives in 2006. Almost one third (31 percent) of companies used merchandise incentives, while 10 percent used incentive travel. 

·        Incentive travel is seen as an investment by 85 percent of companies with revenues over $100 million in the study. Merchandise incentives are seen as an investment by more than three-fourths of respondents.

·        Companies with revenues over $100 million are more likely to use both travel and merchandise incentives than smaller companies.

·        The most common incentive travel application is for sales incentives. Other widely-used applications are non-sales employee recognition and consumer/user promotions. 

·        Merchandise incentives are most often used for non-sales employee recognition and business gifts. 

·        The average budget for travel incentives was $164,271. More than three fourths of incentive travel end users spent between $100,000 and $500,000. 

·        The typical budget for merchandise incentives last year was $119,008. Almost half of the merchandise incentive users spent between $100,000 and $500,000.

The incentive industry shows no sign of slowing. More than half of large companies queried state their budgets for incentive travel have increased over the past two years, and believe they will continue to increase over the next two years, while almost one third say they have remained the same. On the incentive merchandise side, 30 percent of respondents report their budgets have increased over the past two years and 59 percent anticipate these budgets will continue to increase over the next two years.

The study was prepared by GfK, the fourth largest marketing research organization in the world. GfK conducted telephone interviews with executives responsible for the development and budgeting of incentive travel and merchandise incentives. In total, 1,121 executives were interviewed. 

The Incentive Federation represents the legislative interests of the incentive marketplace. The following members of The Incentive Federation sponsored the study: Incentive Marketing Association, The Motivation Show by Hall-Erickson Inc., The Incentive Research Foundation, Promotion Marketing Association, and Promotional Products Association International.

All of these number are clearly based off of 2006/2007 numbers.  It will be interesting to see how the 2008/2009 economy will effect these overall numbers.  I’ll be sure to fill you in as soon as the numbers come in.

Here is a full version of the report.

Companies across the country have been using incentive travel for years.  Could there be a slow down?  Here are a few of the pitfalls of incentive travel.  Over the years the cost of travel has been going up and up.  In 2003 the average cost for 1 persons trip to a 7 day destination was $2045.  In 2008 that exact same trip is $2500. Basically 20% more for the same value.  That may not seem to drastic, until you multiply that cost times two.  Don’t forget, your winner will also be taking a spouse with them.

During these tough economic times, we see merchandise rewards programs coming out as the big winner.  If you had your choice right now to receive a brand new ATV by Polaris or any other piece of merchandise or a trip to Cancun?  Over 50% of you would switch.   Here is what our clients are telling us.

• While recipients have enjoyed travel over the years, many are challenged in leaving home for an extended period.
• When asked if you would rather receive $3500 in merchandise instead of travel, 55% of the audience opted for merchandise.
• When asked if they would redeem items for themselves or for someone else, 64% said that they would pick items that the whole family would use.