Mad About Incentives: The Value of Online Incentive Reward Programs

Incentive: Strategy

Mad About Incentives: The Value of Online Incentive Reward Programs
May 20, 2009

Ley Borlo

By Ley Borlo

As most of you know, the reward and recognition industry has its roots in the Depression years of the 1930s. It was during this time that pioneers such as E.F. MacDonald and Edward Maritz began to sell their jewelry, watches, and other merchandise to corporations as sales incentives and service awards for employees. From those beginnings emerged an industry that is now estimated to be in excess of $60 billion and includes every conceivable type of award.

While the industry has certainly changed over the years with the addition of group and individual travel, special recognition items, and increasingly popular merchant gift cards and bank debit cards, nothing has made such an impact on it as Web-based award solutions. With the click of a mouse, a company can now have what only a few very large corporations previously can afford: a professionally administered incentive or recognition program for employees or channel partners.

According to a Nielsen/NetRatings study a couple of years ago, nearly 85 percent of (or 232 million) Americans have access to the Internet in their homes. One consequence of this penetration is that there has been a proliferation of companies offering Web-based incentive programs. Almost every traditional incentive company has its own online solution, and as the incentive industry has little barrier to entry, there are more and more companies building online incentive solutions.

While there are no complete statistics, some research (by Maritz Inc.) indicates that over 30 percent of the industry’s current revenue is produced through online programs, that 45 percent of companies running incentive and reward programs leverage the Internet, and that 80 percent of current incentive users are interested or very interested in running programs online, and it is forecast that online incentive companies will represent over 70 percent of the industry’s revenue in five years.

The Real Value of Web-based Technology
Web-based incentive and recognition award technology is far more efficient and less expensive than implementing a program offline. Less than 10 years ago, only corporations with substantial million-dollar incentive and recognition award budgets could implement complex, multilayered performance-improvement activities. Today, companies of almost any size can have these same complex programs and at price points that fit their budgets.

After initial setup fees based upon program size and scope, most of the Web-based systems have ongoing monthly maintenance or licensing fees that are minor in comparison to the cost of providing these same activities offline. Administration, communications, training, measurement, feedback, surveys, quizzes, award issuance, and overall program management can be performed through a Web-based system at a fraction of the cost of doing it offline. Prior to these systems, it was not unusual for these types of activities to cost as much as 30 to 40 percent—or more—of a company’s total reward budget, and they often exceeded estimates while not exceeding goals. Today, the cost is usually less than 10 percent! That puts 20 to 30 percent or more of company budgets back where they belong: in the hands of people corporations are trying to motivate.

Frankly I’m a little puzzled why more clients don’t use Web-based programs as an umbrella for all of their non-monetary award needs. You can separately implement different programs by employee group, and you can keep budgets completely distinct. You can create synergy by using the umbrella to allow employees who may be involved in more than one program to accumulate points for much larger awards, and you can have the system contain virtually any type of award you desire.

I suppose one of the reasons many companies don’t have an umbrella system is that all too often, the right hand doesn’t know what the left hand is doing. It is not unusual for a company to have sales incentive programs, years-of-service or employee-recognition programs, safety programs, wellness programs, etc—all of which are implemented by individual departments and different managers. And each unit wants to maintain autonomy and its own vendor relationships. Frankly that’s too bad because the employees won’t get a better overall program (with more value and choice), and the company doesn’t get the advantage of better buying power.

For my money, if I wanted to engage employees in a variety of objectives, I certainly would look at this type of vehicle. Take the time to research online point-based award systems; you may be glad you did, and I can guarantee that by combining programs under one umbrella, you will get a better price and your employees will get much better value and choice.

Ley Borlo is a partner at Incentives Inc., www.incentivesinc.com, a full-service incentive company. In over 35 years in the industry, he has achieved success in sales, sales management, and corporate management with a leading incentive company. He founded Incentives Midwest LLC, a consultancy to educate companies on the vagaries of the award side of the business. He writes a bimonthly column for Incentive on the incentive industry from the perspective of someone who has purchased, sold, and managed those who have sold full-service incentive programs. Other topics he has written on the industry can be found on his blog, www.yourbabysugly.com.

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