Hey, Big Spender

In the heady days of the late 1990s, pushing the incentive envelope with lavish trips and expensive products wasn’t just about motivation, but a badge of pride for freewheeling dot-coms and high-flying financial services companies. Jetting the sales team off to exotic locales on a moment’s notice was standard practice.

Then came the market collapse of 2001 and just staying employed seemed to be incentive enough for most. Now, as people have toiled through the slump with just the faintest glimmer of recovery in sight, companies are once again recognizing the need to motivate weary employees and customers. The question is whether high-end premium incentives still have a place in the budget. “High-end is a matter of perception, not just price point,” according to Karen Renk, executive director of the Incentive Marketing Association, Naperville, IL. “It all depends on how it is perceived by the recipient. A $200,000-a-year employee is going to be impressed differently than a $20,000-a-year employee.”

Marketers also have to match the right gift to the right person — hence the shift toward giving a choice. “That high-end fishing rod might be great for the avid outdoorsman but it wouldn’t do much for me,” says Renk, who relates the story an associate told her about giving a valued employee an expensive coat to reward her years of service. The employee, however was noticeably underwhelmed. After never seeing her wear it, the employer asked her about the coat and she replied, “I don’t like fur.”

“Choice is the driving motivator,” agrees Alisa Shafer, director of planning at Chicago-based Hinda Incentives. “A TV might be a nice prize, but not if someone has six TVs at home.”

Exclusivity appeals. Last year, American Express Incentive Services, Fenton, MO, developed a program for a national magazine that distributed debit cards to VIPs for an event in Chicago. The cards could be redeemed only at certain high-end boutiques in the Chicago area.

That demand for exclusivity doesn’t just apply to high-end products either. “Companies are looking for something unique, something that can’t be purchased,” says Shireen Moore, president and CEO of 141 Communicator, Chicago.

A longtime favorite for incentive programs, trips are changing to meet that need for something special. “When I first started in this business, programs were larger, with companies sending more people to less expensive resorts,” says Keri McIntosh, executive director of The Castle Group, Boston. “Now it’s more exclusive, with fewer people being sent on swankier trips.”

Standard trips are out, regardless of the destination. Minneapolis-based Carlson Marketing, which offers packages to exotic locations such as Africa, is really feeling the pinch from changing attitudes. “From our perspective, high-end has gone away,” says Ed Kinne, director of marketing relations. “Budgets have disappeared and no one is doing that trip to a five- or six-star castle anymore. People and their clients are nervous about everything, from the economy to the looming situation in the Middle East. If people do travel, they want to make sure they can get back home if they have to. A lot of the decision-making regarding high-end incentives has been put on hold.”

So instead of handing that crack sales staff first-class tickets and bidding them bon voyage, more incentive specialists are priding themselves on creating domestic “experiences” rather than just booking trips. “We try to offer things that the recipients might not necessarily try on their own,” like balloon rides, says McIntosh.

Marketers want the reward to stay with the recipient. “We wanted to recognize our channel partners for selling our products, but rather than give cash or merchandise, we wanted to provide them with an experience,” says deMarie Malnar, channel manager for Boston-based software developer Sophos Inc. “We wanted something that created a lasting impression and had more staying power.”

With the help of the Castle Group, the company developed the Sophos MVP (Most Valuable Partner) Zone, an online rewards program that lets partners earn points that may be redeemed for “experience” rewards, like a hot-air balloon ride, a trip in a private jet or a personal chef. “Rewards are personalized to the user’s location and they choose what they’d like,” says Malnar. “It’s a great sales tool.”

The incentives market is also seeing a shift beyond hard goods to “lifestyle awards” that appeal to people with little time. Atlanta-based USMotivation offers Elegant Escapes, a rewards program that develops customized trips and experiences for each recipient, including “concierge services” that address their individual needs and concerns. The services have ranged from coordinating a picnic lunch for a recipient travelling in Napa Valley to an Elegant Escapes representative personally addressing the concerns of a winner who was scared to travel.

The agency also coordinated a cruise for a winner who was a double amputee by finding a cruise ship and local tourist agencies that could accommodate his disability.

“Elegant Escapes manages the reward travel for our Values-in-Practice [VIP] Award,” says Barbara Lawson, a manager at Cleveland-based consulting firm Booze-Allen & Hamilton. “Employees who’ve earned this honor have been very pleased with the quality locations and the highly-personalized service that they receive from Elegant Escapes’ travel concierge. It makes our people feel special and recognized, which reinforces the goals of the VIP program.”

All in the name

Cash is king everywhere but the incentive world. “There is a trophy value associated with high-end incentives rather than cash,” says Terry Markwart, director and assistant general manager of Special Markets at Lake Success, NY-based Canon. “If I ask what you did with the money you won last year, you might not remember. But if I ask how did you get that digital camera, you’d still be telling the story.”

The average incentive order size for Canon Special Markets these days is $5,000 and the demand for new, high-end consumer electronics like digital cameras and camcorders is so strong that Canon is actually having trouble moving some of its older items. “We’re seeing clients passing on four-zoom 35mm cameras in favor of two-zoom digital cameras,” says Markwart.

Recipients want that high-end item, even if it doesn’t offer anything not found with other brands. “We’re seeing a demand for a combination of functionality and fashion,” adds USMotivation president Mike Hadlow. “Something like Hammacher Schlemmer offers the same basic functions as similar products, but the name has a certain cache.”

Motorola, Schaumburg, IL, isn’t sparing any expense when it comes to motivating its Nextel dealers. Last month, the company hosted the rewards dinner for its Platinum Partners Plus program which recognizes top representatives. The top two reps received AmEx debit cards worth $25,000 and $20,000. Each Platinum Partners Award winner also qualified for a sweepstakes giving away a 2003 Mercedes Benz or $60,000 in cash. “We developed the program to support our dealers while enabling our customers to receive the latest technology that Motorola has to offer,” says Steve Camhi, VP of Distribution for the iDEN subscriber Group of Motorola. “We believe that the incentive is strong enough to promote Motorola’s entire portfolio.

When to say when

As effective as they may be, high-end programs aren’t feasible for everyone. As rewards programs expand beyond just the sales elite, employers are looking for packages that correspond to the recipient’s input. While high-end orders are booming, Canon is also seeing more employees being rewarded with smaller gifts. “There are a lot of support people that need motivation,” says Markwart. “They usually get smaller gifts because they aren’t taking the risks the sales people are.”

“There is a correlation of the reward to the expectations of the recipient,” agrees Al Geismar, VP-marketing and Web business development at American Express Incentive Services. “The sales force is the top of the line, general employees are in the middle, and the consumer is at the bottom. The expectations of what the individual consumer will do for your company are considerably less.”

Other companies might be peppering their incentive programs with high-end items just for appearance’s sake. “Frankly, we’re seeing the bulk of redemption for lower-end items,” says Shafer. “High-ticket items are being offered for show more than anything else. People want something they can actually use. Some clients are even asking us to remove high ticket items from the roster.”

And in certain industries, high-end incentives actually conflict with business ethics. To keep physicians from being influenced by high-end perks rather than scientific research, the Pharmaceutical Research and Manufacturers of America, Washington, DC, last year revised its code of ethics to ban the use of extravagant incentives. The new guidelines prohibit drug salespeople from treating doctors to high-end items such as fancy dinners and tickets to sports and entertainment events. Other rules have placed a cap of $75 on business dinners and require that an industry expert be in attendance along with the rep and the physician. Pharmaceutical companies had spent more than $13.2 billion on marketing to physicians in 2000, according to the Kaiser Family Foundation, Menlo Park, CA.

The effectiveness of high-end premiums targeted to consumers is another hotly debated topic. “We don’t see as many [high-end] consumer programs just because of the cost factor,” says Renk. “Usually you see it when the consumer purchase is on the high side.”

Others are seeing consumer programs come back to earth even as incentives for sweepstakes. “Over the last year we’ve seen the market trending down from $1 million grand prizes to $10,000 grand prizes,” says Jim Lustenader, senior executive president, strategic services at DVC Worldwide, Morristown, NJ. “Still, that hasn’t diminished consumers’ enthusiasm for sweepstakes at all.”

However, Los Angeles-based RPMC, which specializes in high-end, experiential prize packages, says it is enjoying booming business after a very lean 2001 and early 2002. Packages include Live Like a Spy, which lets winners train to be secret agents (for $10,000 a head) and Live Like A Celebrity, which offers a whirlwind tour of Hollywood (for $15,000 a head). “I disagree that brands don’t get the same bang for their buck with a [high-end] consumer program,” says Senior VP Sales and Marketing Kelly Weinberg. “If you’re offering a prize that’s out of this world, you only have to award one or two prizes but the publicity surrounding the program will be huge and completely outweigh the cost.”

Now that’s motivation.