Motivating Matters: Consumer-side growth helps lift revenues 5.2 percent.

What was noteworthy about the results of a 1999 Incentive Federation survey was not that merchandise and travel continue to be strong motivators for employees and consumers. It was how effective incentive programs are: More than 80 percent of users polled by the survey report having achieved their goals.

Revenues in the premium incentive category increased 5.2 percent to $26.3 billion in 1999, according to industry estimates. Spending on business-incentive programs rose an estimated 4.5 percent to $21.5 billion, while spending on consumer programs climbed at a slightly higher 8.3 percent to $4.8 billion.

Among growth areas and trends are incentive programs for non-sales employees, use of gift certificates and stored-value cards, and utilization of Internet-based programs for consumers. “There’s been tremendous use of incentives on Web sites,” says Karen Renk, executive director of the Incentive Marketing Association, Naperville, IL.

Growth on the consumer side came in part from dot-coms, many of whom are using loyalty programs and other offers to make members out of visitors. “The impact the Net is having – and it’s nothing unique to the marketplace – is a result of its immediacy and accessibility,” Renk says. “I’ve accessed retail operations [online] that I would never set foot in [physically], so that bodes well for use of incentives in consumer promotions.”

The Westfield, NJ-based Incentive Federation surveyed companies on their objectives, practices, costs, and results last summer. The study found that 82 percent of respondents use merchandise and/or travel as incentives for their sales force, 66 percent use them for consumer promotions, 61 percent for non-sales employee recognition programs, and 44 percent to reward dealers.

Interestingly, the average per-person costs are highest for dealer programs – $809.31 for merchandise and $2,317 for travel – due largely to the fact that competition among manufacturers for dealer business drives up costs. Average per-person costs were $69.87 for merchandise and $1,202 for travel in consumer programs, and $522.49 for merchandise and $1,981 for travel in sales programs. Costs for non-sales employee programs came in at $120.91 for merchandise, $1,070 for travel.

FLYING SOLO

Travel incentive rewards are increasingly breaking away from the one-trip-fits-all tradition. “There’s been a strong increase in the opportunity for winners to have a choice with their air travel, hotel, destination, or event,” says Peter Edmunds, director of the New York Premium Incentive Show.

“Choice and flexibility are going to be key for winners,” concurs John Farrell, senior director of channel marketing at Minneapolis-based Carlson Marketing Group’s Dayton, OH, office. “This is a generation that values its free time.”

Powering the options trend are Web sites that allow participants to not only review their standings in incentive programs, but to take virtual tours of potential destinations and, later, learn details about their trip or order their prizes.

FREEDOM OF CHOICE

Carlson is among many incentive development agencies making greater use of stored-value cards as rewards. Another is Don Jagoda Associates, Melville, NY, which is an authorized reseller of products from American Express Incentive Services, Fenton, MO.

“We have a program now for the Las Vegas Visitors and Convention Bureau [to reward] travel agents, based on booking room nights in Las Vegas hotels,” says Don Jagoda senior vp Len Daykin. The program issues American Express Persona cards, which are pre-set for use with at least 30 different merchants such as Harry and David’s and Gap, Inc.

A study conducted by Dallas-based Savits Research Solutions for American Express Incentive Services surveying 860 decision-makers last summer found that 47 percent had increased their budgets in 1999 and half planned to boost spending again in 2000. Perhaps more importantly, 25 percent of respondents who weren’t using incentives said they probably or definitely will consider using them over the next two years. (American Express ceo Darryl Hutson says the tight labor market has lead to a surge in incentive programs aimed at improving employee retention.)

On the consumer side, marketers are finding gift certificates – a motivation and incentive tool used for years by corporate America to reward employees – as a great way to increase the value of a program while controlling costs.

There are several reasons why: Gift certificate programs are flexible and broad for both brands and consumers. CPGs choose a denomination and leave redemption up to the customer. Fulfillment requires minimal administration, since consumers redeem certificates themselves. And the cost savings can be substantial: A volume-purchase of gift certificates from Boston-based Loews Cineplex Entertainment, for example, costs $4.50 per ticket. For movie-going consumers, that premium could have a perceived value as high as $10 (if you live in New York City). In addition, marketers only have to pay for the certificates that are actually redeemed.

Tampa, FL-based athletic-gear chain Champs Sports last month ran an in-store promotion offering customers a gift certificate good for a free CD at Musicland Group’s 1,345 Sam Goody, Suncoast, Media Play, and On Cue stores for every $100 they spent. Prism Marketing, Dallas, handled.

SURFER’S DELIGHT

Consumer loyalty is the main objective for a slew of highly competitive e-commerce companies using premium and incentive programs online. “There is a go-for-the throat approach being taken by online marketers to get the customer to share information and then buy – particularly if [the marketer is] not a consumer brand with high awareness,” says Jeff McElnea, ceo of Einson Freeman, Paramus, NJ. “One thing that’s raising eyebrows is how much these companies are giving away to get rather simple customer data and purchase behavior. Customer knowledge is power, and the number of customers is worth more than what you’re selling them today.”

That strategy is the essence of incentive-oriented Web sites such as MyRewards.com, MyPoints.com, and FreeRide.com. Consumers who visit these sites are offered points toward rewards for clicking on sponsoring merchant sites, searching for information, or making purchases.

New York City-based FreeRide offers customized incentive programs to businesses. FreeRide will translate its own type of rewards program for a particular Web site, which can reward points for providing data or making transactions. Customers then go to the FreeRide site to turn in their points for rewards.

“The future is very much online,” concludes McElnea. “It’s embedded in loyalty programs and cross-site linkages.”

But if the past is any gauge, the future will still include a lot of travel and merchandise incentives.

– Revenues increased 5.2 percent to $26.3 billion in 1999.

– Spending on consumer programs increased at a slightly higher rate than spending on business-to-business programs.

– Gift certificates have become a popular premium reward in consumer promotions.

– The Internet has sparked growth via new marketers and helped traditional program planners keep their targets more involved.