Federation Study 2005: Incentive Federation Survey of Motivation and Incentive Applications

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Prepared for
Prepared By Center for Concept Development, Ltd.

May 2005

A Study Conducted among Current Users of Merchandise and Travel Items for Motivation/Incentive Applications has been sponsored by the following members of The Incentive Federation:

Association of Retail Marketing Services
Incentive Marketing Association
The Motivation Show by Hall-Erickson Inc.
Promotion Marketing Association
Promotional Products Association International
Site Foundation

The Incentive Federation represents the legislative interests of the incentive marketplace. The 2005 "Study Conducted among Current Users of Merchandise and Travel Items for Motivation/Incentive Applications" was funded by the following members of the Incentive Federation: Association of Retail Marketing Services, Incentive Marketing Association, The Motivation Show, Promotion Marketing Association, Promotional Products Association International, and the SITE Foundation (Society of Incentive & Travel Executives). The survey, a benchmark study to a 2003 report, was conducted by the Center for Concept Development and the methodology and findings were reviewed and approved by Frank Mulhern, PhD, managing director of the Forum for People Performance Management and Measurement at Northwestern University.

Table of Contents

• 1. Background
  • Project Overview
  • Project Objectives
  • Participants in the Study
• 2. Summary of Key Findings
  • Overview and Highlights
  • Communications Methods
  • Types of Suppliers Used
  • Usage Expectations
  • Setting Objectives and Crafting Incentive Programs
  • Use or Non-Use of Online Incentive Programs
  • Program Goals and Evaluation of Results
  • Number of Incentive Programs Annually
  • Non-Sales Recognition/Motivation
  • Non-Cash Incentives Allocation
  • Thoughts about Cash Compared to Travel and Merchandise
  • Comparison of the 2003 and 2005 IFI Surveys
• 3. Implications
• 4. Methodology

1. Background

Project Overview

The Incentive Federation Inc. has commissioned a survey involving current users of merchandise and travel items for motivational applications. The Center for Concept Development (CCD) was asked to analyze the data collected in this survey and to prepare this report on the survey findings.

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Project Objectives

The overall objective of this study was to gain insight into practices and attitudes among current users of merchandise items and travel items for motivational applications.  Data from this survey would allow for comparisons with information from the 2003 IFI survey.

The survey gathered information from participants in the following specific areas:

• Current usage of four basic incentive or motivational applications:
  
  
  • Consumer/User Promotions: Offers tied to specific products/services; can be merchandise or travel; terms can be free, self-liquidators, at cost, or other.
  • Dealer Incentives: Merchandise or travel items for dealer principals, distributors, and wholesalers.
  • Sales Incentives: Merchandise or travel items for sales management, internal and outside sales force, dealer and distributor sales personnel, independent sales representatives, and sales support personnel.
  • Non-Sales Recognition/Motivation: Merchandise or travel items for safety, productivity, quality control, suggestion box, training/self improvement programs, ride share, team work, attendance, etc.
• Sources of merchandise items and travel items used for each of the four motivational applications.
• Methods employed (internal and external) to communicate incentive programs.
• Specific merchandise items and travel items anticipated for use in incentive programs.
• Setting program objectives for each application.
• Factors or issues considered when creating a program for each application.
• Average acceptable sales or performance increases set as incentive goals. 
• Factors used to base quotas for sales improvement and criteria used to evaluate incentive programs.
• Use of ROI as an evaluation criterion.
• Number and length of incentive sales programs conducted per year.
• Use or non-use of online incentive programs.
• Number of non-sales recognition/motivation programs conducted per department and evaluation methods.
• Participants’ thoughts about cash versus merchandise and travel.

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Participants in the Study

Approximately 2 out of 3 participants whose completed questionnaires were included in this study were in Manufacturing (24%) and Services (42%). The remaining participants who answered this question represented Finance/Insurance/Real Estate (10%), Retail Trade (10%), Wholesale Trade (5%), Transportation/ Communications/ Utilities (2%), and Construction (2%).

Almost half of the participants (44%) had over 100 employees in their organization. Nearly one-fifth of these (18%) had 1001 or more employees in their organization; about one-fourth (26%) had 101 to 1000 employees in their organization.  The remaining participants had 41 to 100 employees (21%), 11 to 40 employees (15%), or had 1 to 10 employees (12%).

Half of participants (50%) identified themselves as the Owner of or Senior Management for their organization. About one-fourth were Marketing or Sales (12% for each respectively). The remaining participants were Other Managers/ Other Directors (13%), Other VP/Executives (3%), Human Resources (3%), Secretary/ Clerk or Administrator (1%), or had other titles (8%).

Nearly half of the participants worked in Management (47%); about one-fifth worked in Sales (21%) and another one-fifth worked in Marketing (19%).  Other functional areas identified were CEO (3%), HR/Recruiting/Training (2%), and Procurement/ Purchasing/Buying (1%).

Classification information for participants is summarized in graphic form in the Details section in this report.

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2. Summary of Key Findings

Note to the Reader: This section provides an overview of the findings for each of the questions asked in this study.  For the interested reader, more detailed information for each question is presented in graphic form in the Details Section of this report, on the specific page numbers indicated below.

Overview and Highlights

• As in the 2003 study, most respondents in the current study are using more than one type of incentive or motivational application. Sales Incentives and Non-Sales Recognition Motivation programs are the most widely used applications of the four applications investigated in this study, as shown below, followed by Consumer Promotions.  Relatively fewer respondents use Dealer Incentives.

• In terms of specific types of incentives or awards, more respondents indicate that merchandise incentives and travel incentives are more compelling than cash. (See Details).
  
  
  • About four of five respondents believe that travel awards and merchandise awards are remembered longer than cash awards.
    
    
  • Almost two-thirds of the respondents feel that cash awards are remembered for the shortest time.
    
    
  • Furthermore, about three-fourths of respondents agree that they can build a more exciting, memorable program around travel or merchandise than cash.
    
    
  • Respondents feel that three out of five (60%) of employees see cash as a part of their compensation package.
• In general, respondents use more than one type of supplier for their incentive applications. (See Details).
  
  
  • Those who are “heavy” users of incentive programs (defined as 8 or more programs per year) generally use more types of suppliers than either “moderate” users (defined as 4 to 7 programs per year) or “light” users (1 to 3 programs per year).
• Respondents use a variety of suppliers for their incentive applications; e-commerce (the Internet) continues to grow (see Details).
  
  
  • About one in five respondents use the Internet for consumer programs (22%), sales incentives (20%), and non-sales employee programs (22%). Fourteen percent of respondents use the Internet when buying merchandise for dealer incentives. 
  • However, usage of the Internet is higher in the segment of users of online incentive programs when buying items for all applications.  Internet usage also is slightly higher in the segment of “moderate” users when buying merchandise for consumer promotions and for non-sales recognition/motivation.

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Communications Methods

• Mailings to customers/employees and e-mail are two of the most widely used communications methods to communicate the incentive programs under consideration.
• In addition, there are other communication methods that are important for different types of incentive programs, summarized as follows:
  
  
  • Consumer promotions: consumer advertising (print and/or electronic), word-of-mouth, and Internet (company home page).
    
    
  • Sales incentives:  company newsletter and sales meetings.
  • Dealer incentives: Internet (company home page) and sales meetings.
  • Non-sales recognition/motivation: bulletin boards, company newsletters, and Intranet (LAN)
    
    
  • Manufacturer representatives are often involved in selling products to other suppliers, including middlemen, incentive companies, sales promotion and advertising agencies, etc.

• According to more respondents, e-mail, mailings to customers/employees and consumer advertising (print and/or electronic) are among the most effective communications
  methods overall.

• E-mail is the most effective communication method according to slightly more of the “moderate” users of incentive programs.

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Types of Suppliers Used

• When buying Merchandise Incentives, the main types of suppliers or sources are nearly identical for consumer promotions, sales incentives, dealer incentives, and non-sales recognition/motivation. Promotional products/ad specialty distributors, direct from the manufacturer (no rep), and incentive company/house are important sources for each type of motivation application.
  
  
  • Sales promotion/advertising agency and manufacturer’s representative also are important for consumer promotions; and local retail store and manufacturer’s representative also are important for non-sales recognition/motivation.

• When buying Travel Incentives, direct purchase and incentive company/house are the main sources for all four applications investigated in this study.  Corporate travel agencies also are an important source for dealer incentives. 

• Although participants are using a variety of suppliers for their incentive applications, e-commerce (the Internet) continues to grow as a source for incentive applications. Overall, in the total sample e-commerce usage ranges from 1 in 10 respondents for dealer incentives to about 2 in 10 respondents for consumer promotions.
  
  
  • E-commerce usage is slightly higher among online program users across all applications.
  • E-commerce usage also is slightly higher among “moderate” users for sales incentives and non-sales recognition motivation, and among “light” users for consumer promotions.

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Usage Expectations

• In terms of merchandise items, there are some similarities and some differences in the most popular items that respondents would be most likely to use.
  
  
  • For example, gift certificates and electronic items are popular items for all four applications.
• In addition to gift certificates and electronic items,
  
  
  • Writing instruments, food and beverages, and apparel are popular for consumer/ user promotions.
  • Food and beverages, watches and clocks, apparel, and sporting goods are used frequently for dealer promotions.
    
    
  • For sales incentive programs, plaques and trophies, watches and clocks, apparel and food and beverages are popular.
  • For non-sales employee awards plaques and trophies, watches and clocks and apparel incentives continue to rate highly – most likely because respondents have included advertising specialty items such as t-shirts and caps.
    
    * Electronic items include cameras and accessories; computers, accessories and software; home entertainment such as television; and telephone-related items.
    
    
• The most popular items are:

• There also are similarities and differences in plans for travel items.
  
  
  • Individual travel (domestic) and travel certificates are popular in plans for consumer promotions and sales incentives.
  • Group travel (domestic) and cruises are popular in plans for dealer incentives.
  • Special events and travel certificates are popular travel items for non-sales recognition/ motivation.

• In general, “heavy” users are more likely to use a wider variety of items than “moderate” users or “light” users.

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Setting Objectives and Crafting Incentive Programs

• Some of the main objectives for consumer promotions, sales incentives and dealer incentives are similar:
  
  
  • Increase or maintain sales is a common objective for consumer promotions, sales incentives, and dealer incentives.
  • Create new markets and larger share of market are other common goals for consumer promotions, sales incentives, and dealer incentives. Create new markets is a particularly important objective for sales incentives and dealer incentives among users of online incentive programs, “heavy” users, and “moderate” users.
  • Build customer loyalty/trust also is an important goal for consumer promotions. 
• By contrast, the main objectives set for non-sales recognition/motivation programs are very different. For example, the most common objectives for non-sales recognition motivation programs are better customer service, build morale, foster teamwork, and obtain ideas or suggestions.

• There are similarities and differences in the factors considered in crafting a program for each incentive application.
  
  
  • Important considerations across all four applications are cost versus shared result, freshness (unique) over time, perceived value, and ease of administration.
    
    
  • Ease of administration is especially important across all four applications to online users and to “moderate” users.
  • Being fair to everyone is important for sales incentives, dealer incentives, and non-sales recognition/motivation.
  • Profitability is another important consideration for consumer promotions and sales promotions according to online users, “heavy” users, and “moderate” users.

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Use or Non-Use of Online Incentive Programs

• About 1 in 4 respondents (24%) have ever run an incentive program online (up from 19% in 2003). However, 44% of the larger companies have run online programs.

• Over half of the online programs (59%) were sales incentive programs.
• Employee recognition programs and customer acquisition programs each represented about one-third (36%) and one-fourth (26%) of the online incentive programs.

• Being unsure of how the program would work is a common reason for not using an online incentive program, according to 38% of non-users of online incentive programs.
• About 1 in 5 respondents (21%) have not run an online incentive program because they feel that most of their potential participants have limited access to the Internet.
• Relatively few non-users (7%) have not used an online incentive program because it costs too much.

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Program Goals and Evaluation of Results

• When respondents set incentive goals, there is very little difference in the percentage increase in volume required for consumer/user promotions, sales incentives, or dealer incentives.  The percentage increase ranges from 16% to 18% for the total sample.

• The percentage of programs reaching their volume increase goals is very similar for dealer incentives and sales incentives and for consumer/user promotions. In the total sample, 3 of 5 (60%) of sales incentive programs reach their goals, followed by dealer incentives (59%) and consumer/user promotions (55%).

• Online users report that slightly more sales incentive programs (63%) and more dealer incentives (64%) reach their goals. However, slightly fewer consumer/user promotions (50%) reach their goals versus the total sample.
• The two most widely used measures for basing quotas for sales improvement programs are previous sales for established duration and sales forecasts.
  
  
  • More heavy users (68%) and online users (80%) use previous sales for established duration versus the total sample (60%).
  • Similarly, more heavy users (60%) and online users (57%) use sales forecasts versus the total sample (51%).
• The most widely used criterion for evaluating sales improvement incentive programs is total units or dollars sold. This criterion is used by about 3 out of 4 respondents (74%) and by about 4 of 5 of the “heavy” users and online users (79% for each segment).
  
  
  • ROI is used by about one half of the total sample (55%); however, more “heavy” users (44%) and online users (40%) rely on ROI to evaluate their programs.
  • Increased market share also is used by about 4 in 10 of all respondents (41%). Again, more “heavy” users (40%) and online users (42%) use increased market share to evaluate their programs.
• In the past two years, almost 3 of 4 of respondents (74%) are placing greater emphasis on ROI as an evaluation criterion.

• About 1 in 4 respondents (24%) is placing about the same emphasis on ROI in the past two years.
• Very few (2%) are placing less emphasis on ROI in the past two years.

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Number of Incentive Programs Annually

• Respondents conduct slightly more sales incentive programs (9) in a year than either consumer/user promotions (7) or dealer incentives (6).
  
  
• On average, the duration of each type of program ranges from 3 months (consumer/user promotions) to 5 months (sales incentives).

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Non-Sales Recognition/Motivation

• Most non-sales motivation and incentive programs are targeted to production employees (20 programs per year) and to operations employees (14 programs per year.) The remaining employee groups (marketing/sales support, warehouse/ transportation, office employees, plant engineering/maintenance, quality control, and R&D staff) typically are the targets of 4 programs or fewer per year.

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Non-Cash Incentives Allocation

• Over half of the total cost of non-cash incentives (52%) is for merchandise awards.  Travel awards and recognition awards comprise relatively less of the total cost of non-cash incentives, at 25% and 23% respectively of the total cost.

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Thoughts about Cash Compared to Travel and Merchandise

• Three of 5 respondents agree that a cash payment is perceived to be part of an employee’s total remuneration package.
  
  
• About 4 of 5 respondents (78%) perceive that travel is remembered longer than cash; about 4 of 5 (84%) agree that merchandise is remembered longer than cash. Nearly two-thirds of respondents (62%) feel that cash is remembered for the shortest time.
  
  
• Approximately 3 of 4 respondents (74%) agree that they can build a more exciting, memorable program around travel than around cash.
  
  
• Similarly, about 3 of 4 respondents (73%) agree that they can build a more exciting, memorable program around merchandise than around cash.
  
  
• Slightly more than half of the respondents (53%) agree that employees tend to look at bonus payments as something they are due as part of their compensation package.

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Comparison of the 2003 and 2005 IFI Surveys

• Applications

• Types of Suppliers Used

* Manufacturer representatives are often involved in selling products to other suppliers, including middlemen, incentive companies, sales promotion and advertising agencies, etc.

• Criteria for Evaluation Sales Improvement Incentive Programs
  
  
  • ROI, as a criterion for program evaluation, showed an increase over 2003.

• Cash as an Incentive
  
  
  • Cash payments continue to be viewed as part of their remuneration package rather than a reward/ incentive.

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3. Implications

• Findings from the 2005 survey of current users indicate a continuing opportunity for suppliers of merchandise and travel items for motivational applications.  Based on the 2005 survey’s findings, it appears that users plan to continue using a variety of merchandise items and travel items for each of the four motivational applications investigated in this study.
• Heavy users (7+ programs per year) represent a key target and opportunity for the incentive industry.
  
  
  • In findings that are consistent with the 2003 survey, heavy users in 2005 not only execute more programs per year than other users, but also use a wider variety of suppliers for their merchandise and travel incentive needs.
  • In addition, heavy users indicate that their plans include using a wider variety of merchandise items in particular as compared to other users.
• To gain a competitive edge, companies and agencies involved in the supply side of the incentive industry should keep in mind users’ key program objectives. Suppliers may stand out versus their competitors if they can help users choose incentives that are targeted specifically to achieving their key objectives.
  
  
  • Based on the 2005 survey, suppliers should offer items that support users’ key objectives such as increasing sales and market share, creating new markets, and building loyalty among customers or employees, for example.
• Suppliers also may gain a competitive advantage by being attuned to users’ main considerations as they develop motivational programs and choose incentives.
  
  
  • According to the 2005 survey, suppliers should address users’ key needs and concerns in terms of the cost, profitability, uniqueness or freshness, and ease of administration of the merchandise and travel items they offer.
• A noteworthy finding in the 2005 survey is that ROI appears to be increasingly important as an evaluation criterion for users.  Nearly 3 of 4 users in this survey indicate that they are placing more emphasis on ROI when they evaluate the results of their motivational incentive programs.
  
  
  • To interest users, suppliers should gear their communications toward helping users realize tangible rewards and meaningful value for their investment in incentive programs.
  • Offering a “guaranteed return” can be very compelling to users, if suppliers can support this promise.
• There has been an increase overall in usage of the Internet for running incentive programs in the 2005 survey versus the 2003 survey.
  
  
  • The incidence of using the Internet for running programs appears to be higher in 2005 among “moderate” users than the average. It may be that the Internet is a particularly attractive vehicle for running an incentive program to users who are not accustomed to running a large number of programs per year.
  • There also appears to be more usage of the Internet for incentive programs among larger companies (501+ employees) who participated in this survey. To larger companies, the Internet may be an efficient way to run larger programs.
  • Suppliers should continue to keep a presence on the Internet to attract users who are looking for incentive ideas and for suppliers.
  • In addition, suppliers should offer guidance and support in executing Internet-based incentive programs, given that not knowing how to run an Internet-based incentive program is a barrier to over half of the non-users of online incentive programs.
  • Although the Internet still is not widely used to execute incentive programs, the Internet emerges in this study as one of the two most effective ways for users to communicate incentive program details to participants.  An opportunity for suppliers looking for a competitive edge may be to offer assistance to users with their e-mail notification of program details.

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4. Methodology

The methodology for this project was a questionnaire mailed to 6,000 participants on December 29, 2004. The project was “closed” on March 15, 2005 with a result of 245 useable questionnaires.

Sample Details
Incentive Magazine made 6,009 “records” (subscriber name, address, etc.) available. Mr. Pete Ericksen contributed 7,877 records (attendees at motivation shows). Combining these two lists and removing duplicates resulted in 13,661 unduplicated records. The sample, 6,000, was drawn at random from the 13,661.

Mailing Packet Details
Each potential respondent received an envelope containing the following:

• A two page letter that explained the project and that provided all necessary definitions;
• A four page questionnaire;
• The incentive sheet that contained the sweepstakes offer (open to all) as well as the offer of a copy of this report (to be sent by mail to only those completing the questionnaire); and
• A return envelope.

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