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What are the key elements to define objectives in an incentive?

It’s easy, be smart!

Good objectives should be:

Specific: your objective should specify what they need to achieve

Measurable: You should be able to measure whether you are meeting the objectives or not.

Achievable: They must be achievable and attainable from your target’s point of view

Realistic: Can you realistically achieve the objectives with the resources you have?

Timeable: when do you want to achieve the set objectives?

When you work on your objectives don’t be too perfectionist. Keep it simple! Simple objectives will be easier to understand, to endorse and to remember for your participants. They will be easier for you to manage and eventually, will produce better results at the end.

Target your target!

A common mistake done when organizing incentive campaigns is to invite everybody.

This is not a good idea for different reasons:

  • You can’t afford it: the more people in your campaign the bigger rewards budget you’ll need. As your budgets are limited (most of the time at least…), it will end up to a lot of people invited to win… nothing. Instead of doing this, apply the pareto rule stating that 20% of your stakeholders are responsible for 80% of your results and try to focus on these 20% people. They’ll be more motivated. You’ll make more money while spending less.
  • It’s not exclusive: people like to feel very special. If everybody is invited, then it cannot be very exciting. It is not worth doing. Instead, they feel that they are among the “happy fews”, they will be “honoured” and will try to stay among these happy fews.
  • It’s difficult: your stakeholders are different. Some are very loyal but have low potentials. Others are new but unloyal. Some are facing very tuff competitive environment. Etc. It is not easy to address these different profiles the same way. It’s better to segment your actions to keep it simple and more readable.

Focusing on the target group being the most entitled to meet your business objectives will be much more efficient, affordable and manageable.

What motivates people?

There are 4 major motivation drivers:

  1. Status: Status is what’s most important to most people. It means long term loyalty as nobody wants his status to decrease
  2. Access: If you are a loyal customer, you can get earlier access to things you didn’t have access to before (e.g.: early access to an auction).
  3. Power: Give people control over others, like for example a moderator of a forum. Putting people in power motivates them to work for free while they think they are doing something awesome.
  4. Stuff: Rewards are very efficient as they create aspiration but they are short term. As soon as they are redeemed, the motivation goes.

These 4 drivers are shown by order of importance. The good news is that the more powerful, the cheaper they are!

Incentives programs have gone through 4 main era’s:

  • Free stuff ( from 1800): “Buy 10, get 1 for free”.
  • Virtual money (from 1930): “Collect points or stamps and use them to get stuff”. The magic of this is that it increases perceived value and aspiration.
  • Loyalty programs (from 1981): first introduced by American Airlines, loyalty programs were the first to understand the importance of status.
  • Gamification (from 2000): the game is the reward. People get points they cannot use in real life (e.g.: Zinga). They can even buy points with no value to reach their goals of the 3 first drivers! Auction

These 4 ways of developing motivation are still valid. What’s important to remember is that, by investing in the mechanics of your Motivation campaigns, you will access motivation drivers that are much more powerful than the ones linked to Stuff. These investments have become affordable thanks to Internet. Use a good loyalty platform!

Why motivation matters?

Some hundred years ago, nobody cared about motivation. It was more like “do it or get out!”.  Fortunately, times have changed, and the people have been more and more taken into consideration inside and outside corporations. For a couple of years, we have been assisting to the up come of the Y-generation that is putting the motivation as a pre-requisite to their involvement in any job.

Motivation is the main driver of organizations productivity:

If your stakeholders are motivated, they’ll run.

Companies are aware of this and we see new words appearing like “relationship marketing”, “VP of Loyalty”, “Incentive Director”, … They have understanding that investing in the motivation of their stakeholders is not just a nice to have to show them that we care, but it’s a must to increase profitability. Motivation is a profit center!

Motivation should developed and monitored:

Inside the company

In order to:

  • Increase engagement level: if an organization’s employees are highly motivated and proactive, they will do whatever is necessary to achieve the goals of the organization as well as keep track of industry performance to address any potential challenges.
  • Reduce hiring and training costs: Acquiring good employees and getting them up-to-speed and sharing your values is a very costly process.
  • Develop team spirit: If your employees share a same project and tend to common goals, they will better work together and develop synergies as a team.
  • Improve company reputation: Motivation is contagious. Viruses ignore walls and borders. Motivated employees will spread the word, letting the world know that you are offering them a pleasant work environment and ultimately impact how existing and potential clients or partners view working with you.

Outside the company in order to:

  • Acquire new customers and partners: unlike employees, customers are usually not limited in numbers. Any new customer is an opportunity to increase your turnover and your profitability and so building the future
  • Develop existing customers and partners: It is commonly accepted that developing an existing customer is much cheaper than acquiring a new one. This is why loyalty is so important to most sales and marketing executives. When we have a customer, we need to get him to come back, to buy again, in to increase the scope of his purchases
  • Improve their partnerships: Dealers and reseller’s are partnering with you to distribute your products and services. They have an impact on your image and you want them to spread this image your own way. This is why most companies use incentive programs to promote the quality of their partnerships.
  • Develop knowledge and anticipate innovation: motivate your customers to actively participate in your activities is a way to better understand them and to have them to better understand you.

Motivation should be part of your strategy. You should have dedicated budgets for it and you should be able to monitor its (positive) impact.

Why segmentation is key?

In the good old times, the typical incentive was: “If you sell 200 of my cars this year, I’ll invite you in a dream trip at the end of the year”

This was quite efficient to create a good relationship with your stakeholders. For all the rest, it failed:

  • Every year, the same top sellers won the trip. Top seller is not necessarily the most engaged one. It can just be the oldest one, or the one with the biggest shop, or the one having the most Corporate customers. What about the people really working for you with less success (for the moment…)?
  • People not interested by this “dream trip” didn’t run for it, … and quite often still won it but gave the ticket to somebody else…
  • The goal was the same for everybody. We compared achievements that were not comparable. An old customer is not comparable to a new customer. A big dealer is not comparable to a small one…

The result is: huge budgets, poor results.

By chance, technology has evolved and modern platforms can organize motivation campaigns that are addressing your stakeholders much better. A good platform is a platform being good in segmentation at every level:

  • Stakeholders are organized by profiles/segments. They can easily change from one segment to another and combine multiple segments
  • Targets are defined by stakeholder/segment in order to make sure that they are achievable while profitable.
  • Rewards are individualized. Each beneficiary decides what he wants to run for. The platform usually present a combination of rewards catalog and points systems but focus on the tangible rewards each user wants to get
  • Communication is personalized. Everyone receive only information that matters to him. There is no spam. People read your communication because your campaigns are important to them.

You should take some time to think about the segmentation of your campaigns because this time will be largely compensated by:

  • Lower budgets: stop spending money for unengaged people
  • Higher return: More people will participate and be REALLY motivated by your campaigns

Rewards or cash?

When you get, or earn, money, you think it will accomplish all your dreams. Then you go shopping with your dreams and you come back with your needs…

Cash is about needs. Tangible rewards are about dreams. Tangible rewards are aspirational. This is why tangible rewards mostly outperform cash when we speak about motivation.

In average, the results of rewards incentive are close to 50% more than the ones of cash incentives (source: Goodyear, Aberdeen, Andersen Consulting, BI Consumer).

Cash outperforms tangible rewards in only two situations:

  1. When what you give is two small compared to the cost to deliver the rewards
  2. When you give too much, compared to the financial income of your stakeholders. First eat, then dream!

In total amounts, the majority of your Incentives and Recognition budget should go to tangible rewards

There are issues with tangible rewards though. The main issue is to know the dream of your beneficiaries. What do they really want?

Internet can help you to know what creates inspiration to your beneficiaries. A good e-incentive campaign should present a range of rewards to the beneficiaries and ask him to select his rewards as early as possible. This way, we can communicate about this reward during the campaign instead of communicating about points.

Points are virtual. They don’t mean anything concrete to the beneficiaries. They are not aspirational. However, they can be used as a way to:

  • Show the current standing of the participant
  • Promote savings through multiple actions
  • Facilitate the selection of rewards for the beneficiary
  • Etc.

Use points to manage your campaigns but communicate about tangible rewards whenever it’s possible.

Tangible rewards also bring you indirect benefits:

  • They take the focus off the price. They help you to avoid competing solely on price. Cash is too close to discount
  • They stretch you budgets. You can offer more for less by optimizing the perceived value, getting volume discounts, etc.
  • They are memorable. They are tangible. They are what you beneficiary dreamed of but would never have bought. They will think about you every time they’ll think about or use their rewards
  • They spread the word. Your beneficiaries will be pride to have won these rewards and will tell it to their friends. This will promote your company outside of your direct circle.

Incentive or recognition?

We have seen in the previous article that we need to create a partnership with our (employee and customer) stakeholders.

There is no strong, long-term partnership without sharing the profit generated by this partnership. Even if the stakeholders are not motivated by money, if they create value, they must have a share of the pie, otherwise, sooner or later, they will feel rooked and your partnership will be at stake.

The most common and natural way to give a share of your profit to your stakeholders is:

  • For your employees: commissions, bonus, salary increase, etc.
  • For your customers: discounts, End-of-Year premiums, etc.

This way to share your profits is needed but it lacks flexibility. It is permanent. It must be measurable. It does not create aspiration. And, it does not really motivate… (see also the Cash versus Reward[Nd1]  article).

A more flexible and efficient approach to linking motivation to rewards is Incentive and/or Recognition.

The difference between Incentives and Recognition is tiny but important:

  • Incentives promote performance. The beneficiary is rewarded if reaches defined objectives.
  • Recognition promotes people. The beneficiary is rewarded because he is important to us. He is loyal, he achieved something great, he shares our value, etc.

Incentives will more naturally apply to customers while Recognition will apply more to employees but there is no exclusive.

The table below shows examples of reasons to apply Recognition versus Incentive on Employees versus Customers:

By efficiently implementing Incentive & Recognition campaigns, you will increase the motivation of your stakeholders:

  • With the best match between their and your objectives
  • With a long-term strategy but often with short-term, focussed actions giving instant motivation without long-term commitment. You can stop (or not renew) the campaign when you decide it
  • With concrete rewards linked to concrete achievements. This will create aspiration and strengthen your relationship with your stakeholders
  • While learning to know them and so progressively further improve your mutual partnership

Employees or customers?

Who should I target with my incentives? My employees or my customers?

Employees are in fact your most important customers.

Your customers are the ones you invoice. They are the ones who create positive figures with multiple zero on your P&L Statements. You want to take care of them, making sure that they are happy customers, listen to them to anticipate their needs, making them bigger customers.

How could this be made possible without your employees?

The interactions with your customers happen through your employees. They are the face of your company. They need to be close to the customers in order to know whether they are happy or not. They need the skills to understand the customer needs, and eventually turn it into innovation.

This is becoming more and more important with the progression of the technologies:

  • The rise of Internet and social media empower your customers.
  • The back-offices are converging with front-offices

The value don’t get created in back-offices anymore but through our direct interactions with our customers

If you want to get deeper into this, I recommend you the book “Employee First, Customer Second” from Vineet Nayar. This book covers the different drivers to make your employees more efficient and happy.

Your employees are NOT with you for the same reasons as your customers.

Employees are with you because they like doing what they do (at least they should!), they share your corporate values, they can realize great things, eventually they get paid, etc. Customers are with you because you have the best products and services, at the best price, with the best customer service, the most reliable continuity, etc.

Similarly, you don’t have the same expectations for your employees as you have for your customers. You expect your employees to be loyal, independent, creative, cheap, etc. Your customers should be easy to manage, solvable, returning, etc.

Motivation is nothing but finding the match between your expectations and the ones of your stakeholders. Once this match and its associated objectives are identified, try to reach and to beat these objectives by creating a real partnership with these stakeholders.

Naturally, most companies tend to focus to their customer first (customer is king!). But don’t forget that employees are (internal) customers too, and probably your most important customers.

Motivation or loyalty?

What’s most important for me: motivation or loyalty?

Most companies try to increase their client’s loyalty instead of focusing on client motivation.

Actually a good loyal client is nothing else than a client that you repeatedly motivate to get back to you. Furthermore, if he is not motivated, he will never be loyal.

So let’s focus on getting him to buy tomorrow or next week, and you will still have him in one year or two.

Behaving this way also forces you to focus on what really matters to you and to your clients: your offer. How can I convince my clients and prospects that I have the best offer? If he is really convinced about it, he will come, come back and tell everybody around him.

Your campaigns will be more efficient because they will be more tangible and your targets will remain top-of-mind for your clients. Your customer will associate easy to understand concrete short-term actions to what their rewards. They will be more motivated in the short term. They will have a positive feeling about the campaign and, as a consequence, about your company. This positive feeling will bring them to their next purchase.

This also works for employees. If they are happy in their day-to-day job. If they know what you expect from them and they feel recognized when short term objectives are achieved. They will be loyal.

You will save money because you will not reward your clients for things they did not achieve but for concrete achievements and you will avoid to reward clients multiple times for the same achievements as it regularly happens when you combine short with long run campaigns.

Your message will be simpler, more accurate and your campaigns will be easier to manage. Of course, you shouldn’t motivate your oldest client the same way as your hottest prospect but this is not about motivation versus loyalty, it’s about setting differentiated goals and rewards. We’ll come back later on that.