Feature Article - January/February 2008

A Booming Business

Incentive Federation Research Reveals Growth in Industry

By Emily Tipping

New research shows that travel and merchandise incentives have become a booming $46 billion industry, according to study results announced during The Motivation Show in Chicago this past fall. Companies using merchandise incentives spent $32.7 billion, while those using incentive travel spent $13.4 billion. (See Figure 1.)

The Incentive Federation's 2007 United States Incentive Merchandise and Travel Marketplace Study revealed that the market for travel and merchandise incentives has a significant impact on the economy, according to Frank Katusak, chairman of the Incentive Federation, and shows no signs of slowing.

Nearly 60 percent of respondents said their spending for merchandise incentives will increase over the next two years, while more than one-third expect their budgets to remain the same. On the travel side, more than half of respondents expect their spending to increase in the next two years, while 37 percent said it will stay the same.

Room for growth

Overall, 34 percent of the companies surveyed said they used either merchandise incentives or incentive travel in 2006. A similar study released in December 2000 showed that 32 percent of respondents used merchandise and travel to motivate consumers, salespeople, dealers, distributors and non-sales employees.

Karen Renk, executive director of the Incentive Marketing Association (IMA) said the organization was pleased to see such growth in the marketplace.

Ten percent of respondents said they used incentive travel in 2006, while 31 percent used merchandise incentives (see Figure 2), with larger companies having a higher usage of both incentive travel and merchandise than smaller companies. Nearly one-quarter of companies surveyed that reported annual revenues of more than $100 million said they used incentive travel, and 48 percent of them said they used merchandise incentives.

Ten percent of companies in the survey with less than $100 million in annual revenues said they used incentive travel in 2006, and 30 percent used merchandise incentives.

"We've only just begun," explained Norma Jean Knollenberg, president of Top Brands, a full-service incentive house based in Oshkosh, Wis. "This research shows that only 35 percent of the companies interviewed used either merchandise or travel incentives in 2006, so the opportunity for growth is huge. It also revealed that the traditional consumer/trade/sales incentive programs have declined, and employee performance improvement programs have taken the lead. Therein lies another opportunity for growth."

In fact, among responding companies that used incentive merchandise, the most common application was for non-sales employee recognition, followed by business gifts.

"One of the very positive trends was the huge increase in the use of incentive programs for employee recognition programs," Renk said. "There is tremendous potential there because every organization has employees that they need to keep engaged and motivated."

Altogether, 80 percent of respondents that used merchandise incentives in 2006 used them for non-sales employee recognition, while two-thirds used them for business gifts. More than half of the respondents that used merchandise incentives employed them in consumer/user promotions, while just over a third used them for sales incentives. Dealer incentives were the least popular application of merchandise incentives, at 17 percent. (See Figure 3.)

The largest amount of dollars—$12.06 billion—went to customer/user promotions, which represented 27 percent of all expenditures on travel and merchandise incentives. Merchandise incentives for non-sales employees made up a quarter of expenditures, at $11.35 billion, followed by travel incentives for salespeople at $6.6 billion, business gifts at $5.59 billion and merchandise for sales incentives at $5.1 billion. (See Figure 4.)