Guest Column - January/February 2009

Awards That Keep on Giving

By Ira M. Ozer, CPIM


I

n these difficult economic times, when most people need to cut back on their spending due to the reduction in income, job instability and shrinkage in their investment portfolios, there is a dramatic shift occurring in consumer psychology. As reported by the Wall Street Journal on Oct. 4, 2008, there is a significant decline in the purchases of luxury goods accompanied by a trend toward reverse psychology in that people don't feel it's necessary to "keep up with the Joneses."

People are leaning toward frugality, because they do not feel the positive social reinforcement that showy behavior provided when economic times were better. They also can't justify the splurge, so a reverse snobbery is occurring. People still want to buy, but we as marketers need to help them justify it with items that can save them some money and are practical, such as gourmet coffee makers that still give them the quality java experience, but without the big dollars at retail. People prefer "green" products that give back to the environment because it's the right thing to do and it makes them feel more socially responsible. These behaviors are consistent with the four "psychological processes" by which tangible awards motivate better than cash, as defined by Scott Jeffrey, Ph.D. in his 2003 whitepaper (available from the Incentive Research Foundation, www.theirf.org), but to use these principles effectively, our motivation strategy must be changed.

So what can we do to change our motivation strategy to best take advantage of these trends? We don't have to stop offering luxuries—in their hearts, people still want to redeem for these—but we should consider giving items with special value and improve the way we communicate these benefits. We should offer awards with value that continues after the initial purchase (or award redemption), or more simply stated: "awards that keep on giving." There are several ways to accomplish this.

Luxury Awards

At the high end, we should still promote dramatic luxury, such as home theaters. These have huge appeal and "trophy value." But consistent with people slowing down their purchases, they are less likely to redeem for these unless we position them differently. We need to communicate not just the joy the recipient will get by seeing sports, movies and favorite TV shows in hi-definition video, with surround sound, but also that these home theaters can actually save them money on an ongoing basis.

Take for example a Sony or Samsung home theater that sells for $5,000 (in award point value). At first, this sounds like a lot, but consider that taking a family of four to the movies costs an average of $70, including four tickets at $10, concession snacks worth $20 and a transportation cost of $10—and this doesn't include dinner out, which can add another $20 per person, or a total evening expenditure of $150. If you divide the $5,000 cost by $150, it means that the home theater will pay for itself in just 33 evenings, or less than one year of watching a weekend movie! (Sure, you can factor in the cost of the cable TV bill, but this needs to be paid regardless.)

If the awards budget isn't high enough to award a complete home theater, then giving just one component such as a Blu-Ray Disc player might be just the ticket.

Also, consider housewares items that people wouldn't normally go out and buy, such as an Oster Mini-Convection Oven, cappuccino maker or popcorn machine. These allow the recipients to create restaurant-quality experiences at home.

Home theaters and housewares awards are available from Harco Incentive Solutions and other authorized premium incentive distributors. For information, contact Ruth Owens at (201) 894-8941 x124 or by e-mail at ruth124@harcoweb.com.