Opportunity Knocks, Despite Recession
By Bruce Bolger
By now, most would agree that this is a recession of epic proportions. Few people have ever seen anything quite like the severe and sharp decline that took hold in early autumn of last year and that has drained the life out of business since then. The severity of the decline has even shaken the time-tested presumption that the incentive business usually fares relatively well during recessions, since it's during such times that companies resort to more targeted, cost-effective ways to drive performance.
There is no question that this downturn has had an especially big impact on incentive companies because of the severity with which it hit their traditionally large clientele in the automotive, financial and housing industries, augmented by terrible publicity related to incentive trips. Despite the bad news, the traditional drivers, plus a new factor, are actually in place to fuel new growth in this field.
The usual reasons that incentive programs thrive during recessions have begun to kick in. Properly structured incentive programs enable companies to target their business development and performance efforts specifically at the people who can help achieve goals. These programs have a variable cost structure based in part, at least, on the results. Add to the economics of incentive programs the growing ability of businesses to measure the human factor in business—that is, the direct impact engaged customers and employees can have on their bottom line—and you can see a formula for relative growth for the field on several fronts.
The first part of the business that benefits from recessions are the programs aimed at attracting new customers or getting current customers to buy more. Anyone tuned into media and marketing has to notice the proliferation of consumer offers. Distributor channel incentives similarly prosper during times like these, as manufacturers battle for market share. Sales incentives also benefit, as companies seek less expensive ways to increase activity by promoting behaviors most likely to increase sales, such as making more calls or presentations, and look for ways to keep morale up despite reduced commissions. Because such programs often are aimed specifically at a highly identifiable audience, and because the incentives presumably get awarded based on performance, they are less risky than traditional advertising and direct marketing programs whose out-of-pocket cost is the same whether or not the campaign reaches its goals.
There may be another factor in this field's favor. The marketing world is experiencing a huge shift in budgets from mass-marketing to more targeted approaches that build lasting relationships with customers and promote word-of-mouth marketing. The Internet, e-mail, blogs, forums and social-networking have made it possible like never before to cost-effectively communicate one-to-one with almost any customer or prospect, no matter how large or small. In an era when it costs less than a penny to communicate with someone, any size company can benefit by building permission-based databases of people willing to engage. Increasing numbers of companies use incentives and other tactics to get them to opt-in to communications and to remain engaged.
In addition, at a time when companies increasingly can measure the drivers of customer loyalty and willingness to recommend a company to another, it has become clear that the customer experience often plays a critical factor in creating an emotional connection between customers and a brand. Very often, the decisive element is not technology or a process, it's the human factor: the extent to which employees feel engaged to deliver what the customer wants, either directly in face-to-face contact or indirectly by consistently providing and delivering on time the product or service a customer expects. Based on its extensive research on customer and employee engagement, The Gallup Organization has developed a Human Sigma scoring system that enables companies to measure their degree of customer and employee engagement in a single mathematical factor that can be correlated to financial results.