Guest Column - May/June 2011

Trending Toward Simplicity

If Your Incentives Aren't, They Should Be

By Matt Harris

We have an astonishing array of choices today: 87,000 drink combinations to order at Starbucks; 1 billion Web pages to explore; 65,000 iPhone apps to download; 10,500 radio stations to listen to; 5,500 magazines to read; and more than 200 cable TV networks to watch, reports Karl Fisch on Shift Happens 4.0 (see On a daily basis, this proliferation of choice can be mind-boggling—especially when options continue to multiply at a rapid pace. Many choices we have today didn't exist just five years ago. Clearly, it's commonly accepted that the more choices you have, the better your quality of life. But is this accurate? Not necessarily.

Having more choices isn't always better. This seems counterintuitive, but research about shopping behavior supports this truth. In The Art of Choosing, Columbia University professor Sheena Iyengar cites a study she conducted at a luxury food store. Researchers set up a table offering samples of jam. Sometimes, there were six flavors; at other times, 24 flavors. After the taste tests, 30 percent of shoppers with six flavor choices purchased jam. But only 3 percent purchased jam from tables with 24 choices. In other words, faced with too many choices, it became difficult to settle on a single selection.

Having too many options can overwhelm reward recipients too. When this happens, what should be a stand-out experience loses impact. And today's rewards are losing their motivational power as the trend toward choice dominates incentives, and they bow under the pressure. These quotes from current incentive Web sites tell the story: "We offer over 750,000 items and almost 2 million certificates a year!" "We offer more than 25 million items, experiences and charitable opportunities worldwide." "We have the largest variety of travel certificates to choose from. Thousands of options from hotel nights, roundtrip airfare, cruises, theme park getaways, and exotic resort stays."

With the incentives industry becoming more about offering a quantity of choices, gift card rewards have sharply risen in popularity. Of incentive buyers surveyed for the Spring 2010 and Fall 2010 Incentive Research Foundation Pulse Surveys, 22 percent expected to see an increase in gift card rewards in 2010. That number jumped to 41 percent for 2011.

It's easy to understand why: Gift cards are an inexpensive way to offer great variety, especially those with open redemption. Plus, on the surface, it appears that open cards are what people want. A major card network's recent research found that "92 percent of participants surveyed want cash (or an open card)" for their reward.

Yes, it's true that when you ask, people will tell you "the more choices the better." But it's not necessarily inspiring the behavior that supports an effective incentive experience. The actions of both jam shoppers and recipients of open card rewards tell you the same thing: When there are too many choices, they look for an easy out. And that's about coping with an experience, not remembering it or enjoying it. Consider the redemption data in Figure 1, from millions of open card transactions.

Data from InteliSpend Prepaid Solutions shows the reality of too much choice: Two-thirds of open card reward recipients don't use them for meaningful, memorable purchases. Instead, purchases get lost in the everyday shuffle of life. That's not quite the inspiring experience or effective reward we all want to deliver. But too few choices can be just as unsatisfying. Who wants another iPod, when everyone in their family has one? Or a month of free coffee when they drink tea?