Departments - July/August 2013

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Boost of Confidence
Trust in Economy Driving Creation of Incentive Programs

By Deborah L. Vence

Less concern over the economy is boosting motivation industry professionals' confidence in the planning and implementing of incentive travel and merchandise programs.

This, according to a spring 2013 Pulse Survey by the Incentive Research Foundation (IRF) that queried more than 2,000 program planners, suppliers and buyers, and had a total of 241 participants. The survey showed a 13-point increase among respondents who said the economy is having a "positive impact" on their ability to plan and implement incentive travel and merchandise programs—56 percent vs. 43 percent six months ago. (The Pulse Survey covers indicators such as budget changes, specific program elements, incentive travel, merchandise/noncash rewards and other issues that affect program planning and implementation.)

"Although we generally see more optimism in the spring surveys than we do in the fall surveys, this general trend toward a more optimistic outlook is actually reflected in various other executive surveys, including those recently conducted by McKinsey consulting," said Melissa Van Dyke, president of the IRF. "The data seems to indicate that declining concerns over consumer demand for goods and services and an expectation of falling unemployment rates contributes to part of executives' optimism in the U.S.

"During the height of the economic downturn, overall demand from consumers for goods and services of all types was a major concern of executives looking into the future. They naturally felt that lagging consumer demand = lagging sales = lagging growth. In our recent Pulse Survey, executives seemed less concerned with that now, and more optimistic, which indicates that they are willing to make investments in previously disregarded areas," she said. "This optimism is no doubt easing pressure both internally and externally on program budgets."

Other survey data revealed that 82 percent of respondents expect incentive travel budgets will stay the same or increase in 2013. Also, innovation is playing a critical role in many incentive programs right now, either as part of the planning process or as a key outcome. And, nearly half of respondents indicated that they have an innovation strategy in place or are looking at one.

With regard to establishing innovation strategies, Van Dyke noted that "Crafting a culture of reward and recognition continues to be a strong precursor to cultivating a corresponding culture of innovation.

According to a Babson Executive Education survey that was published in Harvard Business Review, "employees in 'Rewarder Organizations' generate ideas 250 percent more often than organizations that do not use reward and recognition," Van Dyke said. "Not surprisingly, employees in rewarder organizations are also three times less likely to be concerned with negative outcomes when engaging in innovation efforts. With this research and others, the crucial tie between innovation and a culture of reward and recognition continues to grow."

When asked about incentive travel program budgets for this year, many respondents (45 percent) indicated that they anticipate budgets for incentive travel programs will "remain unchanged" this coming year; while 18 percent indicated that budgets for incentive travel programs will decrease by some degree in the coming year; and 37 percent indicated that budgets for incentive travel programs will slightly increase this coming year.

To boot, survey results on techniques used in the coming year to enhance the air transportation portion of incentive travel programs included the following:

  • 38 percent anticipated that "only tickets will be provided" as part of their program(s).
  • 36 percent indicated that "all costs for air transportation" will be provided.
  • 11 percent indicated that "non-air options" will be included.
  • 10 percent indicated that seating upgrades will be included.
  • 5 percent indicated that "airline club passes" will be included.

"During the research we made an attempt to understand through open-ended questions what innovation strategies are in place for various organizations. Not surprisingly, many organizations said that the details of these efforts were proprietary," Van Dyke said. "We did, however, hear respondents talk about automated communications supporting the innovation process, the use of game mechanics to encourage the process, use of video to create organizational 'heroes' out of winners, integration of CRM systems, weekly solicitation from management for ideas, and, of course, reward and recognition for top ideas that cut costs or increase revenues."

Other highlights from the survey included:

  • Social media and corporate social responsibility (CSR) continue to be popular enhancements to incentive programs, although their usage has dipped slightly since September 2012.
  • Despite the fact that a majority (64 percent) indicate they use points-based systems for their merchandise/noncash incentive programs, this figure is down from 82 percent in the September 2012 Pulse Survey.
  • When asked how budget increases or cuts have affected program outcomes, 91 percent of those who increased budgets indicated a corresponding increase in sales results.
  • 39 percent of respondents anticipate no change with respect to destinations for incentive travel programs this year; 17.5 percent say they will pick locations closer to home; and 16.8 percent will select domestic rather than international destinations with the move away from international travel stabilizing.
  • When asked which specific regions they will likely choose for their incentive travel programs, 42 percent of respondents selected North America, 34 percent said Central/South America, 32 percent selected the Caribbean, and 31 percent chose Europe.
  • Top product categories in merchandise-based incentive programs are electronics (61 percent), clothing/apparel (49 percent), golf items (45 percent), jewelry/watches (45 percent), luggage (44 percent) and housewares (40 percent).

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