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Study Shows Modest Increase in Incentives Use
By Deborah L. Vence
The use of incentives for employees and customers has grown significantly, according to a recent study by the Incentive Federation. The study—conducted together with research firm Aspect Market Intelligence—shows that the non-cash incentives market is thriving, with 74 percent of businesses in the United States spending $76.9 billion on an annual basis on incentive travel, merchandise and gift cards.
"We knew that coming out of the recession, having a solid view into the state of [the] market would be vital. To find that 74 percent of U.S. businesses on average are using non-cash rewards and recognition (and almost 90 percent of companies with over $1 billion in revenue) tells us that non-cash rewards and recognition were an important tool that U.S. businesses undoubtedly turned to even in the tough economic times," said Melissa Van Dyke, research chair of the Incentive Federation and president of The Incentive Research Foundation.
What's more, half of this market is driven by smaller businesses (those with between $1 and $10 million annual revenue), whose budgets might be tighter, but whose total volume produces $39 billion a year. Also, U.S. businesses, overall, spend $22.6 billion annually on incentive travel and more than $53 billion on merchandise and gift cards to reward employees, partners and customers. (A total of 1,952 business people responded to the survey. Of those, 526 are responsible for managing an incentive or non-cash rewards program and provided budget information.)
"For many years the Incentive Federation has served the industry by coming together to take a pulse on the size of the incentives and reward market. The last study was done in 2007 and everyone on the board felt it was time to reach out and understand again how big the market for incentives and rewards is," Van Dyke said.
"In sum, we wanted to answer the question, 'Could the market for non-cash rewards and recognition withstand the pressures of one of America's greatest economic downturns? The answer was a resounding, 'Yes'," she said.
For example, some of the study's findings include the following:
- Seventy-four percent of U.S. businesses use non-cash rewards to recognize and reward key audiences in the form of incentive travel, merchandise or gift cards.
- Ninety-eight percent of businesses running non-cash incentive programs include merchandise or gift cards, spending $54.3 billion each year.
- Forty-six percent of businesses running non-cash programs include incentive travel, spending $22.6 billion per year.
- Non-cash employee awards are the most prevalent, with 56 percent of U.S. businesses having programs, followed closely by corporate gift programs.
- Non-cash sales incentive programs are present in almost one-half of U.S. businesses, and non-cash customer loyalty programs are used in one-third, while only one-quarter of U.S. firms use non-cash channel programs.
- Gift cards are more frequently used for employee programs (88 percent) than for corporate gifts (55 percent), while merchandise is used relatively evenly.
- The incidence of all program types tends to increase with firm size.
- U.S. businesses spend $76.9 billion per year on incentive travel, merchandise and gift cards.
- Smaller firms account for half of the market based on the sheer number of these companies.
"It seems the recession may have supported the growth of non-cash rewards for all types of employee motivation, as employee non-cash rewards were the most prevalently reported program (56 percent of businesses have such programs)," Van Dyke said. "Employee programs were even more prevalent than the traditional programs of corporate gifts and sales incentives. This supports the anecdotal stories we hear about many managers and executives looking for ways to increase engagement that did not fall in to the standard compensation approaches."
The study also revealed that non-cash employee programs are the most prevalent, followed closely by corporate gifts. To boot, non-cash sales programs are present in almost one-half of U.S. businesses, and non-cash customer loyalty programs are present in one-third. Non-cash channel programs are the least prevalent, with one-quarter of U.S. firms having reported the presence of these programs. The incidence of all program types increases with firm size.