Feature Article - September/October 2014

State of the Incentive Industry

Economy Showing Positive Effect

By Deborah L. Vence


Incentive Federation research, conducted in 2013 in partnership with Aspect Market Intelligence, revealed that U.S. businesses spend $76.9 billion per year on incentive travel, merchandise and gift cards. Some 74 percent of U.S. businesses use non-cash rewards to recognize and reward key audiences.

The state of the incentive industry in 2014 continues to move in an encouraging direction with the economy being cited as having a positive effect overall on the planning and execution for travel incentives and merchandise/noncash programs.

In fact, an industry survey this summer by the Incentive Research Foundation on incentive travel programs, merchandise/noncash programs, budgeting and other key areas for 2014, showed that things have stabilized compared with the previous four survey periods, which established a strong positive upward trend.

Respondents feel positive—63 percent—about the economy's effect on their ability to plan and implement incentive travel programs. This is the first time that this indicator has remained over 60 percent in two consecutive survey periods since 2008. (November 2013 was at 69 percent.)

In addition, other survey findings showed that respondents are almost evenly split when it comes to the involvement of procurement/purchasing with incentive travel programs in the coming year—47 percent anticipate no change in such involvement, while 48 percent say that the procurement/purchasing role will increase to some degree. Electronics (43 percent), jewelry/watches (33 percent), and open-loop gift cards (36 percent) are the most common merchandise used in reward and recognition programs. Other popular merchandise types are golf items (32 percent); apparel (31 percent); housewares (30 percent); and luggage (29 percent).

What's more, "Employees are becoming the number one focus vs. technology and tools. And, there's more research today that shows engaged employees can have a bigger impact on the bottom line than other investments, such as hardware or software," said Louise Anderson, vice president, recognition sales division, Business Impact Group, Chanhassen, Minn., and past president of the Incentive Marketing Association (IMA).

From the effects of the economy to merchandise awards to social media, industry authorities discuss their thoughts on the state of the incentive industry today and what factors are having an impact on it as a whole.

The Economic Factor

Forty-eight percent of survey respondents indicated that the economy is having a positive influence on program planning and execution of merchandise/noncash programs, as well. The percentage of those saying it will have no impact rose from 32 percent a year ago to 42 percent currently.

And, how has the economy had such an impact?

The state of the incentive industry in 2014 continues to move in an encouraging direction with the economy being cited as having a positive effect overall on the planning and execution for travel incentives and merchandise/noncash programs.

Companies now are much more aware of what the specific labor hour is worth.

"As we invest in these labor hours they are finding that paying people more isn't getting greater results," Anderson said, "but using behavior-based rewards and recognition, which gets them more productivity—but also gets them a higher quality feedback rating."

And, with a "higher quality feedback rating, then you are more likely to purchase from them, a friend or family, as people are smarter about tracking and rewarding, tracking results, tracking customer engagement," she said, adding that recognition has taken a different focus now, too, where it's more often peer-to-peer, and not just coming from the top down anymore.

And, companies are stretching their dollars, too.

"It is taking more points for program participants to earn the same reward as in previous years. I am not sure if the participants have caught on, but it's occurring across the board, even in customer loyalty programs," said Richard L. Low, vice president, special markets, Citizen Watch Company, Lyndhurst, N.J., and president of the IMA.

Despite the positive signs of economic recovery, some things are still a challenge, including overwork due to employees taking on the work of those who've been let go. The true unemployment rate, which counts the people who actually have given up looking for work, still is in the double digits.

"Companies seem to be rewarding their employees who are doing double duty because of cutbacks," said Spencer Toomey, CPIM, senior vice president, Luxury Lines by MMSC, Westport, Conn., and vice president of the IMA. "The unknown is the effect of the Affordable Care Act. The extra costs to employers may force more layoffs or may cut into their budgets, and they may cut back on incentives."