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On the Rise
Study Shows Reasons Behind Incentive Industry's Growth
By Deborah L. Vence
The Incentive Federation Inc. released in June the results of a study that delved deep into the $77 billion incentive industry and the reasons behind its growing numbers.
The study, titled the 2015 Incentive Federation Program Design and Support Study—which examined program design by audience, objectives, structure and metrics, and analyzed the use and importance of success measures—revealed that companies that spend more on reward and recognition programs are more likely to believe in the importance of incentives and feel that their programs are effective.
"IFI opted to conduct this specific study to: better understand the reasons for implementing incentive programs; how the programs are sourced and monitored; and obtain information on program spending," said Jessica Tadlock, managing director, Incentive Federation.
"IFI believed that this study would not only identify important information in those areas, but [the] IFI also hoped to: show what non-cash rewards are also most popular by program type; how the rewards are sourced (via local store, dealers, etc.); how recipients qualify to receive the award; and how companies use technology to run their programs. We believe the study not only met, but exceeded our expectations," she said.
A key finding from the study showed that small businesses take advantage of incentives with employees and customers, a practice that was thought to be confined only to larger corporations.
"As we learned from our 2013 sizing study, over half of the $77 billion market is made up of smaller firms. We knew they were participating and felt that incentive programs are important," Tadlock said. "In this study, we asked some end user attitudinal questions that confirm the belief that incentive programs influence behavior. In fact, 79 percent of the companies asked felt this way. I think that high percentage surprised us."
Other highlights of the study include the following:
- The most important program design factor, whether for sales, channel or employee programs, is making sure the rewards are received by the right people.
- Small business is pervasive in the economy. The typical company is a small business and spends less than $50,000 per year on its incentive program(s), regardless of the program audience.
- Smaller firms report spending less than $50,000 per year on sales programs. More robust investment in sales programs can be seen once firms pass the $10 million revenue mark with increases aligned to company growth.
- Recognition awards, events and gift cards are the most common types of recognition/reward, regardless of the program audience.
- Electronics take the top spot as merchandise awards for employee programs, followed by food, beverages and apparel. Sporting goods, luggage, watches/clocks and home décor are other categories favored for employee programs.
- The use of technology to administer and/or evaluate programs increases with company size with a little more than one-third of the largest companies having strong program-specific technology in place.
Based on the study's findings, Tadlock said that, not surprisingly, the top three drivers by program are: sales (increase sales, improve morale and improve customer satisfaction); channel (improve productivity, increase sales of specific product/service and increase overall sales); and employee (improve morale, improve productivity and improve customer satisfaction).
She added that the types of awards most frequently offered used by program type are: sales top award types (recognition awards; gift cards/gift certificates); channel top award types (recognition events, gift cards/gift certificates and recognition awards); employee top award types (gift cards/gift certificates and recognition awards).
Recognition awards, recognition events and gift cards are the most common type of recognition/reward utilized across program types, she said. (Note: group travel was not considered, but individual travel was included.)
When it comes to reporting and analyzing metrics, "the most prevalent form of reporting is periodic static reporting, and only one-third have access to reporting portals. Surprisingly, one quarter do not have any reporting analysis in place," Tadlock said.
As to how the study's information will be used in the incentive industry, Tadlock said the IFI is running a series of white papers that will offer a closer look at the results for the following topics: program goals and objectives; award program spending; engaging outside program support; and program communications, technology and reporting.
"We feel that any industry player can benefit from one or more areas covered by this study. In addition to the standard methods of distribution, we will be sharing the data at upcoming industry events," Tadlock said.
Intellective Group of St. Louis conducted the study and used a national sample of business stakeholders from firms with at least $1 million in annual revenue.
Organizations that are interested in the study can find more information at www.incentivefederation.org.