Departments - November/December 2015

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Small Business Impact on Incentive Spending
Incentive Research Examines Awards Program Spending

By Deborah L. Vence


According to 2015 incentive industry research, the typical company spends less than $50,000 per year on their program(s), overall, regardless of the program audience. And, this is due to the vast number of small businesses in relation to larger firms.

The data—collected by the Incentive Federation Inc., an alliance of associations involved in a variety of aspects of the incentive field, encompassing rewards, recognition, promotional products and related promotions—was based on survey results from the federation's 2015 national sampling of reward and recognition "end users" of sales, channel and employee programs.

For example, research showed that when it comes to sales incentive program spending, smaller firms most frequently reported spending less than $50,000 per year. More robust investment in sales programs can be seen once firms pass the $10 million revenue mark, and increases are apparent as the company size grows. (It is possible that total spend on sales programs was not captured in the largest of firms, due to distributed spend across numerous divisions and operating units.)

For channel incentive program spend, half of smaller firms reported spending less than $50,000 per year on channel programs. Investment in channel programs increases as firms exceed the $10 million revenue mark, and continues to increase as company size grows. (It is possible that total spend on channel programs was not captured in the largest of firms, due to distributed spend across numerous divisions and operating units.)

And, for employee program spend, the majority of small firms spend less than $50,000 per year, and this level of spending also is seen among a considerable proportion of larger firms. Within the largest companies, spending on employee programs increases dramatically. (It is possible that total spend on employee programs was not captured in the largest of firms, due to distributed spend across numerous divisions and operating units), according to research.

Furthermore, recognition awards, recognition events and gift cards are the most common types of recognition/rewards that are used, regardless of program audience.

The following is a list of the types of awards and recognition used among sales, channel and employee programs.

SalesChannelEmployee
Recognition Awards78%52%55%
Recognition Events46%59%47%
Logo'd Merchandise39%45%29%
Symbolic Awards30%46%32%
Gift Cards/Gift Certs.78%59%84%
Merchandise Awards 23%28%16%
Individual Travel24%37%16%
Group Incentive Trips21%18% 1%

Other research revealed that for merchandise usage by audience, three merchandise categories dominate in terms of prevalence in sales programs. They are: food and beverages, electronics, and apparel. The remaining categories of merchandise are not negligible—the least-frequent categories are found in one out of five programs.

Within channel programs food and beverages are everywhere, while electronics and writing instruments also make a strong showing. Housewares, however, are absent within channel programs.

For employee programs, electronics take the top spot, followed by food and beverages and apparel. Sporting goods, luggage, watches and clocks, and home décor are other categories favored for employee programs.

What's more, for programs offering merchandise or individual travel awards, points-based systems of earning and redemption are used to varying degrees, depending on the audience type. Channel programs have a very high incidence of points programs for both merchandise and individual travel, while points are more common for merchandise-based sales programs than those including individual travel. Points are not common within employee programs.

The chart below reveals the incidence of points-based programs by award type.

SalesChannelEmployee
Merchandise Awards58%95%14%
Individual Travel18%76%16%

A large percentage of companies were in agreement when they were asked if their non-compensation reward mix includes cash. When asked to describe these cash rewards, however, many program managers mentioned bonuses and gift cards. The implications are twofold: There is not a commonly understood line between compensation and rewards, and gift cards are considered cash-like to some program managers.

Incidence of cash as a non-compensation reward:

Sales programs: 71%
Channel programs: 66%
Employee programs: 61%

In terms of the application of specific types of reward and recognition, buyers also were asked about various program rule structures and the types of reward and recognition they prefer in each of these circumstances. Some reward and recognition types are preferred more or less than others, depending on programs. The broader learning, however, is that all types of rewards and recognition are used to reward participants for all types of programs.

For more information on the research or to learn more about the association, visit www.incentivefederation.org.