Feature Article - September/October 2016

Trending Up, 2016

The Stunning Post-Recession Rise of the Reward & Recognition Industry

By Rick Dandes


Tracking Trends: What Are the Rewards?

A trend noted by both Ozer and the IRF is a return to luxury awards. "We have watches and electronics much higher as desired awards," Van Dyke said. "But now we've seen a return to luxury on the merchandise front, and a relative stability for merchandise and gift cards, with non-cash awards becoming more and more a part of an organization's portfolio."

Another trend is an increase in per-person spending, Van Dyke said. "The growth in the overall industry is evident in our research, but we are also seeing per-person spending in gift cards, and that curve has been trending up in the past couple of years."

Last year, Van Dyke explained, IRF did a participant experience study, " and that is where we did some sophisticated marketing research. We went out to individuals and asked them about their entire reward experience and made them make trade-offs in what they wanted. We showed them different scenarios and asked which ones do you like, more or less? And through that series of questions, we learned what really mattered most to them. They were able to trade off who was being recognized, how they were being recognized and what awards they received and what rewards were meaningful to them. What was interesting is it got us closer to what people really value."

The results were surprising.

"When we looked to see whether there was a difference in what millennials wanted vs. everyone else, we could not find any break by age group that was statistically significant," Van Dyke said. "We could not find any data that concluded, yes, millennials like gift cards more, or yes, millennials wanted a certain type of merchandise. What did change in how people wanted to be rewarded and recognized is when we started to look at the people's work location, preferences about working at home vs. office."

For generational differences research showed nothing statistically significant at the 95 percent level. For example, millennials have slightly more interest in clothing than gen X or baby boomers. Boomers were a bit more interested in watches and clocks than gen X or millennials, Van Dyke said. Everyone had a strong interest in gift cards.

Challenges Ahead

No doubt, there are great and numerous opportunities for growth in the incentive industry. But there are serious challenges as well, Van Dyke said. Tracking where items are purchased is an issue facing program designers and product buyers.

"For example," Stotz said, "as we see gift cards and point systems growing in volume, the challenge is, where are the end-user buyers, the corporate buyers, purchasing them? Or, how are those points being redeemed? Are they being redeemed through a retail store? Online? A special online catalog? It is challenging to figure out exactly where that volume is going. It is becoming more difficult than it used to be to track where items are being purchased."

"That gives special markets a major challenge in terms of promoting products for their brand," Stotz said. Sales, which used to be tracked through specific channels, are being distributed through many channels.

In recent years, there has also been a shift in how human capital is viewed. Now, within corporate executive boards, the number-one issue for CEOs is human capital. "It has been that way for the last three years," Van Dyke noted, "far exceeding their interest in cost reduction or operational efficiency. There is a huge portion of the U.S. market that sees the value of their business not in their factories they own or products they produce, but in their intellectual and human capital property."

Now is the time for everyone to get much deeper into program design, she said. "Our challenge at IRF is to help those individuals who run those programs day in and day out to create stronger programs, know what types of design patterns work and don't work, since now we have such a large portion of the U.S. market using these tools."

There is a movement away from "do this, get that" programs to a more holistic approach regarding the entire performance journey. The journey doesn't stop with the end of the program and issuance of awards. For the designer, the end point is used as a launching pad, in terms of what is coming next, as well as the impact on the overall business or certain parts of the business, " and how it has created what I would call intangible results," Van Dyke said "Program design has changed quite a bit."