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Posted on Jun 29, 2017 by

Long-Term Goals, Sound Program Design Are Essential

By Deborah L. Vence

 

To reach a successful return on investment, you have to know what your goals are, the risks that are involved and have effective communications in place when promoting your incentive program.

To create and deliver a program with impact, “First and foremost, you must understand the objective of the program,” said Maggie Wenthe, manager, marketing strategy, ITA Group Inc., West Des Moines, Iowa.

“Are you intending to increase sales? By how much? In what areas? Increase margin? Launch a new product? Increase certified employees/partners? Increase engagement?” Wenthe said.

Tricks of the Trade

Besides knowing your program goals and objectives, you also need to understand how you will measure the outcome.

“Make sure you’re able to get your hands on the proper data,” Wenthe said.

Program impact also should begin with a sound program design.

“It is essential to consider the long-term goals and implications of the program, as well as to explore the risks and benefits,” said Susan Adams, senior director of engagement, Next Level Performance, a Dittman Company.

“Sometimes the goal is for short-term sales of one product or service. But, far more often, program owners are interested in this year’s results, as well as in how they set the company up for success next quarter or next year,” Adams said.

“The program should be communicated frequently to keep it front of mind, and must feature motivating merchandise or travel rewards to connect with eligible participants’ individual aspirations,” she added. “The program should not only drive the immediate results you need, but should inspire everyone to engage with next year’s program before it is even announced.”

Scott Siewert, who served as divisional vice president of sales of USMotivation in Atlanta, which closed earlier this year, said there are many tricks of the trade to create and deliver a program with impact, but four are particularly important to consider.

First, he said, you need effective communications.

“Effectively communicating is critical when announcing and promoting your incentive and recognition program. There would be very little, if any engagement if your communications plan is lacking or non-existent,” Siewert said. “I advise clients to put their best foot forward with all communications.”

Participants also need to know what is expected of them, what the program rules are, how a participant can earn points or awards, how a participant can redeem them and how this relates to a person’s taxes (are the awards a taxable event), etc.

To reach a successful return on investment, you have to know what your goals are, the risks that are involved and have effective communications in place when promoting your incentive program.

“Promotional, awe-inspiring, concise and clear communications win the day,” he said.

Second, he said, when possible you should have the participant’s significant other and family involved.

“If a participant does have a non-work friend or family member involved and cheering that person on, your chances for the participant to hit their goal are better,” Siewert said. “Thus, if possible, communicate to the participant’s home or family. Through careful use of social media you are bound to touch a participant’s home and family.”

Third, he said, report all news in a timely way. In other words, “… let all participants know where they are at any given point during the program.

“Our platform allows for real-time status updates. As soon as points are deposited in a participant’s account, the points are reflected in their account,” he said. “We send an e-mail (could be a text) notification alerting the participant that there has been a point issuance.”

And fourth, “have a rewards catalog that is in line with your audience’s demographics. Allow for the multigenerational aspect of today’s workforce,” Siewert said.

“We believe in award choice. Let the participants choose what their award should be. This is critical to ensure we are touching the participants with what matters to them,” he added. “It is, after all, their program. It needs to motivate them!”

Designing a Profitable Program

The first step in designing a profitable incentive program should be accurate and realistic forecasting, while taking into consideration market conditions.

“Based on history, it becomes possible to estimate the expected increase in sales without the program,” Adams said.

Challenging but attainable goals should be set to inspire extra effort, and the resulting anticipated increase in revenue gives you a program budget.

“The program structure and rules will help to contain any risk. For example, an open-ended program rewards all eligible participants who reach a goal, while a closed-ended program rewards just a certain percentage of top performers,” she said.

Choosing a program structure that will keep the entire force motivated through the life of the program is key to success.

The first step in designing a profitable incentive program should be accurate and realistic forecasting, while taking into consideration market conditions.

“Choosing meaningful and desirable rewards also is essential to motivating program participants and reaching goals,” Adams said, adding that joint research from 2015 by the Incentive Research Foundation and the Incentive Marketing Association showed that program participants are highly unique in their recognition and reward preferences.

“For higher budget incentives, group or individual travel is proven to be the most desirable award,” she added. “When the budget is not as large, providing winners with a choice of merchandise or gift card rewards can be an important way to engage their personal hopes and aspirations.”

Wenthe said that “Surprisingly, many companies don’t have a good handle on profitability by product/solution. What can be found as a possible cause? For example, did the sales reps with higher levels of training sell more of your product through the program? Were those that were active in the program more likely to seek training?”

All of the pieces of your programs are interrelated and pave the path to a positive ROI and increased profitability for your company.

“Prep work is the key. Know what you’re trying to accomplish and how you can measure it before you even ask for the money to make it happen,” Wenthe said.

Many factors go into designing a program that is profitable. And, from a high level, there are a few areas that Siewert noted:

  • Program rules dictate what specific actions are going to get rewarded (obviously, the value of those actions leads us to the value of the reward)—the rules need to be concise and easily understood to have a profitable program.
  • Accurately reporting and measuring the results (by participant and in total) is critical to operating a program that is profitable. If there are changes that need to be made to make the program more profitable, the reporting and measuring will allow you to make an informed decision.
  • Effective communications and promotions are a must for a program to be profitable.
  • Having an awards catalog full of choice allows your program to touch all generational groups. This leads to better motivation and profitability.
  • Managing all program costs through an ROI-based managerial mindset allows for the best chance for a profitable program.

Measuring ROI

The first measure of ROI is whether or not forecasted gains were achieved.

“A well-designed program should always pay for itself, out of the incremental increase in revenue generated by the program,” Adams said. “It is easy to forget that incentive programs are also about sales and channel partner engagement.”

Meanwhile, other measures of ROI can include adoption rates of the program, increased awareness of products and services, and sales rep satisfaction with their relationship to the organization.

“A company offering exciting and effective incentive programs should not only see a lift in revenue, but also a lift in the behaviors associated with an engaged workforce, at least among eligible employees,” Adams said. “Incentive programs keep sales forces motivated, connected to the brand and provide important recognition for these valued teammates.”

Wenthe said there is a standard formula that most companies use. “ROI = (gains-cost)/cost,” she said.

“You can use this formula to get an idea. How much did it cost to implement your program? Based on the objective you set, did you meet or exceed your goals? By how much? However, it isn’t as cut and dried as it sounds. How did you measure the ‘gain’? Are you able to accurately track the increase in sales (for example) based on the program? If not, you need to look at the other reasons your program succeeded,” Wenthe said.

“What else did you gain by making this investment? (increased market awareness/presence, increase in channel loyalty),” she added.

Siewert noted the usefulness of the ROI Institute’s methodology to measure ROI, a systematic approach to evaluating all types of programs and projects. The five levels of evaluation are: Level 1, Reaction and Planned Action; Level 2, Learning; Level 3, Application and Implementation; Level 4, Impact (Tangibles and Intangibles); and Level 5, Return on Investment.

“When one has an accurate picture of a project or program’s ROI, there are five key ongoing benefits,” he added. “Improve projects with knowledge of the ROI; demonstrate value; secure funding; forecast ROI; and align with the business.”

What Are the Returns?

It can be difficult to quantify the benefits of incentive programs beyond financial gains, Adams said.

“We know that companies with an engaged workforce have healthier bottom lines, but also see increases in retention, reductions in absenteeism and an increase in customer service,” she said. “These effects can be measured year over year, as part of an overall review of engagement programs.”

However, Wenthe said, VOI is just as important.

“VOI, or Value on Investment, is defined by Gartner as ‘intangible assets that contribute heavily to an organization’s performance. These intangible assets include knowledge, processes, the organizational structure and ability to collaborate. Where ROI is the measure of the tangible benefits of a project or activity, VOI is the measure of the intangible benefits of a project or an activity. VOI includes ROI,'” she said.

In addition, other factors that are important, Wenthe suggested, include:

  • Customer feedback, employee feedback, channel partner feed-back, whatever method you use (survey, online forums, social, etc.) What are they saying about your initiative?
  • Knowledge. Do your reps, employees and partners truly understand your products and services?
  • Steps-to-the-sale, deal registration, client retention, implementation success. These are all other things that are indicators of success that lead to revenue, she said.

For example, in a July 2016 blog post, Wenthe stated that when an employee has done a good job, you present them with a certificate. (“Great job on your performance the past few weeks,” it says.)

“While that certificate is no doubt a kind act—and it probably stirs some happiness in the recipient—the issue of concern here is not with the award, but with the concept of traditional recognition itself,” she said in the blog. Driving great performance through recognition and incentive programs doesn’t stop with a certificate.

Her blog also stated that traditional recognition programs “can often be seen as reactive—not proactive—and fail to have the same cut-and-dry focus and results that others do.”

“Still, more and more companies are adopting formalized recognition programs. But the best among them—the companies that view recognition and incentives as investments, not as expenses—are evolving to use these programs to incent employees in a unique way,” she stated.

Meanwhile, Siewert said there are “returns that we call intangible returns (returns that do not provide quantifiable financial results).

“These types of returns,” he said, “are not measured in financial dollar value, but they do provide an intangible value to the program or project. One should consider the intangibles when evaluating a program.”

Influencing the C-Suite

Convincing C-suite executives of the value of programs beyond the dollar amount can be challenging. But, it helps to show past success.

Driving great performance through recognition and incentive programs doesn’t stop with a certificate.

“We have found that most C-suite executives today realize the positive value of an incentive or recognition program or project,” Siewert said. “What we have seen is if the ROI is quantified using The ROI Institute’s methodology, the CFO—sometimes called the CF-NO!—becomes the CF-YES!, since the financial ROI backing is there for the program or project. For all other C-suite executives we are constantly reviewing all of the intangible benefits of offering a reward and recognition program.”

“In the end, the results of past programs do the convincing. Facts convince C-suite executives more than hyperbole,” he said.

Wenthe agreed that it can be hard to persuade C-suite executives, especially at first.

But, “Using what you’ve learned through your VOI research, they’ll start to understand the multitude of ways your program impacts your business,” she said. “It can’t be only about revenue. That’s a single thread to your tapestry.”

But, what have emerged as essential to a business strategy are recognition, engagement and incentives.

“Success is achieved through the efforts of people, whether employees, channel partners or even customers,” Adams said. “Programs that inspire the top 20 percent of an organization’s performers will always have value.

“Programs that help the important ‘middle 60 percent’ to refine their efforts and achieve more will have significant impact on the business overall. This is well understood in the C-suite,” she said. “Additionally, in the current regulatory environment, it is increasingly important to root incentive programs in the right behaviors in many industries.”

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