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New Study Examines Motivational Reward Usage&Spending

A new study shows US corporations have reward and recognition on their minds as more businesses are utilizing incentives to motivate consumers, employees, and their dealer/distributor channels…

A new study shows US corporations have reward and recognition on their minds as more businesses are utilizing incentives to motivate consumers, employees, and their dealer/distributor channels. During the year 2000, US corporations spent $26.9 billion on travel and merchandise rewards. The research project, A Study of the Incentive Merchandise and Travel Marketplace, was conducted by the Princeton, NJ-based Center for Concept Development. The Society of Incentive & Travel Executives, through the SITE<.> Foundation, is one of the sponsoring organizations of this study.

The comprehensive study is a follow-up examination of corporate spending on non-cash incentives. The last study was conducted in 1996. At that time, one-quarter of US companies (26 percent) used non-cash incentives as rewards – with annual spending pegged at $22.8 billon. In 2000, nearly one-third of the nation`s more than 10 million corporations (32%) utilized non-cash motivators.

Expenditures on travel rewards have risen from $8.4 billion in 1996 to $9.8 billion in the year 2000. Sales programs have bypassed dealer programs and now claim the largest segment of incentive travel usage. These programs represent 48% of the total travel budget expenditures – with $4.7 billion spent in 2000. Dealer programs follow at 41% with 2000 expenditures weighing in at $4 billion. Non-sales employee programs account for the remaining 11% of travel expenditures – $1.1 billion was spent last year on this market segment.

The cash is king mystique has finally been shattered as merchandise topped the usage charts at 71%. (Cash slid to second place at 69 percent.) Group travel programs rose from 29 to 42 percent and individual travel climbed the charts from 38 percent to 47 percent. When it came to gift certificate usage, travel rewards edged out merchandise in terms of popularity – 35 to 32 percent respectively.

Big Business Buys In

Incentive usage grows with business size. The majority (53 percent) of companies with 1000-plus employees now use merchandise or travel incentives as motivators. (This compares with 38 percent of companies this size who used these types of motivators in 1996.) Manufacturing companies lead the pack in usage of non-cash motivators. Only one in five companies employing between five and 19 workers use these non-cash rewards.

We are thrilled to see healthy increases in the use of non-cash incentives by corporate America, stated SITE`s executive vice president/CEO Jill Harrington. While it comes as no surprise that the greatest users of incentive programs continue to be those companies with the largest workforces; it underscores an ongoing task for industry professionals, she added. An incredible opportunity exists for the incentive industry if we can provide the necessary education and support to those large organizations that haven`t yet discovered the power of non-cash incentives.

Harrington further believes that the incentive industry can and will make inroads into America`s small business community. As a variety of creative and flexible reward options suited to smaller organizations-such as individual travel and travel gift certificates-continue to be developed, we will see greater usage by the smaller companies that make up close to 98% of corporate America.

In addition to examining the size and scope of the US incentive travel and merchandise marketplace, the study also looked at the effectiveness of these items as motivators to achieve business goals.

Trying to achieve sales/marketing goals? The most effective motivators – following cash – seem to be a break from the daily office routine. While cash still holds the top spot – 76% rank it as an extremely or very effective tool to reach their sales/marketing goals – time off from the job (59%); individual travel (58%); and group travel (49%) claim the next spots on the effectiveness (extremely/very) scale. When it comes to achieving non-sales goals – time off (61%), follows cash (71%) as the most effective reward selections. More than half (53%) say individual travel is an extremely or very effective motivator for this target audience.

Sourcing Reward Options

Promotional product distributors edge out other resources as the most popular source for merchandise or travel rewards with 37 percent of respondents using them. The DIY (do-it-yourself) segment is evenly split between those confident (and knowledgeable) enough to go direct to manufacturers (36%) and those who buy reward items at the local retail store. More than one-third (35%) of respondents use the services of an incentive marketing company as the source for their travel or merchandise items. Incentive marketing companies will be pleased to see that they have increased their piece of the market pie by 7 percent. Fifteen percent of respondents report using the Internet for motivational programs in the last 12 months.

Industry Challenge

Concern about cost is the key reason cited by corporate executives who do not use non-cash motivators. Nearly half (48 percent) give this as the reason for not using travel or merchandise rewards. One-quarter of respondents express concern about being able to make an incentive program fair to all participants; while uncertainty about outcomes, appropriate award choices, and insufficient knowledge about incentives are identified as additional concerns by corporate executives.

Cost perception continues to be the greatest concern for organizations that choose not to use travel and merchandise incentive programs, explained Harrington. We encourage industry professionals to focus on demonstrating the effective implementation of incentive planning to prospective users as part of their marketing strategy. In addition to this advice, she outlined organizational efforts underway to overcome these corporate concerns. SITE is a strong supporter of this corporate education process through its work with the Industry Promotion Campaign (IPC) and through its development of new educational products geared to assisting corporate users of incentives drive strong measurable returns from their incentive investment.

Nine organizations prominent in the field of motivation contributed funds to underwrite the study conducted under the Incentive Federation umbrella. In addition to SITE/SITE Foundation, other co-sponsors were the Association of Retail Marketing Services (ARMS), Incentive magazine, Incentive Manufacturing Representatives Association (IMRA), Incentive Marketing Association (IMA); The Motivation Show by Hall-Erickson Inc., Potentials magazine, Promotional Marketing Association of America (PMMA), and the Promotional Products Association International (PPAI).

A cross-section of American businesses was selected for the sample pool in the study. The study was composed of two phases, including focus groups and written questionnaires. Eight thousand questionnaires were mailed to executives in sales, marketing, and human resources, as well as CEOs, presidents, and company owners. The survey drew an 11% return rate.

Theodore Koumelis
Co-Founder & Managing Director - Travel Media Applications | Website

Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.