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How to Run A Successful Incentive Award Program
An incentive campaign is a practical and affordable means of helping your company reach the pinnacle of success. Whether you're an experienced user of incentive programs or new to the concept, this guide will show you step-by-step how to plan and orchestrate an incentive program that will bring you many positive returns.
An incentive program is one of the most powerful tools available to competitive businesses in pursuit of increased productivity, sales and customer satisfaction. Time and again it has been proven that increased motivation leads to improved performance. Rewards come back in the form of new business, increased sales and a renewed sense of optimism, among scores of others.
An incentive award program can spur on all of this…but it must be carefully designed and orchestrated. The basic elements of a successful program include establishing objectives, targeting the right audience, budgeting, selecting the awards, developing a strategy, announcing the program, running the program and evaluating the results. These are the heart of any incentive program, whether it's geared towards sales and non-sales employees, dealers, manufacturers and distributors, consumers or any other audience.
Above all an incentive award program should:
- Motivate participants to reach higher levels of achievement
- Offer awards that have intrinsic value and trusted brand names
- Provide outlets for peer recognition
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What do you want your incentive award program to accomplish? To discover what the particular objectives are for your incentive program, arrange a brainstorming session with colleagues in the departments that will be involved. They can provide valuable insight, for example, into changing market conditions or aspects of the program's target audience that you may not be aware of. Formulate a running list of objectives. Objectives include, but certainly are not limited to:
- Increasing sales during a slow period
Consider the objectives you have outlined. Are they achievable? Or are the objectives so far out of reach that no matter how wonderful the awards may be, the participants will be too frustrated and give up trying before the end of the program?
Answering all of these questions and setting achievable objectives will help you focus the incentive award program and, ultimately, steer it on the path to success.
Objective Checklist
Incentive program objectives should always be achievable and never leave a question in a participant's mind about what they are being asked to do. See how yours stack up They should be:
It's time to pinpoint your target audience - those who will participate in the incentive program and help the company achieve the objectives outlined in Step I. Begin by developing a profile of the players in the target audience. How is each person involved in day-to-day operations and the development and distribution of your product or service? Try to assess how much you can realistically expect from them based on their level of involvement. A participant profile will give you a broad picture of each person's contribution to business and show you exactly who needs to be motivated.
A successful incentive program should pay for itself from the profits it generates. There are two types of incentive program budgets: fixed (or closed) and open. A fixed budget caps the value of the award earned, such as a merchandise award whose price has been predetermined. This type of incentive program allows you to establish a firm budget at the start. An open budget allows participants to earn points or dollars for each unit sold or for achieving preset goals throughout the program's duration.
Reliable guidelines for incentive award program budgeting follows:
- Administration: Plan to spend 5 to 15 percent of the budget on administration, which includes enrollment and database maintenance, points and award tracking, updating and mailing of performance standings reports.
You can package an incentive program in any number of creative ways, but you will have to choose the method for motivating the target audience and measuring their progress.
- Calculate the ratio of your work force that produces most of the volume and award accordingly. For example, you may choose to offer a few tiered levels of merchandise awards or more expensive items to your top performers. The objective is to strike a balance between an award large enough to be a motivation and one that fits within your budget.
Writing Down the Rules
If there's a golden rule for writing rules, it's "keep it simple." Rules should always be free of industry jargon, easily understood, specific, straight forward and above all, fair. Get a second opinion before officially releasing them by giving a copy of the rules to several potential participants for feedback.
Top 10 Incentive Program Rules
For Incentive programs with a close-ended budget
For programs with an open-ended budget
Once you know which group needs to be motivated, find out more about them as individuals with the help of a questionnaire. For starters, you'll want to know the ratio of males to females in the group, how many are married or single, their hobbies and interests, median income, level of sophistication and lifestyle. The answers will guide your award choice.
While your tastes may be truly exquisite and personal interests fascinating, avoid selecting awards based solely on them. What appeals to you may not be the greatest lure for others.
Tips for Selecting Awards
- Seek out the advice of an experienced award distributor. They can offer expertise in selecting awards and promotional materials needed to enhance your program. Plus, they will offer awards at below retail cost.
Without a strong promotion campaign, your incentive program may never get off the ground. You have to get the word out, so make developing communications a top priority before the actual program launch.
Your communications portfolio could, and probably should include these six basic pieces:
- Teaser letters drop a hint about the coming program and are often accompanied by a small gift or interactive game (a puzzle or riddle) related to the program's theme.
Orchestrating an incentive program is often a second job for a company's administrator, and typically requires:
It's time take the final step - the post-program evaluation. First, listen to the participants. Speak with them personally or conduct a survey to find out whether the program and its rules were clearly communicated, if participants liked the awards mix, if training made a difference in their performance, how they felt about the promotional materials and whether the standings bulletins were easy to understand and timely enough.
Then consider all the tangible and intangible aspects of the program. Ask yourself such questions as:
Finally, review separately each of the program's components: the budget, the measurement system, the awards, promotion and the administration. See what worked and what didn't. Put your ideas down on paper, and then use them next year to make your incentive award program even better.
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- Improving productivity
- Introducing a new product
- Promoting a specific product
- Enlarging the customer base
- Staying productive in a slow economy
- Increasing product or service quality
- Off-setting the competition
- Simple and Specific. Spell it out. Objectives should be clear, well defined and leave no room for misinterpretation. Steer away from broad terms like "increase sales" to increase sales of computer systems 10 percent between June 1999 and December 1999.
- Realistic. Have an ambitious agenda, but don't go overboard. Objectives should be attainable. Morale will quickly sink when participants don't -or can't - reach the goal.
- Measurable. Make the objectives measurable so that they can be evaluated fairly. Sales driven programs are easily measured because they are numbers oriented, but you can, for example, easily measure sick days in an attendance program, the number of new accounts opened, clients served or safety procedures observed.
- Timed. Adjust your objectives to suit fluctuations in the business cycle. Programs aimed at increasing sales in a slow period won't even come close to peak-period sales.
- Synergistic. An incentive program must fit in with the company's overall business strategy and philosophy and run at a time when the current market conditions and workplace environment are compatible.
B. Know the Players
C. Paying for It
- Promotion: Most companies spend up to 20percent of the budget on promotion, one of the most important aspects of an incentive program. To be effective, the campaign must be widely publicized through a solid communications program. Don't cut corners.
- Awards: The majority of your budget fund - between 70 and 75 percent - should be earmarked for awards. The higher the participant's income, the more valuable the award should be to motivate outstanding performance.
- Research/Training: The remainder of your budget should be dedicated to these areas. These are important elements in an incentive program, especially if participants need training to improve their performance.
D. Mapping a Strategy
- Pacing - or taking into account your industry's seasonal cycles should never be overlooked. Although successful programs run during peak seasons, don't rule out the slow ones-during a lean period incentive programs can help bridge a gap.
- Choose an applicable method to measure success in terms of job performance, progress towards goals or a change in behavior, whether it's calculating the number of accounts opened, dollars in sales or safety procedures followed.
- Decide also how you'll record and communicate progress to the participants. Don't be lax in sending out standings updates - participants may start losing interest in the program.
- Make Your Own 0dds - "Earn a sweepstakes entry for every case you sell, so those who sell the most have the best chance of having their ticket drawn."
- Hit and win or Buy In - "The top 50 who achieve the objective get the award; those who reach at least 50 per cent of their objective can pay a premium and buy in to the award."
- Only the Top Win: "The top 50 achievers and their spouses win the award" or "The three people who submit the greatest number of accepted ideas win."
- Unequal Thirds: "Participants are divided into three groups (each accounting for one third of the sponsor's total volume) and the top 20 participants in each group win."
- Take-one Board: "Sell X amount and you get to choose an envelope on the prize board that may be worth up to 100,000 points, plus serves as an entry in a one million point sweepstakes."
- Basic: "Earn 100 points for each person you recruit" or "Earn 500 points per unit sold plus 1000 bonus points per month."
- Escalator: "The more you sell the more you earn"
- Two for One: "Participating distributors can earn 10,000 points per $1,000 in incremental purchase increase, providing they buy a certain number of points to pass along to their customers."
- Retroactive: "You have to reach a minimum goal before earning any points, but payoff is retroactive to include all sales once the goal is passed."
- Team Bonus: "Along with the individual points, each person will be eligible for a 5,000 point bonus quarter if all the people in the department meet their goal."
E. Selecting the Right Award
- Merchandise relating to an individual's personal interests and hobbies or that are used to enhance the home are always desirable awards.
- Offer a wide variety of gifts (with price tags in your budget) so recipients can choose what they want.
- Select merchandise with trusted, brand name recognition and warranties.
- For on-going programs, merchandise should have continuity.
F. Planning the Promotion
- The announcement piece clearly states what participants can win and how. Included in this piece are the program's objectives, rules, structure, length, measurement system and the awards.
- Kickoff materials and activities drum up enthusiasm for the program. For maximum impact, consider inviting the CEO to announce the program or using themed decor connected with the program around the office.
- Remind your participants what they're working for with frequent promotional mailings. These may include letters from corporate VIPs, training information, sales strategy tips and banners and posters.
- Standings Bulletins update participants' progress and should be sent out frequently
- Don't forget to send a congratulatory mailer at the program's end to tell the winners their final standings and celebrate their success. Make them personal with letters from top management recognizing their hard work and value to the company.
G. Running the Show
- Mailing promotional pieces to gather information about each individual and building a database.
- Designing, printing and sending out promotional bulletins.
- Tracking points and credits earned toward awards within the participant database and regularly mailing out standings statements.
- Creating progress reports from the database for key executives.
- Reporting earnings to the IRS using 1099 and/or W-2 forms when the program is over.
H. Evaluating the Results
- Did the program help the company achieve its financial goals, improve morale or generate new ideas for operating more efficiently?
- Did the program and its awards meet or exceed the participants' expectations?
- Which awards were most popular with recipients?
- Were there any unexpected fringe benefits, such as renewed enthusiasm or an increase in goodwill gestures?
- Is there anything you'd do differently next time around? Are there different objectives you'd include?
I. Last Words