Reading is so 2010. Listening is all the rage now with kids. You need to jump on board.
Over on TLNT.com today is a 26 minute podcast I did with Lance Haun (@theLance.) We cover the incentive industry, why HR is more interested in rewards today - why engagement is key to success and how that has affected how incentives and rewards are positioned. We hit on the "AIG Effect" - patriotism versus mercanaries - cash vs. non-cash - all the biggies.
Basically, it's a bar conversation without the bar (insert sad face here.)
Pop over - spend a few minutes and let us know what you think.
Thinking about the “normal” incentive program process today. The “normal” process looks something like this (your mileage may vary…)
Announce program with flashy four-color printed brochure – or if you live in the 2000’s an html email with a link to a website that is just as flashy.
Follow up with monthly mailings – or if you live in the 2000’s a monthly html email that is just as flashy (and may include flash – still!) FYI – lot’s of people have their email set to “text only” so all that work you’re doing on the flash/html emails – no one but the client and the designer are seeing it.
Monthly statements via email – I don’t think anyone does printed and mailed statements any more.
Maybe, just maybe, a couple of “random” emails to the participants reminding them to redeem and earn fabulous points!
That’s pretty much the norm. A few forward thinking companies are doing a bit more… but I emphasize the word “bit.”
Rethink Communications
I’ve long held that you’ll get more bang for your incentive buck if you put more money into communication and connections to participants and less into the actual award value and points earned. I’m not suggesting you do away with awards but take about 5% of the money you were going to spend on the awards line item in your budget and give it to communications. Your program will be better, the participants will understand the program better, they will keep the program more firmly in the center of their mind and everyone will be happier (‘cept the incentive supplier, wink.)
But I2I – Where Should I Spend That Extra Money?
Thought you’d never ask. Here’s an idea…
First - think of the process your participants go through to earn the points. I mean actually write down the steps necessary to earn points. Take a sales incentive program…
Indentify target account/person
Connect with target account/person
Present to target account/person
Follow up with target account/person
Answer objections, etc. with target account/person
Get deal done!
Now, normal programs reward the person at the end of the process. Then… and only then… do they present the participant with …
“Congratulations… You’ve Earned 100,000,000 points – go redeem for some slippers in our fabulous catalog of awards!”
Repackage…
I’ve also gone on record that the behaviors need to be rewarded – not the outcomes – so the first thing is to redeploy the points you were giving in a lump sum when the deal closes (in this example) AND then include a communication element in the process so it looks more like this…
Communicate they could earn 50,000 points if they indentify target account/person when they get into your CRM/Sales Contact management system – right there on their screen – pop-up, button, whatever – communicate they can earn points BEFORE they do the behavior.
Communicate they could earn 20,000 points if they connect with target account/person via an email to the participant on Monday when they come in to work and are setting up their weekly call list.
Communicate they could earn 100,000 points when they present to target account/person immediately after the initial contact meeting is held (you can probably see it on their calendar) to get them moving toward scheduling the presentation.
5, 6, Etc.. etc… etc… You get the idea.
The point is this… Use your communication money to inject the program into the participant's normal process regularly – and highlight what they could earn.
Why do I say this?
This is why…
"The Neuromarketing takeaway from this research is that exposing customers to point values at the time of purchase can amplify the effectiveness of the loyalty program. Want to encourage sampling of a new product, or drive upgrades? Or get a customer to visit you instead of your competitor? Try something along the lines of, '100 extra Rewards Points with every purchase!' "
"Choices were influenced by points even when consumers were provided with other truly discriminating information (e.g., price) and the irrelevance of the loyalty points was readily discernable. This implies that irrelevant information can influence choice when other, easily justifiable bases for decisions are available and, therefore, that irrelevant information can function as more than a tie-breaker."
What this means to me is that each employee, sales person, distributor and dealer has a choice to make each day relating to your product, service, incentive program. Presenting the choice along with a reference to the program and the awards will INCREASE the likelihood they will do the behavior.
Injecting your program communication money into the process of the program will ensure the participants see the message each time they need to make a choice – increasing the effectiveness of the program.
Or … you could just sent the monthly mailer out. They look nice next to the four credit card offers, the “val pak” and the note from your realtor “friend” about the house they just sold up the street.
Your choice.
Take some money from awards – put it into intelligent and relevant communications and do your program and your company a favor.
Login- a few keystrokes and clicks later you have a loyalty program.
The program allows the merchant to track checkins, updates to statuses, purchases, etc. and then reward those behaviors with points redeemable for whatever the merchant decides and of course, for merchandise from an award catalog.
Full transparency – I’ve never used the service so I’ll be a bit ignorant on the specifics of the business model but it looks to be based on making money through the sale of merchandise items for points, or, and this is a total guess… taking a cut of any deal offered to customers. There isn’t a lot of info on their site about this so I’m guessing.
The pitch is they can bring the big company frequency/loyalty program to the small company on Main Street, USA. That, I’m all for. I also like that they reward loyalty behaviors other than just purchases (ie: checkins, recommendations, etc.)
An Aside:Warning – their terms and conditions state THEY can use any information you collect through the service. Meaning – they get your customer list and can use it how they want. I’m sure there isn’t some diabolical intent here but the bottom line is they own your customers names and details too. Someone may find that info valuable at some point and the merchants’ customers may be getting offers from someone else in the future.
Living in a House VS Building A House
Enough about what they do. What I really wanted to get into is a discussion around how amateur evaluations of loyalty and incentive programs sound great – but aren’t. It’s kinda like saying “because I live in a house I can build a house.” Really… let’s see how that works out for you. Just because you’re a member of a loyalty program doesn’t mean you know how they work.
At one point in the video (actually more than once) Scoble uses airline frequent flyer programs as the model for Chatterfly – saying something to the effect, and I’m paraphrasing not quoting - “the airlines use these programs successfully to drive loyalty therefore they should work for the local merchant.”
Not sure if I buy that. And here’s why (and why you need to have someone evaluate these types of marketing programs)…
Airline Frequent Flyer Program Value
Airline frequency programs are based on ticket purchases – and a vast majority of people in airline loyalty programs do NOT spend their OWN money on tickets. They spend their company’s money. In other words – you’re not investing YOUR OWN cash.
Airline frequent flyer programs seem simple – one mile for each dollar spent. However, miles and dollars are not equally valued. A flight to LA from NY may be $700 and a flight from LA to SF may be $500 – the airlines have a variable starting point for their award calculation – and, as anyone who’s ever paid for a ticket out of their own pocket you know there is some serious calculus behind what an airline charges for a ticket. It’s not the same as the price for a Grande Latte – which is the same no matter when you buy it and where you might buy it (regional cost of living equations aside.)
The math doesn’t work… let’s review
For purposes of discussion we’ll assume the average ticket cost is $500 and the average “award ticket” can be earned at 25,000 miles (this too varies considerably between airlines and programs.)
So… a dollar spent = a mile earned and therefore: $500 ticket = 500 miles.
25,000 miles divided by 500 miles = 50 tickets
Out of pocket for the traveler = $25,000
Award value = $500 (one ticket “free” at normal average ticket prices)
Award value as a percentage of purchases to earn the award = Approximately 2%
So the math says the airlines are giving away about 2% of their revenue in awards. (We could go on too about the value of an airline seat and how it has a specific shelf life – an empty seat =$0 so any amount is better than $0 – not the same with tangible goods.)
Now let’s get into the real “value” of an airline ticket. As most of us know – an airline ticket isn’t just an airline ticket – it’s a portal to a destination. A destination where we’ll spend a week or at least few days, enjoying the sights, the sounds, the food, the fun, the surf the sand, etc. In other words, we don’t look at the ticket in isolation. The ticket gives us the ability to have a much larger award – a vacation or something that feels like a vacation. The ticket value is not $500 – it is an “experience” as MasterCard would remind us – that is priceless.
Loyalty programs for airlines are hugely successful for those two BIG reasons
It isn’t your money
The award to you get is much more than the award offer from the sponsor.
The Amateur Evaluation
So let’s apply the same ideas and thoughts to a local merchant. Let’s just say a restaurant.
If we use the same math as above – you’re looking at about 2% of spend as a reward. I know it can vary but the amateurs in the crowd want to use airline loyalty as a starting point so I should too…
Average meal cost (guessing and variable by region) = $50
2% of Spend = $1.00
Spend required to get a “free meal” (assuming that would be one of the award choices) = $2,500 (remember – this is YOUR money – not someone else’s.)
Now, assume you want to use your points for something other than services offered through the sponsor – like say an iPad (I only use that ‘cuz it might drive some SEO here on the site.)
Cost of iPad = $500 (roughly – I’m into easy math)
Point value using industry standard ½ cent points = 100,000 points
Amount you need to spend at the restaurant to earn an iPad = $25,000 (for the real math geeks – that’s $68 per day for an entire year – no days off, no holidays, no weekends – every freakin day for a year!)
Yep… you’d have to spend $25,000 at a restaurant to get an iPad if we applied “normal” airline frequency payouts as our guideline. And the iPad is just an iPad – no beaches, no family time, no shared experiences (okay – we can probably say something about accessing cool apps and membership to the Apple fanboy club – but really not the same as a vacation is it?)
Why You Need Experts
This is why you need experts in the field. Scoble is a very smart guy. Yet, he falls victim to thinking that because a concept works in one place – it should work in another – ignoring (or being ignorant of) the variables that go into creating a workable, successful loyalty and incentive application.
Social Currency
I realize I’ve spent the entire post talking about the financials here – and that is one HUGE variable in the equation. But there ARE ways to use these local, small business programs effectively without having to make your customers live, eat, sleep and breathe your product.
And that is to leverage social currency such as badges, special VIP seating, notification of specials, special VIP events, etc. There are a variety of awards you can bestow on your best customers that have nothing to do with redemption and point values.
This is where Chatterfly could have some real juice – connecting all those non-purchase loyal behaviors to social currency.
But that also means you need to really understand your offer, your value, your position as a vendor/merchant to know what those social currencies are and how to leverage them.
Whew…
If you’ve stayed with me this long I salute you. Love to hear your comments on whether you think local programs are valuable – and if the mode of points for “prizes” is applicable in the small scale, day-to-day world most of us live in. I think it takes a different approach than points for purchases.
They (researchers) found that hating your job may run in the family (let's see an incentive program handle that.)
But why not just click over to our "Compendium" and read them yourself?
The compendium is a collection of the things we've seen in and around the web that we found interesting and noteworthy in the incentive world and we think you might like it too. You don't need to do the work - we're already doing it so just piggy-back on our stuff. We don't mind. Really, we don't.
See ya soon with another compendium...
BTW - can you believe it is September already! Wow.
Compendium Sources
FYI - we are always looking for new sources of information so feel free to let me know if you have blog or a site that you think we would find interesting. If so - we'll subscribe and see if there is stuff that should be included in the next go-round.
Be warned - if your feed is set up to only push out a teaser paragraph or an excerpt it gets bounced. We won't spend the time to click out and give you link juice when you could be thinking about your readers and provide the full feed. And FYI - most people who subscribe in a reader feel the same way. Open up the feed kids - information wants to be free!
A few weeks back I posted on gamification. My intent on that post was to warn companies about turning a strategic recognition program into a "game." I also said gamification could be considered when looking at incentives. A great conversation followed in the comments. Take a look when you get a chance.
For those that don’t click over the net-net was this...
Strategic recognition isn’t a “game” and shouldn’t be positioned as such (I do, however like some of the psychological principles involved in game design and those can be part of the program.)
Making strategic recognition too much like a game takes away some of the value (IMHO – some would argue – but I think they’re wrong…)
When/How Game Mechanics Apply in an Incentive
However – I DO think game mechanics are valuable in an incentive application for a variety of reasons – shorter term, more focused on transactional behaviors not values and more esoteric things. The fact is, although we in the industry didn’t call it “gamiifcation,” we’ve included many of the elements of game mechanics in our programs for years. We just didn’t have the foresight to call it something cool.
To give you an idea of how game mechanics CAN be used in an incentive program I point you to this post (I’m gonna steal liberally from it.) It’s one of the better summaries I’ve seen on how to incorporate game mechanics in a corporate initiative to drive behavior. The author, Roan Yong, consults with companies on using these principles in the Knowlege Managment space. His post is about using game mechanics to influence behaviors to increase knowledge sharing in a company – a problem many companies have.
The Basics
The author outlines how game mechanics impact our reward center in the brain and makes us WANT to keep playing…
Showing progress through visible “progress bars.”
Including long and shorter term goals in the “game.”
Rewards for efforts – not just outcomes.
Rapid and frequent feedback – even if it is negative. Think of games where you die if you make a mistake. That is negative feedback. But we learn and continue. The key here is that the failure is safe – you’re not fired for doing something wrong. The author calls it a “safe-fail environment.” I like that a lot.
Keep them guessing by providing uncertain award – think slot machine. This is a big one for most companies – they like things to be fair so they shy away from uncertain rewards. But if you put minimal value on the award – and base it on behaviors not outcomes – you have better chance of it being accepted.
Add an element of collaboration – allow people to work together on a task/challenge. People are inspired and engaged with other people. The ability to solve a problem with a team is a reward in itself.
The author then goes on to show how to incorporate those elements to drive knowledge management activity. The recommendations are solid and I’m reprinting them in whole below so you can see how they can be incorporated into a specific objective – sharing knowledge.
Establish Points System. If someone in the organization captured her knowledge, give her some points. This gives her some sorts of reward for capturing knowledge.
Establish Hall of Fame, and ensure that it is visible throughout the organization. Hall of Fame would allow people to compare themselves against others – which would build up healthy competitive spirit. For example, the high scorers would be given ‘lofty titles’ – such as KM champions, evangelists, guardians. And the top ten in the list would be featured in the organization newsletter.
Show the Impact of KM activities. Establishing Hall of Fame is not enough, people may not see the value of outscoring each other. Unless, they are able to see the impact of KM activities to the organization, or to themselves. Consider illustrating the benefits of KM activities in terms of time saved, productivity gained, increased innovation. Better still, translate knowledge capture in terms of personal development. In gaming, this is called ‘leveling up’.
Make Types of Rewards Uncertain. An element of uncertainty is what makes people keep on going. The key here is to keep people guessing on what kind of rewards they would get. So, consider giving random rewards. It is important to avoid giving financial rewards such as salary increment, or bonus payment. Instead, tell people that they can expect either one of these: (1) Appreciation Lunch with Senior Management; (2) Time-off; (3) Employee of the Year award; (4) More training opportunities; (5) Additional points during performance review.
Give Rapid and Frequent Feedback. In gaming, when you are inexperienced, your character would die often. These instances of getting killed are part of the rapid and frequent feedback mechanism. This kind of feedback system, spur people to learn. In the same way, people who are inexperienced in KM activities should be given rapid and frequent feedback. For example, they should be informed of how many people downloaded (or using a Facebook term – liked) the knowledge capture documents.
Give Autonomy. In gaming, gamers could accomplish missions in various ways. That’s why gaming is so engaging! In the KM world, people should have the freedom to capture knowledge using methods that they prefer. Rigidity kills intrinsic motivation.
Now think about your own organization goals. Which one would benefit from adding some form of game mechanics into the process? I’m thinking most of them if not all of them.
Substitute your goals/process into the above list and see if you can create a “gamified” solution.
Traditionally, incentive programs were designed around the idea of “do this get that.” It’s been an axiom of program design. Give people a reason to do something and they will do it. Mostly, we’ve focused on our inner Gordan Gekko and assumed participants are rational and will do the things that maximize their personal ROI on the effort required to earn an award.
And, except when badly designed, these programs work pretty well. Actually, when badly designed they work even better – but to the detriment of the whole versus the individual… again I’ll cite Wall Street as our cautionary example.
But new research is showing that maybe, just maybe, awarding people with stuff they can’t ever use or own is better for the person earning it – and better for the company offering it by actually spurring higher levels of performance.
Prosocial Incentives
Yeah, you read that right – a new term that I’m sure will be bantered about with the same frequency as “gamification” – is an incentive that, to quote a recent article in the Washington Post on the idea, is
“a novel type of bonus spent on others rather than on themselves”
The article highlights a study done by Harvard Business School, the University of British Columbia and the University of Liege. To pull from the Washington Post article:
First they researched how the recipients “felt” about themselves after earning the proscocial award and the results:
“…Compared to people who did not get the charity vouchers, the employees who donated $50 said they were happier and more satisfied with their jobs. (The opinions were unchanged among those who got the $25 donation.)"
They then looked at actual performance (‘cuz hey, we don’t really care how they feel do we, we just want to know if the results were better)…
"They decided to study the effect in both sales and sports, giving Belgian pharmaceutical sales teams and Canadian recreational dodge ball teams money. Some were told to spend it on themselves, while others had to spend it on a specified teammate. The researchers found that those who had to spend the money on other teammates performed better, in terms of sales made or games won, than those who spent the incentive on themselves."
The author does note (as I do in a lot of these cases) that this is an academic study and didn’t really control for the myriad of variables within a larger organization but it is an interesting guide post for program design.
Something for us to consider – if not implement.
Our Recommendation?
I’d recommend you do both – create a win-win-win. Award the individual with something for themselves – and add a little sumptin’ sumptin’ to the award they can then use on someone else.
Recipient wins, the social target wins, the company wins.
Pret A Manger Has a Different Take On Prosocial
The article also references Pret A Manger’s unique recognition strategy which I think is pretty cool too…
"And 'when employees are promoted or pass training milestones, they receive at least £50 in vouchers, a payment that Pret calls a "shooting star,"' Clifford reports. 'But instead of keeping the bonus, the employees must give the money to colleagues, people who have helped them along the way.' The message? You didn’t do it alone, and need to recognize those who helped you get there."
Nice way to really cement the idea that “we’re all in this together.”
Ask yourself – could you do this in your company? Should you?
How would this impact your next channel incentive program? If your company has a charity they support – or if your client has one – why not tie some of the awards earned in the program to that charity or cause and connect the earner to it through awards.
I’m not talking about just throwing up an “option to redeem” for charity contributions – I’m talking about you being prosocial and making it an automatic thing – 5% of earnings go toward a charity.
Is this something you’d be willing to do? Would taking 5% from a budget allocated to awards and moving to social causes really cause a program to fail?
Or, as this research suggests… cause it be more successful?
I’m in the latter camp and think you should be too.
And a video treat for those that might want to consider social responsiblity and including "prosocial" incentives... (video embedded - RSS and email subscribers may have to click through to see video.)
Short post today on what I think are THE most important decisions you need to make when deciding whether to run an incentive program. I know I’ve said this 1,000 times (or more) but people still don’t get it.
Click here or on the image and download the FREE (and no requests for your email, address, phone number, height or weight) “Incentive Decision Flowchart.”
Use this EVERY time you think you need an incentive program.
Make sure you go through all the steps.
Don’t Want to Download?
Fine …here’s the three five things you need to do…
Identify your goal.
Make sure you find the critical behaviors that drive that outcome.
Find out if it is a training issue, a communication issue or a process issue.
If not… then maybe it’s an incentive and influence issue.
Make sure you do #3 FIRST – DO IT – then call us if you have questions.
That is all.
Let me know in the comments if you think I missed anything.
(BTW - more resources avialable on our reference documents page - check them all out! And they are ALL free!)
A couple weeks ago I posted a link to our "compendium" of articles from the incentive, engagement, recognition and reward world. My initial thought was to create one each week. But that was too much work - and I'm all about reducing the "too much" part of work.
So, I've just added on to the last compedium. Over time it will grow and grow... kinda like that stuff in the back of your refrigerator.
This go-round we have about a dozen new posts - listed before the ones I put in last time. This way - if you're new to the compendium - you can review the history. If you've seen it before you can just view the newest batch.
In digging through some of the posts and articles I’ve starred in my reader this morning I ran into a post I put into the pile about a year ago. March 2011 to be exact. It was on the LeadFormix blog and it was entitled: “Focus on Generating Opportunities not Leads.”
You can link out to the article which isn't bad but the reason I starred it for future reference is that is made me think about how you frame an incentive activity and how that can affect the program outcome.
Leads VS Opportunities
Many lead generation incentive programs are focused on filling in blanks. Adding people to the CRM database. The rules might be something like: “10 Points for every lead that includes, company name, contact name, company size, competitor – you name it."
Each program will have its own data fields.
Overall, the goal of the program is to create a list of possible contacts that could buy your product. The company can then send a sales person to hunt them down and sell them – or put them in a marketing database for newsletter follow-ups and other e-marketing initiatives.
The point is that the goal of the program – based on the rules – is really about filling in data. It’s about filling in form fields. It’s very – tactical.
What if you changed the framing on the program rules from “lead generation” to “opportunity identification?” What if you rewarded people for similar “data” fields but also added something in there about defining how they could use the product or service you are hoping they buy?
Frames are Small But Important
Adding the idea that we are rewarding people for identifying opportunities will change the way they approach the program. No longer are the participants just filling in fields – they are thinking about your product and service and connecting it to the data they pass onto sales and/or marketing.
While it may seem trivial – changing the framing can affect the program results. Changing the frame changes the interaction your audience has with the program.
Think about your incentives – both internal and channel – can they be reframed to drive different behaviors? Can you change how you position what it is you are really trying to do and realize greater success?
Or – you could do a lead generation program and get leads – whether they are real leads, real opportunities or just names pulled from the phone book.
What do you think? Does reframing change the program outcome or are we talking distinctions without differences?
Everyone is aware (I hope) that the current economic situation is tough. As a country, we’re in debt. We continue to deficient spend. And we don’t really have any good answers on where to get more money or where to cut our current spending.
Maybe I should rephrase, we can’t “agree” on where to get more money or where to cut. We all have our opinions.
But this isn’t a political post – it’s about numbers and how we perceive them in our brains and how that might just affect your next incentive program.
First... Let’s Start With the Economy
The numbers are big. Very big. And we don’t do well with big numbers. Our human brains were designed to work with much smaller issues – how many people in my tribe, how many saber tooth tigers are chasing me... that kind of stuff. There’s even something called the Dunbar number that says we can’t effectively handle more than roughly 150 personal relationships. We don’t do BIG numbers well.
Our economic situation is similar...
The federal government will take in $2.173 trillion in 2011 and spend $3.818 trillion. We will take in $1.645 trillion less than we spend. And we owe $14.2 trillion already.
Big numbers.
What does that look like in numbers we can all understand ... simple. Divide by 100,000,000 (as if we could understand that math either...that’s ONE HUNDRED MILLION!) and you get
A family that is spending $38,200 per year.
Their income is $21,700 per year.
The family adds $16,500 in credit card debt every year in order to pay its bills.
The family already owes $142,000 on their credit cards.
After a long and difficult debate among family members, keeping in mind that it was not going to be possible to borrow $16,500 every year forever, the parents and children agreed that a $380/year premium cable subscription could be terminated.
So now the family will have to borrow only $16,120 per year.
Starts to make a little more impact. Nothing changed but the number of zeros.
Our Brains Need Smaller... but not too small
Blame it on evolution or the public school system but we don’t handle the big (and the very small BTW) well.
And your incentive program may be plagued with the same problem.
Telling a sales person to sell $100,000 more by year-end may not have the same effect as showing them how making 4 more calls this week will result in one more sale. Those are numbers we can deal with. Those make sense.
Any incentive that is 12 months long and includes large numbers (read: goals) may not be as impactful as a shorter-term program with smaller goals (even if the sum of all that is the same.)
Work with the brain – work with your people to create programs that fit the way we think and behave.
Or... just keep putting goals out there that they ignore anyway – hoping someone they don’t know calls and orders one big humongous number of widgets so they can get the trip to Hawaii.
A
Marketing and Incentive Design Consultancy