Breakage – The BEST Definition?

The incentive industry is a weird one.  Somewhat stealth – a lot sketch – it has its own vocabulary, culture and secret handshakes.  I knew I was in an interesting field when I tried to explain it to my Mom and Dad years and years ago.  I don’t think they ever really understood. 

Or maybe they did.

I posted the other day on taxes and non-redeemed points.  Non-redeemed points are considered breakage - the difference between what is issued and what is redeemed.  In that vein, my father once told me a joke – and he prefaced it by saying, “I think you could use this joke as an intro to what you do...”  

And damn if I haven’t used it over the years.  It also goes to show what folks see as the takeaways when you explain how motivation and incentive programs work.  

There is always a risk when trying to write a joke versus telling it... so be gentle with me.  

What Is Breakage?

The father of the incentive industry passed away after building a huge company providing point programs that corporate America used to motivate their sales staffs.  All the dignitaries from the industry were there.  In fact, the Presidents of the next three biggest incentive companies took time out of their “busy” schedules to attend.  

After paying their respects to the family of the deceased, they stood in the back of the funeral home reminiscing and talking about how lucky they were to have been part of the industry their friend created.  Then, in mid-sentence one of the three Presidents broke away from the group, walked up to the casket and bowed his head.  He then reached into his back pocket, removed his wallet and pulled out a crisp $100 bill.  He said something under his breath and laid the Benjamin on his friend’s chest.

When he rejoined the group, they asked what he had done.  He told them that he left the money in the casket as a way to show how much he appreciated the work their friend had done to build the industry.  

Not to outdone... the second President walked up to the casket, took out his wallet and dropped a $500 bill in next to the $100 bill.  When he got back to the group, he announced that he dropped $500 in because he was more thankful for all their friend had done for him.

The last President stood there for a moment with the other two and then briskly walled up to the casket.

He too reached into his pocket for his wallet.  However, unlike the other two he stood there a bit longer.  After a few minutes, he walked to back of the room where his cohorts were and stood there silently.  

The other two incentive company Presidents stared at him for quite a while before one of them broke the silence and asked why it took so long for him to say his good-byes.  The third incentive President looked up slowly, wiped a tear from the corner of his eye, and said...

“After seeing you both walk up there and drop your money in the casket as homage to his efforts for our industry I too wanted to show my appreciation for the life I’ve been able to lead because of this industry.  I looked at the $100 bill.  I looked at the $500 bill.  I realized at that moment that I needed to do more.  So – I wrote a check for $1,000,000 and took the $600 as change.”

That my friends – is breakage.

 

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Comments

[Drew Hawkins]

I hate it when people ask me what I do for a living. There's not really a solid 30 second elevator speech for it. In my interview for where I currently work, I actually asked in the interview "ok, so what is it that you all do again...?" Still got the job but still fuzzy on what it is I do for a living.

[Michpoko]

Hi,
Where I work, we've recently adopted a great way to describe what we do, in reasonably simple English. And though it is somewhat a lofty goal, it summarized nicely why as an incentive/motivation/loyalty solution provider seek exist. I won't share this description, else it show up on the landing page of every competitive website:-)

The story is entertaining, Paul. Made me think of the thread we shared recently about how just earning points is rewarding. The reality of breakage, to some extent, reinforces a model we have adopted and are using in the design of programs, based on the work of Paul Lawrence and Nitin Nohria. As humans, we are motivated by multiple, innate human drives. We we are not purely rational, economically driven people. Otherwise, we'd be focused on spending those points, right? Provides more to think about in terms of what is valuable... and should be billable?

[Paul Hebert]

I like the fact that we can't explain the industry in 30 seconds. I'd rather have a longer conversation. I always use a story... ie: do you have people that you wish would do "x" - then launch into how that is accomplished.

[Paul Hebert]

Real familiar with the 4-drive model - in fact - was on the phone with someone who uses that model with their clients just and hour ago. I think the "aquire" drive though, has at it's core that what we acquire has to have value - whether tangible or social - otherwise it's just hoarding no?

I'm convinced that there needs to be a balance between emotional/rational so I don't think we can eliminate the need to use tangible awards as part of our incentive strategies. I would say that there is a need to move the billing away from the deliverable - but most incentive companies aren't structured to do that and still remain profitable. Too much overhead associated with selling the delivering the merchandise and travel. IMHO.