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.
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.
A recent article from strategy+business (magazine by booz&co) added another generation to the already crowded room that includes Gen Y, Gen X, Generation Jones, Boomers, and Gen Z.
They are coining the term Gen "C."
Gen C is (to steal shamelessly from the article):
"We call them Generation C — connected, communicating, content-centric, computerized, community-oriented, always clicking. As a rule, they were born after 1990 and lived their adolescent years after 2000. In the developed world, Generation C encompasses everyone in this age group; in the BRIC countries (Brazil, Russia, India, and China), they are primarily urban and suburban. By 2020, they will make up 40 percent of the population in the U.S., Europe, and the BRIC countries, and 10 percent of the rest of the world — and by then, they will constitute the largest single cohort of consumers worldwide.
This is the first generation that has never known any reality other than that defined and enabled by the Internet, mobile devices, and social networking. They have owned various handheld devices all their lives, so they are intimately familiar with them and use them for as much as six hours a day. They all have mobile phones, yet they prefer sending text messages to talking with people. More than 95 percent of them have computers, and more than half use instant messaging to communicate, have Facebook pages, and watch videos on YouTube. Their familiarity with technology; reliance on mobile communications; and desire to remain in contact with large networks of family members, friends, business contacts, and people with common interests will transform how we work and how we consume."
So there you have it... a new generation, a new problem, a new opportunity.
The s+b article goes on to highlight the various impacts Gen C will have on the world but they left out the most important impact IMHO – the impact they might have on incentive and reward programs.
So here’s my prediction (and please remember – predictions are tough, especially about the future):
Impact of Gen C on Incentive and Reward Programs
Go Mobile or Go Home:
By 2020 80% of the world will be on mobile phones. Running an incentive and reward program – better have a mobile format ready to go. Or an app. You choose, but yesterday’s big, slow, lumbering website won’t cut it.
Travel Awards Become More Valuable:
As we connect more and more on the wires, face to face will be more and more scarce. The increasing costs of travel will also make it less attractive than virtual meetings. When things get scarce they get desireable.
Awards with No Internet:
Travel awards featuring internet disconnect may be popular. Since Gen C will always be connected, time spent unconnected will also be scarce. Awards that provide a disconnected experience may be more important to Gen C.
Award Redemption will Need to Mirror Retail Activity:
From the article... “Ubiquitous connectivity will continue to transform the retail industry, seamlessly integrating the online and offline worlds, and ultimately leading to a form of augmented reality that allows a more elaborate presentation of retail goods.”
Will your reward options be ubiquitous? Will the fit the expectations Gen C has of their “shopping” experience requirements? If you are 2000 and they are 2020 – will they even stop by your store?
Recognition and Reward Networks Go Social:
The article states that ... "Even within the family, the need for physical proximity will be reduced through increased digital interaction. Just as Facebook’s “Connect” buttons are already distributed across 80,000 websites and devices, social networks will accompany people throughout their daily activities.”
How are you integrating your reward and recognition efforts into your participant’s ever-expanding social web? (for a sneak peak check out my webinar tomorrow on Recognition 3.0)
More Digital Information:
As our participants interact more and more online, with and through the channels incentive companies create, what will you do with that information? How will you use that information to design better programs with better results with more connection to the individual? If you’re not thinking about the information that exists in your programs you’ll be thinking about closing your doors.
Less Hierarchy – More Virtual Teams:
Designing incentives for teams has always been difficult. But if the future is close to what the articles says it is – team-based will be the predominate form for incentives ... “As 24/7 connectivity, social networking, and increased demands for personal freedom further penetrate the walls of the corporation, corporate life will continue to move away from traditional hierarchical structures. Instead, workers, mixing business and personal matters over the course of the day, will self-organize into agile communities of interest. By 2020, more than half of all employees at large corporations will work in virtual project groups.”
Not to mention that top-down objectives may go the way of a screaming AOL connection if the teams are setting their own goals and objectives. How do you design for that?
I do know this... it will be different and incentives and reward programs will need to adapt... to pull the closing paragraph from the article:
“Executives must begin now to develop an agenda that includes an analysis of the capabilities and workforces they will need in the next decade and beyond. A critical step will be to make sure that the organization as a whole understands the coming changes, and that there are already people within the organization who are living these changes now, who don’t perceive them as a threat, and who can help integrate them into the organization’s business plan.”
I agree – start asking people how to do this stuff and be prepared.
I am so stoked but also a bit scared. Scared good not scared bad.
HRReinvention takes place this week on Thursday in Omaha (first time there for me btw) - it is the brain-child of Jason Lauritsen who writes at Practicing HR and is the VP of HR for a large Nebraska bank. Actually it was spawned when Jason went to HRevolution 2010 (so that makes it the brain-second cousin or something like that.)
Jason has pulled together some great people to come and talk with some other great people. This will be epic - and hence my bit of anxiety. I mean I'm up there with:
Jason Seiden - China Gorman - William Tincup - Joe Gerdstandt - Greg Harris - Chris Bryant - Dr. Roger Fransecky - Dr. Kim Hoogeveen. Whoa ... great company.
To borrow from the document I sent to Jason explaining what I would cover...
In the book Zen and the Art of Motorcycle Maintenance, the author suggests that a combination of logic and emotion – rational and romantic – the being in the moment (zen) and the step-by-step nature of maintaining a motorcycle should coexist in order to have a higher quality of life. HR needs to look at their function in a similar fashion – the processes, laws, rules and organizational elements PLUS the emotional, illogical and often messy world of humans as people.
Neat huh.... and also why I'm a bit worried. But no guts no glory.
Starting today I’ll be skulking around Chicago for the next 4 days. The annual Motivation Show is in town and I’m making the annual pilgrimage to motivation mecca.
According to “inside sources” there should be over 8,000 people (some say as high as 10,000 – some say lower – but who cares – it’s a bunch!) – either as exhibitors or looky-loos. I’m in the latter category.
I am not exhibiting. I am speaking at two different places…
Tuesday - I’m talking social media at the IRF education day summit. Only one of many speakers – but I’m sure it will be the best (kidding – they are all good.)
Wednesday - I have a solo gig called “Responding to the Assault on Incentives” where I’ll walk through how to talk to clients and your own folks about incentives and their effectiveness and need – even in today’s more “enlightened” business world (think zappos and “if-then” awards coexisting.)
Then – during my free time…
I’m really hoping to do more (some) video this year of the show floor with some interviews and commentary to post either at vimeo or youtube. I keep saying I’m going to do this but it always turns out to be harder than all the articles on video blogging say it is. Maybe I’m just video-challenged.
I’ll be tweeting – hopefully during my presos with the help of a PowerPoint plug-in – and during the times I’m wandering the floor. I’ll for sure be using the “official” hashtag #moti – but I’ll throw in a #good, #bad, #ugly tag now and then as I run across stuff. Unfortunately for you all – my snark instincts go on high alert at the show so expect me to tweet out some rather snide remarks. If I don’t it’s ‘cuz I’m either busy or I just didn’t find anything you’d find interesting.
Pay attention on Wednesday afternoon!
I (we) have an announcement – one that smart incentive companies will jump on – and not-so-smart ones will deride. But I’ve got thick skin and I know when I’m right (even when I’m wrong.) I think it could change the industry (or is that just hyperbole to get you to watch for my announcement – probably both.)
So – as you read this – I’m “en-route” to Chicago – the city of big shoulders, hog-butcher to the world, and for a few days in October - home of cheesy swag, gift cards, chocolate pillow gifts in the shape of corporate logos and all other manner and madness associated with “motivation.” Abe Maslow would be proud.
It should be fun… it should be funny… it should be interesting.
First, from the perspective of what I was thinking when I started this site.
Too much was written and shared on the web that was plain bad advice relating to incentive and reward activities that I felt it necessary to help inject some critical thinking and analysis into the conversation. I also felt that too many organizations were implementing badly designed and in some cases, needless, incentive activities. Our goal was to put some intelligence back in the incentive and reward space.
The other way to read that headline is that we’re all over the place the next few weeks. Our effort to bring intelligence to incentives has increased the demand for our point of view – online and in-person.
So today I thought a summary of where we’re going to be over the next few weeks would be helpful. Hopefully you can set your calendars and your clocks to get all the yummy goodness we’ll be serving up.
Tuesday Sept. 28, 2010 – Noon EST (or EDT if you prefer – either way it is Noon where I am) – Twitter Chat for KMers.org.
I’ll be leading a twitter chat for the Knowledge Management community at KMers.org on tomorrow. For those interested KMers.org is a community website focused on hosting and storing twitter chats around the #KMers hashtag. Their goal is to use social media via twitter chat and a CMS tool (Drupal) to help KMers share information about the practice of Knowledge Management.
My topic on Tuesday will be around using rewards/recognition/incentives to drive sharing behaviors. Check it out. Love to hear from you.
Motivation Show Oct. 12 – 14, 2010
Two Presos and Much More
I’m lucky enough to be presenting twice at the show (and you may be lucky enough to be in the audience?)
I’m on my own with a session on October 13th entitled : “Responding to the Assault on Incentives” where I’ll provide our perspective on how incentives fit into the “new age” thinking that’s been bouncing around the interwebs. You’ll walk away with a way to position traditional incentive and reward programs within the context of new progressive non-traditional engagement activities. I’m hoping for great conversation so please register if you’re going to be in Chicago on the 13th… Check our rough video promotion of the session here.
Third… Connecting To Social Media "Live"
Influence Insider Blogtalkradio going “on site” at the Motivation Show
Stay tuned and I’ll hit you with the details. Tentatively I’m thinking Thursday at noon but that could change. If you are at the show and want to be on the show hit me in the comments – we’ll work something out.
Live Video?
I’m bringing the flip and also my Droid x (which has some great video capabilities) so I’ll be looking for reasons to do some live video and also some video posted to the site. Again – want to be get your face out there hit me in the comments and we’ll set up a time/place to chat on camera.
Live Twitter Chat – Of Course
I’ll also be using the hashtag #moti while on site so you can follow any and all the twitter chatter you want. Anyone interests in a tweet up or two – jump on “the twitter” and add the hashtag and we’ll get something going.
October 28th/29th – HR Reinvention Experiment – Omaha, Nebraska
I’ll be traveling to Omaha at the end of the month to help out with Jason Lauritsen's ambitious effort "The HR Reinvention Experiment." The HRRE (I made that up) is an invitation-only gathering of the Midwest’s top HR leaders to chart a new course for the future of Human Resources. There will be speakers, there will be discussion, there will be discourse, and there will be cocktails. We will dialogue, discuss and perhaps bicker a little. At the end of the Experiment, we will be different. HR will be different.
So that’s my October. Feel free to jump into the comments section if you want to hook up at the Motivation Show and be on the radio or in a video. I’m open to almost anything except a late night infomercial on your company. Other than that I’m sure we can accommodate. Let me know.
If you have a need in September for a great presenter who's fun to be around, accessible to the audience, pretty darn cheap and usually buys the first round - AND - can talk about how to influence behavior - I'm your guy. Let me know how I can help.
We make a big point of defining the difference between influence programs and strategies and typical incentive and reward programs here at I2I. We do that on purpose – and it’s not just “marketing spin.” It’s reality.
There is a huge difference between our point of view and the output our clients receive and the recommendations from those that do “incentives.” But sometimes it is difficult to communicate that difference.
I think this post will help.
I know most marketing agencies will try to get you to distill your point of difference down to a simple sentence, an “elevator speech” or some other quick sound bite of information. Their point being that if you can’t articulate your value in 25 words or less you won’t get the opportunity to do it again.
While I’d love to have the ability to boil our point of view down to 25 words – there is too much lost in that translation. We think the client gets a better understanding of our value if they watch the whole movie rather than just see the trailer. I don’t know about you but I’ve been disappointed more than once after seeing a trailer and then seeing the whole movie.
We’re a movie company – not a trailer company.
So with that long-winded introduction let me give you a good idea of the difference between a “traditional” incentive company and the way we approach problems/needs/solutions at I2I.
Incentive for Reducing Travel Costs
I saw this on an incentive company site yesterday – and I’ll post it verbatim (names changed to protect the “guilty”):
"As the cost of air travel continues to rise, many businesses are creating new employee incentive programs that reward them for following the company’s travel policies, according to the New York Times.
Travel experts told the Times that many companies have instituted a points-based program to help reduce overall costs.
"If you book according to the air travel policy, you get 10 points," a travel consulting expert told the paper. "If you book a hotel within the policy, you get 10 points. A rental car – you get 10 points. If you do all three, you get a bonus of 20 points."
After an employee accrues enough points, he or she can trade them in for all kinds of products, or even expensive vacations.
Reducing travel costs is becoming a larger corporate priority as the price of air travel continues to rise. Industry analyst Michael Boyd has predicted that the cost of airfares will rise between 4 and 8 percent in the U.S. this summer alone, according to the Charlotte Observer."
This company was using the article in the Times (or Charlotte Observer – I couldn’t tell from the post) to communicate to potential clients that using points-based incentives are the way to reduce travel costs.
And – potentially it could.
I’m guessing the conversation went like this:
Client: “I have a problem – I need to reduce travel costs.”
Incentive Company: “Great, we’ll give people points for saving the company money. The award amount will be calculated to be big enough to move their behavior but low enough that you’ll end up netting a cost reduction overall. The program will be designed so only those that adhere to the policy get the points. They can then redeem them for merchandise and travel.”
Client: “Cool.”
Now… The I2I Approach - We Dig Deeper
First of all –the issue here is that the company wants to reduce travel costs. Okay – got it. The end result is reduced travel expenses.
Second – they have put a “policy” in place that outlines the rules and regs associated with travel paid for by the company. I’m guessing the policy is based on negotiated rates on specific airlines, rental car companies and hotels. Okay.
Here’s the real difference…
Before we would even look at an incentive solution we ask these types of questions:
“What are all the elements that affect the use of travel in your company?"
"Who approves travel requests?"
"Who determines when travel is warranted?"
"Do you have other technologies that could be used in lieu of travel but aren’t getting the appropriate use? "
"How has the policy been communicated throughout the company?"
"How are costs reported and communicated to those responsible for actually saving the money? Do they know where they stand against your reduction objective?"
And the biggest question we’d ask and one the one we’d point out immediately…
“Why do you need an incentive for a policy?”
Our most important question isn't about the type of incentive - it's about whether you should even have and incentive in the first place. Very few incentive companies will try to uncover the fact that you don't need an incentive.
After all - what would they sell you if they didn't find an incentive at the bottom of the pile?
But I digress.
Let me ask this - do you think this company has a drug policy? How about an “ethics” policy? Do you think they have other purchasing policies for expenses such as office supplies or other business services? I’m guessing yes.
Now, do they have incentive programs attached to those other policies? Probably not.
Incentives Are Choice Architecture Elements
Incentives are designed to provide participants with a decision. The goal is that by adding incentives to one decision increases the likelihood of that decision being made. By default, when you put in place an incentive program, you’re communicating to your participants they have a choice.
“Book airfare according to policy and earn points – or don’t use the policy and don’t earn points. Your choice.”
Or…
“Don’t use drugs in the workplace and earn points – or use drugs and don’t earn points. Your choice.”
Is the disconnect now obvious?
When to Discontinue?
The other main problem with this structure is what do you do in a year? Continue the program? Cancel it? Will the participants simply shift back to old behaviors when the incentive is gone? Probably.
Things We’d Recommend
Train Managers – this isn’t a behavior problem, it’s a management problem. It’s a compliance, communication, education, understanding problem. It’s a culture problem.
Communicate Better – leverage the principle of consensus and social proof by alerting the employees to those that are doing it right – show them the progress against the company goal of saving money.
Recognize – find ways to recognize those that are having impact – make it genuine and make it come from the CEO. After all – it’s his/her objective is it not?
Link to the company culture – Communicate to employees that if they aren’t following policy (assuming your policies are pretty good, normal and valuable) they are outside the culture sphere. Communicate that they aren’t a good company citizen. We all want to be part of the cool group.
Some may not like this but – punish those that repeatedly violate the policy. You wouldn’t put an incentive in place for repeat offenders of any other company policy would you? Nope – you’d document, discuss and finally – disconnect the employee from the company.
None of the above recommendations are focused on any “choice” the participant can make.
Our recommendations are around the root cause of the problem – people aren’t following policy.
Find a way to communicate the policy better, link it to culture, recognize those that adopt quickly and finally – punish those that don’t.
Bottom line – this isn’t about incentives and motivation. Unfortunately, you don’t get that from an incentive company.
You will get that from us.
Now - you try to put that discussion into an elevator speech.
Comments? Agree/Disagree? Is this really an incentive application or is it a different root problem? Hit me in the comments - I have thick skin.
I was remiss the other day in alerting you to the fact that we were once again quoted in the USA Today. (Link here.) The article focused on group travel awards and whether they will come back after the last couple of years of pressure from the government on “boondoggles” and some of the negative press around companies spending money on rewards program when they were taking government bailout funds.
I think they will – with changes.
After the conversation with the reporter I thought it might be a good idea to put together some info on group travel. Specifically the way in which is it sold/purchased.
It's Not Easy
If you’ve never run a group travel program before – be warned – they can be complicated to buy and it is tough to understand the various pricing structures. Travel is probably the hardest “award” to buy and the hardest award to fulfill.
Fulfilling a travel award is tough because the buyer has to rely on a huge number of suppliers – from hotels, to DMCs (destination management companies), individual activity providers, caterers, airlines, transportation companies, and any other potential provider that might be connected to getting your award earners from point A to point B and back. So many moving parts relying on humans make for one messy package. Trust me – until you’re across the table from someone who doesn’t speak English in a foreign country trying to negotiate an Executive VIP pick up at private airport for the CEO of the company that pays you $5,000,000 for a group travel program you don’t know what stress is like.
Travel Awards Pricing
If you think about all the people needed to put together a group travel program you can just image the billing and purchasing nightmare that accompanies it. That is one of the main reasons you need an agency to coordinate and connect with vetted suppliers and quality people. I don’t recommend you try to run a group trip (especially in a foreign country) without help from a professional. Some locations such as Vegas are pretty wired for groups so you may not need an agency to manage it but trust me – there are so many ways to make a buck in the travel biz it’s worth it to get someone you trust and who knows the industry to work on your behalf.
That said – it is also my responsibility as a voice of transparency to alert you to the fact that there are a lot of agencies that are less than ethical – or at least playing fast and loose about working in your interest versus theirs.
Group Pricing/Purchasing Options
I created a PDF document you can download (for free of course) that summarizes the four most common ways group travel is priced/bought and the pros/cons associated with it. This is by no means exhaustive – simply a good overview of the major ways most agencies will quote a trip for you the buyer.
In the document I highlight per person pricing, cost plus, management fee and the dreaded “combo.” If I can say one thing – don’t go with the combo. There are so many ways to hid margin and push around numbers in that format you’ll never figure out what your really paying for a program.
Some offer the best in transparency – some the worst. Some are more manageable – some less. Some make it real easy on the buyer – some make the buyer do a lot of work. There isn’t a perfect method of buying travel.
My recommendation is Management Fee – with a healthy dose of client oversight and a good performance agreement. That’s the way to get the best price and the best outcome IMHO.
Value Is Difficult to Assess – Trust is Critical
But understand – without some idea of what’s going on there are a multitude of ways to get you to pay more than you should. Travel is a service business – and service businesses are notoriously hard to pin down on “value.” You can look up TVs on the internet and get a good idea of a price – but trusting your top performers to a destination management company is much harder to quantify.
My recommendation – Find an agency you trust. Check with their clients. Not just the ones they give you (we all know that references are skewed.) Check their web site and see who else they may have operated a trip with and call them direct. Ask for the travel purchasing person – or the VP of Sales/Marketing (those folks typically are responsible for group travel programs for sales people or important customers.)
Remember – the agency should work for you and you should pay them fairly. That’s just good business and that’s just good human behavior.
Check out the document and hit me in the comments if you think I’ve missed something.
The white paper is an overview and analysis of one company’s group travel reward program and showed that these type of incentives have a clear, measurable and positive impact on corporate culture and employee performance.
The IRF also showed that there was a "ripple effect" on the economy of the region where an incentive travel program is held – but most companies are only worried about their results – not whether Senor Frogs got a bump in late night business. While I understand the need to promote the use of travel as an award media (the IRF is after all, an industry association) whether the award influences the economy at the destination shouldn’t be your reason for doing a travel program. (Unless you own Senor Frogs.)
Taking a Different View
But, rather than simply spit out the results, I thought it would be more fun to juxtapose the results of the study against what most companies do – sort of showing the “before” and “after” point of view.
In other words – the study says what you should do – I’ll highlight what most companies REALLY do. If you see yourself in the picture – take note and do a program autopsy (call us if you need help, hint, hint.)
The 5 Key Program Elements and How Most Companies Do It
Best "Practices"
Actual "Practices"
Earning and selection criteria for the reward were clearly tied to business objectives.
Earnings and selection criteria for the reward are clearly tied to luck and upticks in specific markets.
This is a big one since many companies simply set a sales or profit goal and reward those that did best (ie: top performers.) However, as we all know – results can be skewed by some random events. How would you like to be the bottled water sales person in New Orleans after Katrina – or the hotel GM in the same city. In one case the hurricane helped – the other, not so much.
Try to work in the behavior side of the equation somewhere in the mix. I’m not against rewarding top performers – just like to connect some effort to the output – not a roll of the dice.
Communication about the program and the progress participants were making toward goals was clear and consistent. Anticipation built throughout the year and kept employees motivated to achieve their objectives.
Communicate the program in week one and then announce the "winners" in week 52.
I used the term winners on purpose – most programs call top performers winners. Lottery’s have winners. Reward programs have earners.
But to the communication point. Not only do you need to communicate via the traditional methods (print, email, newsletter, etc.) take the time to teach managers how to communicate progress during the program. Having a manger meet with and review progress in a program has much more impact than a mass email listing the top performers “to-date” (whether they earn the award at the end is still a question mark.)
The design of the travel program, including desirable destinations, interactive sessions and leisure time for the earners, added to the overall excitement.
The design of the travel program meets the needs of the CEO’s personal tastes, or the tastes of his/her significant other.
You laugh. I’ve designed more than one program in my shady past where the destination was either the pet location for the CEO’s wife or some vision the CEO had in a dream featuring a big penguin and Ouija Board.
Destination should cover the gambit of activities and options based on your SPECIFIC participant profile – not just the hottest destination based on recent trends. Don’t want to take that senior group to El Capitan for mountain climbing.
Managers acted as hosts to reinforce the company's commitment to the reward program and recognition.
Managers are “assigned” as hosts and then disappear amongst themselves so they don’t have to rub elbows with the great unwashed.
Believe me – I’ve seen it. Do like one of my clients used to do. They developed a host manual with rules, suggestions, etc. and held a special meeting with the company’s top brass (reinforcing the importance of their role) and reviewed the objectives of the host assignment. This company got it.
The company kept detailed records that prove the productivity of the earners and their contributions to the company's financial performance.
The company hides the fact that sales actually went down during the program period but since they were taking the top 10% of the sales force they still had “winners.”
Keep in mind that your goal is to reward performance not standings. If sales are down – and you still have people who can earn awards – check your rules. (again, we can help – hint, hint.)
As you can see there are many ways to make a reward program good – and just as many (if not more) to make it bad. If you see yourself anywhere in the right column – you gots some problems.
And my final bit of snark…
Retention and Satisfaction – Duh Moment
Researchers examined the tenure and performance ratings of 105 employees who earned the incentive trip at XYZ Corporation. Overall, 88.5 percent of incentive travel earners had a performance level of 1 or 2 (1 being the highest level of performance and 4 the lowest level of performance) compared to 31.2 percent of the control population.
Ask these questions...
Did the program cause them to be top performers (1’s and 2’s) or is it more likely that if you were a 1 or 2 you were a top performer and therefore earned the trip? Just ‘cuz your top performers were on the trip doesn’t mean the trip caused them to be top performers.
15% of the award earners were below the top two levels of performance before the trip. Luck? Dramatic turnaround in attitude and performance?
So the point of the post. Don’t just do it – do it right.
Eliminating business travel will cost your company 17% of profits the first year - and it will take more than 3 years before profits recover to match profits from the time you cut business travel.
That's not just me saying it - that's from a new study by the US Travel Association audited by the Wharton School to ensure the methodology was sound.
We don't really have a dog in this fight - but we think the data is significant.
Here at I2I we don't fulfill awards because it causes a conflict between recommending the right solution and recommending something that we get paid to fulfill. We'd much rather just provide unbiased advice. However, we do think there is value in many of the incentive awards available. Group incentive travel being one of them. Also, from an employee engagement and channel engagement standpoint - meetings travel is a great way to reinforce and drive culture and business practices.
But due to the "AIG" hangover the past 10 months the business travel industry has taken a big hit - mostly undeserved (I posted here, here, here and here on this issue.) But we've got a bit of light at the end of the tunnel. Actually, pretty bright light.
New Survey From US Travel Association, Destination & Travel Foundation and Oxford Economics, USA
Yesterday I was on a press call with the above mentioned groups who walked us through a new study that proves a causal relationship between spending on business travel and performance and productivity. The links to the study are here for Executive Summary and here for the Full Report.
The study is really the combination of two separate surveys of corporate executives and business travelers, a review of related research, and an econometric analysis of business travel on corporate performance.
There are some interesting bits of data from the executive surveys - but that is "opinion" - not necessarily fact.
The key part of the study is the econometric study. Covering 14 sectors of business over a 13 year period using US Bureau of Labor data the study proved...
A business will lose 17% of it's profit if it eliminates business travel as a tool! That loss is pretty much permanent since it creates a new growth curve - below that which you would have had without cutting back.
There is a positive and causal relationship between spending on travel and corporate performance - $1 in travel spending returns $12.50 in incremental revenue and an average of $3.80 in incremental profit.
That is significant.
Remember - this is based on statistical modeling - not just the "opinion" of the executives (interestingly - their opinion did fall in line with the fact-based models.)
If you were considering cutting budgets for business travel in 2010 - don't. It will cost you money.
If you want to drive some significant profit growth - think about beefing up your customer visits, your trade show attendance, your employee meetings and your group incentive travel.
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