By Richard Grogan-Crane
Designing a channel spiff or ongoing rewards program that meets the needs of your global channel partners and their sales teams as well as the ROI expectations of your executive team – CFO, CMO and/or CRO – can be a challenging balancing act.
Channel Incentive Program Design
First, there’s the question of performance?
- Who should be eligible to participate?
- What specific behavior or set of behaviors are we seeking to change?
Next, there’s the question of value?
- How much can be budgeted to fund rewards?
- What’s the right incentive value to capture the attention and motivate the behavior of our partners’ sales reps?
Then, there’s the question of impact?
- What’s the potential ROI based on running the program or spiff?
- Will it shorten the sales cycle? Or increase the number of actively engaged partners and partner sales reps?
- Is the revenue and/or activity generated truly incremental?
Finally, there’s the question of the reward?
- Cash? Gift card? Prepaid debit card? Points? Discount offers? Trips? The latest gadget showcased at CES?
Cash vs. Non-cash Rewards
As a program designer, you might survey your program’s participants to ask what they’d like the reward to be. Or you might interview a number of professionals or download best practice white papers on the topic created by firms that have been designing these types of programs since before the internet was invented.
If you did, with near certainty, when asking potential program participants, ‘cash’ will nearly always be at the top of the list of reward choices. With nearly the same certainty, if you ask the professionals, they’ll likely tell you that ‘non-cash’ rewards deliver better ROI.
Sound a bit confusing?
In reality, both are likely to be right. Seasoned program designers know that the experience matters – often nearly as much as the reward itself. And ‘non-cash’ definitions have come to mean more about where the reward fits into overall compensation than in the reward deliverable itself.
Understanding the behavioral psychology of reward systems has progressed immeasurably in the past 20 years – and new data continues to come forward about intrinsic vs. extrinsic rewards. Meanwhile, what’s in the ‘non-cash’ category has shifted dramatically over the years in ways that underscore that participant choice almost inevitably leads to reward selections that skew toward cash and/or cash equivalent options.
According to a July 2016 Incentive Marketplace Estimate Research Study, conducted for the Incentive Federation, Inc. and supported by its sponsors, the Incentive Marketing Association (IMA), the Incentive Research Foundation (IRF), the Promotional Products Association International (PPAI) and the Society for Incentive Travel Excellence(SITE), in the US 2015 $17.4 billion was spent on ‘non-cash’ channel rewards and that “award points and gift cards account for two-thirds of the market spend.” Further, in the channel, 83% of points programs offered gift cards as a reward choice – more than offered any other reward option. Importantly, gift cards in this study “may be for travel, merchandise, retail, dining, or to be spent at any merchant that accepts credit cards.” Put another way – apparently cash (or cash equivalent) is the #1 "non-cash" reward. Who knew!?!
Which brings us the point of this post. When channel rewards programs offer gift cards, prepaid cards and – yes – even direct deposits to a participant’s bank account, the distinction between a ‘cash’ and ‘non-cash’ reward can become virtually meaningless. A distinction, it would appear, that the market had already eliminated when given the choice.
Give Participants the Choice
Global incentive program management is difficult enough; challenges include cultural, regulatory and logistical considerations. But with all that complexity, why add trying to offer the ‘perfect’ reward when leaving the choice of reward medium to the participant has proven to be an effective – and cost-effective – reward strategy.
Motivation experts will argue for purposeful choice rather than unlimited participant choice. We wouldn’t disagree. But at what cost? Psychographic and demographic data can inform a targeted selection of rewards – categories can be created to satisfy different segments or personas.
But in the end, the personalization critical to making rewards personally meaningful would be better served through effective program design and personalized communications to promote goal-setting, engender persona or role-based achievement and celebrate individual differences with personalized wish lists and the like rather than in curating reward selections that must span cultural, generational and gender differences to serve the diverse constituencies found in the channel.
Offering category choice – retail gift cards, prepaid debit cards or direct deposits – directly to the participant is both operationally more efficient and more desirable for program participants. Creating a program that serves their needs can be greatly simplified by using digital delivery irrespective of reward choice. This also provides the ability for more immediate reinforcement of desired behaviors.
For more information about digital reward choices including XTRM AnyPay please visit our website or view a short video. Let us know what you're doing to incentivize your channel partners' sales reps and how you're doing so to gain maximum motivational impact balanced with operational efficiency.