Incentive Programs Demystified: How Do Incentive Programs Work?

by: Nichole Gunn May 18, 2015

In business, people rely on others to get what they want. Consumers rely on manufacturers to create the product or service they want. Businesses rely on consumers to buy their goods and provide feedback on how they can improve or what new needs have arisen. Dealers and retailers rely on both consumer feedback and manufacturer information to act sufficiently as a go-between. This is sometimes easy to forget, as technology speeds up communications and sales channels become more complex. Individual links in the chain are sometimes weak because they’re too focused on doing their own job. The incentives industry emerged as a way of improving relations between managers and their teams, and motivating employees to meet goals. Ideally, incentive programs keep everyone on the same page: the company success page. But misconception abounds in incentive program implementation. Many companies end up never achieving maximum return-on-investment (ROI). So let's answer the big question: how do incentive programs work?

What’s Unclear About Incentive Reward Programs?

It’s easy to understand, theoretically, why an incentive program should motivate employees or business partners to commit to new behaviors. Misunderstandings and lack of clarity can stunt incentive programs, however. Steve Damerow, CEO of Atlanta-based Incentive Solutions, has been heading his incentives company since 1994 and manages over 200 clients. According to him, “We estimate that about 25% of incentive programs fail and about 60% don’t reach their full potential. If your incentive program fails, you could damage business partner morale, lose opportunities, waste time and effort, or tarnish your corporate image.” So why is it that such a large percentage of clients don't realize their incentive program's potential?

Many different managers tend to share the same aches and pains when implementing incentive programs. They don’t feel confident that incentives are helping sales representatives or business-to-business (B2B) partners promote the right products; they’re uncertain whether rewards are being received by the correct people, or in the correct amount (Heald, M., Jain, N., Wollan, R., 2013). Incentive programs require planning and foresight. They are often set up incorrectly in the very beginning, with poor choices for goals and promotions, or rewards not being allocated to the right parties.

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What Can Be Done to Clear Up Reward Program Confusion?

The best way to prevent confusion and uncertainty is to optimize incentive program spending. Planning the implementation extensively is crucial in seeing the highest ROI. Every company is different, and careful decisions should be made about which participants to reward and exactly what their target behaviors and goals should be.

1. Refine, Redesign, and Realign

Consider the overall goals for the organization and how they apply to each participant when setting up an incentive program. Revisit the overall goal and reconsider individual goals throughout the incentive program’s lifespan. Be sure to reward smaller achievements and incremental improvements, not just drastically significant milestones. Leave room for adjusting to new developments and accommodating the abilities of employees.

2. Look at Success in New Ways

Don’t dwell exclusively on targets like “We must increase sales X% over last year.” Examine all factors that contribute to company growth or increased sales, such as customer loyalty and satisfaction, the popularity of certain products or services by region, and adherence to the company's established sales procedures. Program administrators can consider all the angles of their team's success and fashion new goals from their observations (Heald, M., Jain, N., Wollan, R., 2013).

3. Collaborate and Oversee

The reach of an incentives program’s success is designed to be broad. Motivation, ideally, will be contagious. Therefore, it’s best to take multiple viewpoints into consideration during a program’s set up and throughout its course. Collaborate with marketing, finance, and operations personnel when formulating strategies and budgets (Heald, M., Jain, N., Wollan, R., 2013). Consult with program participants and keep goal discussions open to avoid a “monitoring” atmosphere.

Companies like Incentive Solutions offer programs with multiple capabilities. Administrators have multiple tools and features at their disposal to create the best incentive program to meet their needs. Incentive Solutions provides modular options like the Performance Tracking module, giving program administrators control over setting up promotions and goals. Promotions can be targeted at specific departments or employees; they can be recurring, long-lasting, or short-term. The ability to control all promotion criteria makes it easy to maintain and update a flexible incentive program that adapts to new needs.

Incentive Solutions programs also provide in-depth reports that evaluate progress and help gauge ROI. These reports come with the incentive program at no extra charge and are accessible 24-7. Extensive reports are key in determining where incentive programs are excelling and where they need work. Tracking program information allows administrators to make necessary realignments and share results with other departments in order to collaborate, keeping goals updated and effective.

Program-managament

Incentive programs are meant to foster desired behavior within companies, so that participants work harder toward a common goal. Incentive and reward programs are not instant solutions to organizational or departmental issues. Diligent focusing and investigation are often required to refine an incentive program’s targets, developing it into a precise, successful tool. Administrators can achieve best results by tracking progress, observing reports, continuously adapting the program’s goals and communicating effectively.

 

Incentive Solutions

2299 Perimeter Park Drive
Suite 150
Atlanta, GA 30341
Incentive Solutions

 

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Check out our slideshare on incentive reward programs

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References

Heald, M., Jain, N., Wollan, R. 2013. Selling through someone else: how to use agile sales networks and partners to sell more. Hoboken, New Jersey. John Wiley & Sons, Inc.

 

 


About Nichole Gunn