“I want you to put together a kick-butt program to get our new product line going ballistic,” your boss tells you. “And I want results. None of this spend-a-bunch-of-cash-and-get-no-payoff garbage, either. Oh, and make it interesting.”
Your boss leaves your office and you have one more complex project to add to your already overloaded schedule. Where do you start? How can you make sure the program works? How can you make it interesting? So you start by thinking about what would be the ideal incentive program for you, personally. And, being brighter than the average human, you consider the elements of human behavior.
Any Behavior that is Rewarded Tends to be Repeated
Virtually every study on human motivation shows positive reinforcement of a behavior leads to that behavior in the future. Conversely, negative reinforcement of a behavior tends to discourage that behavior in the future.
The secret to a successful incentive program is to make the prize a positive reinforcement. One can learn a lot by watching animals in training, a child learning a new skill, or an executive negotiating the first few weeks of a new position. In every case, new behavior is quickly learned and reinforced with small, often subtle rewards. For a dog, a tidbit for a trick; for a child, a hug and a smile for trying to walk; for an executive, access to insider information for following corporate protocol.
What’s Their Motivation?
You’ve probably noticed that a percentage of people aren’t influenced by your incentive program, no matter what you offer. About 40 percent of the North Americans are primarily internally motivated. They know they’ve done a good job when they feel like they’ve done their best.
You can recognize internally motivated people because they are less interested in what other people think or do. They tend to be independent thinkers, not as interested in what you’ve done for others, but more interested in what you can do for them. They make choices based on personal ethics and morals.
The most effective incentive programs are based on activities that internally motivated people are already committed. An incentive program makes it easier for them to do what they’re inclined to do. A powerful reward could be a donation to a favorite charity in their name.
Externally motivated people are motivated to “look good” or do things because other people tell them they should. They seek acceptance and an incentive program delivers tangible proof of acceptance.
Most salespeople are externally motivated. Sales positions attract externally motivated people – they’re motivated by quota and rewarded with commission and sales contests. Salespeople will work night and day for a $35.00 plaque and a pat on the back. They tend to quit working hard once they’ve reached their numbers. Well why not? Their manager can’t fire them: they’ve reached their sales numbers.
Externally motivated managers insist that commission is the only way to motivate a sales person. They’re right if they only hire externally motivated people.
Create a Powerful Incentive Program
So you begin designing your incentive program by answering five questions:
- What new outcome do you want?
- Whose behavior do you wish to influence?
- What behavior do you want to have repeated?
- When and where do you want that behavior repeated?
- What’s it worth every time that behavior happens?
With this list of insights, you can begin to design and budget for a successful program.
Who Do You Reward?
You can reward employees for meeting production and safety goals, or sales staff for reaching sales and profit goals. You can reward superiors for their support of the staff or innovation in increasing profits.
You can reward your friends for helping you move to a new house or for taking care of a pet.
You can reward customers for their loyalty, for purchasing more product, more often, or for referring new business.
You can reward prospects for paying attention to your sales message or for directing other prospects to your business.
The most successful incentive programs include rewards for people who are influencers or who are important to the program participants. For example, selecting prizes that a spouse will find attractive increases their support. Prizes for the team increases the team’s moral.
Why Incentive Programs Fail
Many incentive programs reward the wrong behavior, or reward behavior that is likely to happen without an incentive.
Or worst of all, the “reward” creates negative reinforcement. For example, it’s insulting to offer a bottle of wine as a reward to someone who’s going to AA meetings.
It’s less effective offer sports tickets to someone whose spouse hates sports than to offer a romantic evening meal.
Often prizes are selected based on the desires and tastes of the boss supervising the program. Yet not every employee shares the love for modern art prints or golf accessories.
How Do You Know You’ll be Successful?
Here are the elements of successful programs. Use this as a checklist to make sure your program works.
- Successful incentive programs result in measurable results. If you can’t measure your desired behavior change, you’ll never know if your program was a success. Build a measurement phase into your program.
- Aim for permanent behavior change. You not only want a customer to try to your brand, you want them to switch to your brand. Price-based incentives tend to attract price-sensitive buyers. You don’t want people without loyalty who will switch to the next vendor with the lowest price.
- Create programs that increase profits. The only true measure of success in business is profit. Know how much this program can bring to your bottom line.
- The promotion must be easy to run and require little or no staff training. If you need a complex document spelling out the rules and exceptions, your program is doomed to failure. A successful promotion can be described to a 12 year-old in 30 seconds.
- The most effective promotions use multiple influence agents. These are the factors that motivate people to do things. Isn’t that why you’re launching an incentive program.
- Align with a commitment your participants have already made. The hottest programs let people meet multiple commitments. For example, when Total Petroleum ran “Total Thursday’s,” in selected markets, you could simultaneously fill up your car, get a free drink, and donate a few cents per gallon to your choice of charities. The brilliance of this incentive program is it let people give to charity – something most people want to do – while filling up their gas tank – something to which most people are committed if they’re going to drive to work. The program broke all sales records.
Reward Your Employees for Profits
Most progressive companies offer profit sharing for employees, most often by creating a pool and dividing that pool by a formula that gives more to higher wage earners. In three studies for his graduate degree, TAFA (Concord, NH) Senior Marketing Manager, Elliott Sampson discovered that the most effective profit sharing plan split the pot equally with all employees. When the president gets the same share as the janitor, the president will listen to the janitor’s money-saving suggestions. Relatively large gains in profitability occur when you reward saving money and increasing profits at all levels.
When you’re creating an incentive program to promote other behaviors, such as quality control, waste reduction, safe behavior, let the participants decide on the reward. You’ll discover they’ll usually pick prizes smaller than you had in mind, and may select social events – a keg party or pizza night – over bigger prizes.
Reward Your Sales Force for Knowledge
Perhaps you want your sales force to sell more profitably. The problem with most sales incentives is that it rewards behavior that by their job description they’re supposed to exhibit: selling things. Savvy sales managers reward behavior that is beyond job description.
For example: next sales contest, reward competitive knowledge. Have your sales people learn about your competitors, their products, and their customers. Have pop quizzes, and hand out prizes on the spot for correct answers. You reward behavior that is proven to improve sales – there’s no better way to increase your confidence in your product. Best yet, your sales people are more aware of competitive activity long after the contest ends.
Reward Your Customers for Loyalty
Every marketing manager agrees, it’s way more profitable to sell to an existing customer than to find a new customer. So why not reward your existing customers for being your customer.
Often marketing programs encourage new customers to buy at the exclusion of existing customers. The offer giveth: “Sign up for a year’s subscription at the trade show, and we’ll give you a free leather briefcase.” The small print taketh away, “Not valid for renewals.” Oh, great! Tell your customers that they don’t deserve a leather briefcase for their loyalty. It’s enough to make them cancel their subscription and sign up anew.
An unconventional approach is to give your customers a better reward for renewing on the spot, and offer new customers a lesser reward. New customers learn you appreciate loyalty. When your incentive program focuses on profits, you’ll work hard keeping customers. Your cost of acquiring a customer plummets, and your profits soar.
Instead of giving a VIP customer a dining gift certificate as a thank-you reward, tell them to take their spouse to dinner, and send you the bill. The secret here is to not set a spending limit. The gift is your trust in them to spend what they’d like. You’ll find they’ll often spend less than you had in mind. Use your judgment when offering this incentive to a customer with a history of taking advantage of you.
Reward New Customers for Saying Yes
Often, marketing managers create incentive programs so new customers purchase sooner rather than later. When you understand the psychology of a buyer, you’ll better understand how to influence them to buyer sooner. People buy to satisfy a personal urge or desire and to fulfill a commitment they’ve made to someone important or influential in their lives. They won’t buy unless there is a compelling deadline to move forward. That deadline could be driven by pain or hunger, a project deadline imposed by a superior, or the desire to have new shoes for the party tonight.
New customer incentive programs work best when they move up the deadline. Many salespeople use a discount to impose a deadline. “I can give you a 10% discount if you buy now!” An item being “on sale” rewards customers for buying during the sales campaign.
A better approach is offering an added-value reward. Estee Lauder beauty products never go on sale. Yet often you’ll receive, “$50.00 value gift when you buy today.” This works since the gift is more of what they sell. The beauty industry knows that they’ll sell tons of cosmetics when they turn a sample into a reward.
Launch Your Incentive Program
Now that you understand what behavior you want to encourage and you’ve researched the rewards that are meaningful to your group, you plan a kick-off party to let everyone know about the program. At the party, people make and accept challenges. You stimulate and encourage statements like, “I’ll hit my quota in 10 months,” or “I’m going to beat your number, George.”
Using the power of public commitments, you not only guarantee a program that works, but you’re boss is overwhelmed by the success of the program before you’ve handed out a single prize. Congratulations!
Mark S A Smith
Working with leaders to bring in the right customers, fast.
P.S. I have a slot open in my confidential executive coaching program that accelerates business outcomes. I guarantee you meet our agreed upon objectives by bringing you new insights and accountability. Contact me at MarksSchedule.com to discuss what we can accomplish together.
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