The New Reach of Incentives
Dot coms using rewards to entice Internet users
By Martha C. White
David Hytken, founder and CEO of iSearchNaked.com, knows that it's going to take more than a cheeky name to keep browsers coming back to his recently launched search engine, so he's offering incentives.
“People want to get something. They’re always looking for the best deal out there,” he says. The iSearchNaked rewards program will give registered users points for each search they perform; points can then be redeemed at iSearchNaked’s online store. Currently, Hytken says rewards consist of merchandise, but he hopes to expand his selection of products and even add travel in the near future.
Hytken is far from alone. Microsoft and Yahoo are also said to be looking into rewarding users for searching with them. Elsewhere, organizations in all sectors are also hopping on the incentive bandwagon in sometimes surprising ways. For instance, the state of Arizona is looking into boosting the percentage of registered voters who actually cast ballots by creating a voter lottery with a million-dollar jackpot. A pilot program in Philadelphia gives residents rewards like Starbucks gift cards for recycling. Points-based loyalty programs are proliferating, with everyone from booksellers to big-box stores getting in on the act.
More Employee Incentives
Innovative programs like these, seeking to change consumers' behavior by dangling “carrots,” have had a ripple effect on companies’ internal motivational efforts as well. Corporations are coming up with a bevy of novel incentives for their employees: Electronics retailer Best Buy gives perks for carpooling, while heavy machinery manufacturer Caterpillar offers inducements for workers to make healthy lifestyle choices.
All of these new programs make it very clear that incentives are more important than ever, and experts predict this trend is nowhere near its peak. “We’ve seen that [incentives] are going to be very important five years out,” says James Peltier, Irvin L. Young professor of entrepreneurship and professor of marketing, U of Wisconsin-Whitewater.
In fact, experts say that in order to engage a distracted, disaffected population of both internal and external stakeholders, incentives are emerging as the most effective weapon in companies' arsenals. As a greater percentage of corporate America recognizes the value of noncash awards, incentive suppliers have an unprecedented opportunity to become consultative partners to a largely untapped market. To that end, Peltier and others say it's up to the industry to understand the factors driving this phenomenon, and how to position itself to play a vital role in corporate America's new interest in motivation.
Standing Out Through Rewards
The growing creep of globalization and commoditization means that many companies have lost their distinction, says Michelle Smith, vice president of business development at performance improvement company OC Tanner. “Everyone is looking for that edge and how to get that edge, [which] can literally mean the difference between a company thriving or falling off the face of the earth,” she says.
Rewards are the newest way they're finding to stand out among competitors - whether they're competing for customer dollars or employee talent. The burgeoning numbers of incentive programs for consumers only up the ante for corporate motivation managers as they search for meaningful ways to recognize their own people. “There’s tremendous pressure and senior management is finally coming to the realization that incentives are an important tool to help them not only with their own employees [but] with consumers, dealers, vendors and anyone who touches that organization,” Smith says.
As corporations search for new ways to motivate their people, they're finding offbeat or unusual reward programs generate a grassroots level of buzz that gets employees more interested, says Tom Agnew, senior consultant at the Hay Group, a consultancy that specializes in human resources.
Personal Recognition
Whether the target audience is internal or external, noncash rewards are popular because they address the collective desire to be recognized on a personal level. “Cash incentives are important but not sufficient to retain top performers,” says Joe Vocino, principal consultant in the performance, measurement and rewards practice of Mercer Human Resource Consulting. Unlike cash - either given as a bonus to a stellar employee or granted to a customer by way of a rebate or discount - noncash rewards can be tailored to an individual’s likes and interests.
Another benefit to the new incentives is that they aren’t as likely to become expected, experts point out. “By using atypical rewards programs, it’s going to become much more difficult for those to be expected as part of the regular compensation packages. Companies are trying to get more bang for their buck and do something beyond what they would expect in terms of a compensation package,” explains Agnew. Companies who offer employees cash bonuses or offer customers discounts or other rebates invariably face a backlash when the program is over, because stakeholders have become focused on a dollar figure.
Gen Y Has Major Impact
Another big reason for the growth of incentives, experts say, is the growing presence of Generation Y, both in the workplace and in the marketplace. This demographic grew up with the ability to customize everything and have it at their fingertips in an instant. Companies that court this generation, both as employees and as consumers, find that incentives are the only inducement that offers the kind of flexibility needed to satisfy this collective need.
“This is a generation that grew up where everybody got a trophy in T-ball,” Smith says. “This generation grew up expecting instant gratification. They want that stimulation and they’re highly demanding.” She points out that, despite their youth, Gen Y workers are typically the ones to demand an engaging workplace, and will leave if they don’t get it. This, coupled with the fact that younger workers are measurably less loyal than their older counterparts, has companies scrambling for ways to keep them on board.
“A young person coming out of college has a certain salary they start out with and they might not be in a high bonus area,” points out Peltier. “They’re seeking [validation of] their own personal self worth, so noncash awards, a ‘pat on the back’ for the young worker, are an important thing.”
Rodger Stotz, managing consultant at Maritz Inc. also points out that today’s multigenerational workforce has the potential to create conflicts. For instance, a 25-year-old may be managing a 45-year-old. How is a supervisor supposed to recognize a lower-paid supervisor or a higher-paid mid-level staffer without alienating anyone and creating resentment? Noncash rewards, to which employees can’t attach a dollar value as readily, are the solution. “What the use of incentives allows is the ability to recognize teams regardless of their age and hierarchy,” Stotz says.
Maximum Impact Demands Communication
With so many companies focusing on rewards, however, experts say there is a danger that some new players could make the mistake of viewing incentives as an end instead of a means. So companies need to make it obvious to employees that the intent is to recognize contributions, says Tom Agnew. To that end, he says it’s important for program administrators to spell out why the program is being administered. If they don’t, today’s fickle workforce might not stick around. “There’s a greater fluidity in the employment market these days. [Workers] are much more willing to leave an organization.”
Organizations that make incentives the cornerstone of an integrated internal marketing effort are the ones that will really reap rewards, asserts John Von Rentzell, vice president of performance marketing at Carlson Marketing. “If you’re just looking at an incentive to change behavior, it’s going to fall short on its own if you haven’t clearly communicated what the goals are, especially if a population isn’t familiar with incentives and isn’t used to seeing them.” He and others assert it’s up to industry leaders and suppliers to explain not only the logistics of, but the principles behind successful incentive programs.
“The reward alone isn’t going to lead to [the desired] behavior,” he says. “If you communicate the right message along with the reward, you’ll stand a better chance of changing that behavior [by tapping into] intrinsic motivation.”
Social Consciousness: Good for Business
Bank of America gives its employees in some cities $3,000 towards the purchase of a hybrid car. Best Buy reserves preferential parking spots for those who carpool to work. Today, a growing number of companies are creating incentive programs that have a social or environmental slant. As it turns out, what’s good for the planet can be good for business, as well. Experts say that companies that display a strong sense of social consciousness have an advantage when it comes to employee and consumer perception.
Cause-marketing experts point out that consumers take into account good corporate citizenship when they make purchasing decisions. Perhaps more valuable than that, however, is the impact that ethical practices have on a corporation’s ability to recruit and retain workers.
“Younger workers care about the employer caring about the environment and social responsibility,” says John Von Rentzell, vice president of performance marketing at Carlson Marketing. A company with a large percentage of employees in the Gen X and Y age range might want to take this into account when searching for unique ways to motivate its people, he says.
