Is now the time to reinvest in incentives?

This issue strikes at the heart of every business in today’s uncertain economic times. The statistics say we are out of recession, but only just, so confidence remains at a low ebb. Add to that the Coalition Government’s plans to tackle the deficit and the situation becomes even more unclear. Has the market recovered sufficiently enough to mean incentives will make a difference? Are potential customers ringing in, walking through your doors or agreeing to meet with your sales team? Is there a general market appetite for your products or services, meaning an incentive will have an effect? In essence an incentive is not about topping up someone’s salary – it’s about rewarding discretionary effort, which affects your bottom line. If the market isn’t ready, then you could be throwing your money away rewarding people for performance levels they should be reaching anyway!

We have certainly seen a slowdown in the use of incentives, alongside an almost identical increase in employee benefit programs. This indicates that businesses are cutting back on discretionary spend and using a small proportion of the budget to fund benefits associated with a ‘caring and progressive’ company such as; recognition programmes, discount offers and tax efficient schemes. However, such benefits don’t drive sales; they give a comfort level and are often used as a substitute for salary increases. Incentives drive sales, so at some point a company has to take the plunge and speculate to accumulate…

Or do they?

Incentives are definitely back on the agenda. The number of enquiries we’ve seen has increased 3 fold, with those targeted at re-sellers definitely on the increase. However, the way incentives are structured has certainly changed.  We’ve moved from a very simple “sell this, get this” approach to a more controlled structure, designed to minimise risk and control budgets. Such structures include:

  • Increased reward for the second sale – eg 10 points for 1 sales, 30 for 2
  • Performance reward bands – sell 5 products to earn 100 points, sell 10 products to earn 250. Payments are only made if you reach the next performance banding – there are no part payments!
  • Target completion payments – only when a specific target is met does a payment get made
  • The traditional league approach, allowing you to reward certain proportions of the audience only
  • Minimum criteria, only when these are met are incentives paid out
  • Team multipliers – where  the value of the reward is substantially increased when team or departmental targets are met

As well as reviewing a range of techniques, companies are taking a lot more time to model different techniques and forecast phased spend alongside the achievement of different short and long term targets. This is reinforced by a desire to understand how the incentive is performing and what level of engagement is being achieved on a much more regular basis.

So just as they always have, employers are looking for a return on investment into an incentive. The recession has only made a difference in terms of scale. Now employers are reviewing the programme in much more detail. The result is a range of incentive structures that ensure the incentive budget works much harder, with the majority of the funds released when overall targets are met.

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