By Rick Dandes. This article about corporate promotional merchandise originally appeared in Premium Incentive Products Magazine
Reduced budgets, delayed or cancelled programs and a general atmosphere of malaise brought on by the worst U.S. recession since the 1930s have made this past year a challenging time for incentive planners, especially those looking to motivate with travel. Now, however, with some economic indicators pointing toward the end of the recession, incentive and recognition programs are starting to make a comeback, as planners look to the rest of 2010 and a much brighter 2011.
How employees perform has always been critical to an organization’s overall bottom line, but these days, as the economy recovers, performance might be more important than ever before. And, since employee performance in part depends on psychological factors such as the sense of belonging and the need for being noticed, organizations have come to realize that various staff reward and recognition programs are vital for company success in this ever-more-competitive business environment.
Studies show that one of the most effective strategies in maintaining workforce productivity and getting your business to the next level is undoubtedly incentive travel. But incentive travel alone doesn’t do the trick.
Corporate promotional merchandise is often used to great effect to support incentive travel. Such items might include room gifts, goody bags and so on during a trip. Or in a contest where travel is the grand prize or top reward, merchandise or gift cards may be awarded to runners-up or to complement a program.
The reason why travel has proved an effective tool of motivation is that travel is a special type of reward or motivator. It not only makes participants feel appreciated, but is also a way to satisfy a variety of other needs, such as the need for novelty, the need for physical activity, the need for knowledge, the need to rest from work.
“For most of us, traveling creates lifelong memories and unique experiences that we treasure,” said Michelle Smith, vice president of business development for O.C. Tanner, and president of the Forum for People Performance Management and Measurement at Northwestern University. “Those qualities are the hallmark of an effective incentive or recognition award. Whether we achieve an individual travel award that allows us to pick the date and location of our travel, or we’re rewarded with a group trip that offers the opportunity to celebrate and share those memories with colleagues, travel awards are coveted and in high demand.”
What happed to travel awards last year was extremely unfortunate and shouldn’t be interpreted as an indictment against their popularity, Smith said, referring to budget cuts. “Travel has always been a very desirable award choice and I’m sure it will continue to be popular long into the future.”
“Clearly,” agreed Chris Gaia, vice president of marketing for Maritz Travel, “an organization’s top performers are motivated by the recognition and experiences. Money can’t buy the same qualities of effective incentive travel programs.”
Many times, Gaia said, these programs include face time with senior company leadership. These leaders, in theory, then benefit from the market insight and customer-focused view of their organization that their sales leaders or other partners and employees can provide. But at a time when the travel business has been battered by recession (the U.S. Travel Association estimates a loss of 247,000 travel-related jobs in 2009), what exactly is the current state of the incentive travel business? And where do we go from here? Expert opinions vary among top consultants on incentives of all kinds.
The Value of Travel
Studies show that monetary incentives do not motivate as well as non-monetary incentives up front, and monetary rewards have far less lasting value. Two-thirds (66 percent) of executives believe that travel and merchandise incentive programs are more memorable than those using money; and 60 percent of executives believe that creating an incentive program is easier with travel and merchandise incentives than monetary incentives. Financial benefits are often used for paying bills, and many people don’t even remember where they spent the reward sum. The value of travel is greater because most would never spend the money to go on a trip themselves. Likewise with merchandise.
Travel rewards are most effective when companies want to set apart the incentive program from monetary compensation so that the reward system does not become expected. There will be a greater impact on your employees if the recognition value for awards is high.
Most importantly, said James Feldman, CEO of James Feldman Associates, and president of Incentive Travelers Cheque International, “Travel is an experiential award. It’s what dreams are made of.”
Not only can you offer travel incentives to your employees, but also to your top customers, added Rodger Stotz, chief research officer for the Incentive Research Foundation. “For example,” he said, “group travel can be arranged for the first 50 customers to buy a new product or the top 20 repeat customers. Incentive travel benefits at least three groups: sponsors of the program, participants in the program (especially the individuals earning the trip) and the destination.”
The sponsors gain both the improved performance required among the participants who compete to earn the program, as well as the improved morale and retention experienced with those who earn the reward. An additional benefit with group travel is having the opportunity to spend quality time with top producers and to learn what is happening in the field (with customers).
With a successful travel incentive program, participants benefit from the excitement of the program and destination. In a challenging role like sales, the availability and continual reminder of the incentive trip adds a real positive to what can often be a position that faces many negative responses.
The earners of the trip benefit from being acknowledged as top performers, and they get to enjoy a pleasurable experience, hosted by the sponsor’s executives. Being able to meet and share your perspectives with company or industry executives can be a valued aspect of the trip. While the rest of the benefits are true of individual travel, only group incentive travel offers group affinity and interaction. Another benefit is access to executives in a multi-day, casual setting, and building relationships with other earners.
The destination, of course, benefits by the increase of travelers to their facility and the local area. As was seen after 9/11 and again after the economic bubble burst, hospitality has a major impact on local economies. Professional service workers like cab drivers, bellmen, housekeepers, waiters, bartenders and more depend on travelers, and incentive trips offer an influx of people and their related expenditures.
Unlike other traditional programs, travel offers more flexibility and perceived value for participants, and this in turn creates a much more dynamic scale of predictable results.
Mixing It Up
All travel programs need to use merchandise to enhance the experience, Feldman said. “No one goes to sunny places without sunglasses,” he said. “Few people like to travel
alone. Combining merchandise with a travel program provides a tangible reminder of the trip.”
All the benefits of combining travel and merchandise—extra goodies in a room, for instance, or a gift bag handed to the traveler at a destination—can have a tremendously positive effect, if the program is done right. But that doesn’t always happen, Feldman contended.
“I can tell you how the combination of travel and merchandise can be ineffective,” he added.
Feldman recounted a car-driving experience in November 2009. “We went out to a raceway in California and we got to drive $3 million worth of cars, like Ferraris and Lamborghinis. At the start of the event every single person got a ‘goodie’ bag. When you opened up the bag you saw a hat, a key chain, a T-shirt and a video camera. Here’s the unbelievable part: Not one person in the entire day used the camera. You can’t have a much more graphic experience than getting in a half a million dollar automobile, driving around the track with a huge grin on your face.”
Afterward, Feldman went to the people who put on the event and said, “Guys, I don’t know where you got the cameras. I don’t know what you paid for them, but it might as well have been a stick of gum. If you had spent five minutes, by saying to everybody—’Take out your cameras. We have put the memory card in, we put fresh batteries in. We want every one of you to do a video diary. We want all of the cards back. We will then make a compilation of the events from your perspective, we’re going to give you a new memory card while you’re here so that you can take the camera back home as a thank you gift’—the difference would have been like night and day. I think you can compare that experience to what has happened with merchandise.”
Feldman said that professionals selling corporate promotional merchandise are having a hard time competing with the distribution channel of big-box retailers like Best Buy, Costco and Amazon.com. Those who sell incentive travel, he added, have marvelous destinations, but end up losing out when the airlines—where the experience begins—mess things up.
Feldman’s point is deceptively simple: Travel people have been hamstrung by the airlines. And the merchandise people have been hamstrung because they are now competing with the big box stores.
But the truth of the matter is that no matter who you’re working with—sellers of corporate promotional merchandise, gift cards, travel or someone else—you need to remember what the industry is all about: making winners feel like winners. And merchandise makes a travel program more effective.
Make Corporate Promotional Merchandise More Effective
The history of combined travel and merchandise award programs is long and deep— they complement each other well and have successfully worked together in many types of programs over the years.
“Having a choice of awards is so popular in every kind of incentive and recognition program,” said Michelle Smith of O.C. Tanner, “that most programs these days do offer a variety of both in their award catalogs.”
When the dominant award in a program is a group or individual trip, she continued, there are usually still plenty of merchandise options. In most cases, a merchandise item that complements the program theme or trip destination is given to all program participants at the launch of the program to generate awareness, excitement and buy-in. Depending on the length of time covered, other merchandise items may be used during the course of the program to maintain interest and enthusiasm. Similarly, when winners arrive at their destination they will likely find yet another useful item in their rooms to acknowledge their achievement once again and to help them more fully enjoy their travel experience.
Another effective use of merchandise in a travel program is to offer merchandise awards throughout the course of the program to keep participants engaged during a long program and to reward the behaviors and milestones needed to achieve the ultimate goal. Not only does this practice keep energy levels high, but it also allows participants to actively participate—and win—even if they have little chance of winning the final travel package.
“The primary way to combine the two,” said Rodger Stotz, “is to have an incentive program where all participants are eligible to earn based on their (or their team’s) performance, plus a top travel award for the top performers.”
But that’s not the only way travel and merchandise are combined. Smith is convinced that pillow gifts do enhance a travel program and make it more effective. One of the best practices of successful and well-designed incentive and recognition programs is to communicate and “touch” participants as frequently as possible, she said. “We want to do that with winners especially so that we anchor the memory of what they achieved with the award they receive. A pillow gift provides another touch-point opportunity, and I would encourage companies to take advantage of it.
Finally, if the program offers only incentive travel, the sponsor can provide promotional items during the program to promote the travel experience, as well as on-site items (room gifts, travel accessories). Room gifts are “frosting on the cake,” Stotz said. And they can make a good experience a great experience. It strengthens the program.
But caution is appropriate: It is critical to make sure the gift is appropriate—to the participants, the sponsor’s organizational culture and society. An improper gift can detract, so sponsor beware, and enlist knowledgeable planners and promotional experts in your decision process.
Some popular gifts these days are custom golf clubs, Xbox Live games, and luxury brands like Movado, Waterford and Tumi that make a statement. Electronics that can be used at the destination, such as a digital camera for photographing the scenery or an iPod loaded with locally-inspired music are a great idea. Or go for something travel-specific like leather passport holders, luggage or travel accessories.
“In general, we’ve seen effective incentive travel programs that offer on-site sunglasses and fittings at a beach or skiing destination,” Stotz said, “or electrical adapters for participants on an international trip. Of course, there are all types of possibilities for the sports activities at a destination: golf balls, tees, towels, etc.; tennis sweat bands, towels, visors, sunscreen, etc.; spa samples.”
Kurt Paben of Carlson Marketing agreed that corporate promotional merchandise can make a program more meaningful and more relevant. “If gifts are done thoughtfully,” he said, “and if they are relevant, and take care of understanding who your attendees are and what’s important to them, then I’m guessing that these room gifts can add special touches and make the travel event just that much more memorable. We’ve had several clients who combine merchandise with travel. Several of them have done peer kind of incentive programs, where merchandise might be offered for people that exceed their goals, or top performers. That’s a very common strategy.”
Chris Gaia of Maritz Travel added, “Our belief is that an effective model for a sales and customer-focused performance culture is built with an organization-wide reward and recognition program, a sales incentive program consisting of both points-based/merchandise/experiential programs that are designed to ‘move the middle’ of your sales force and incentive travel awards for top performers.”
But does merchandise really enhance the travel program? “It depends on the company and its culture,” Gaia continued. “At Maritz, we have tested these options using our Travel Insight research approach and found that culturally significant merchandise options can enhance the perceived value of the trip experience. For example, some companies have established certain items of jewelry as part of the trip experience, with different items signifying the number of trips earned. These become powerful signs of recognition, status and achievement. Other merchandise options (books, destination-specific items) in some clients have proved to not be worth the investment.”
For a new planner, said Stotz, “engage a mentor, someone who has done it before. There are so many aspects to consider and decisions to be made, I would not suggest a new planner try this on her/his own.”
“I’d offer several pieces of advice,” said Paben. “First, understand your objectives; understand what you are trying to accomplish. That’s important for any type of program you are trying to set up, whether it’s travel incentive or any other kind of marketing program.”
Second, understand how you are going to measure the results of the program, he explained. Measure your success. And then build a strategy around it. Make sure you design an incentive program where the results justify the expense.
“It’s all about objectives, strategy setting and measurement, before you start designing the actual content of an event,” Paben said. “Once you move on to the development of the program,” he continued, “make sure you build experiences or offerings that are relevant and memorable and meaningful to the people you are offering the incentive to.”
Looking to the Future of Corporate Promotional Merchandise
In the end, travel incentive and merchandise experts have mixed feelings about the short-term future of incentive travel.
“The latest data out of Las Vegas shows business travel for 2010 is gaining room nights, but room rates remain soft,” Stotz said. “This is a good sign for incentive travel as business begins to travel in general. I have also heard of more RFPs starting to be released and showing some signs of groups returning. In both cases the recovery seems to be slower as the economy continues to struggle. So as an observer, I sense the recovery and the return of incentive travel will be somewhat in sync.”
Smith and Paben both see signs that the industry is coming out of its slump, but they also believe the recovery will be slow.
“I’m confident that incentive travel will bounce back from the recession and the unfortunate misperceptions and knee-jerk reactions caused by the ‘AIG effect,'” Smith said. “Many travel providers are already reporting that programs are coming off hold status or are being reinstated in 2010. The latter half of 2010 looks stronger than the earlier months, but I think the tide has turned and travel is back on an upward trajectory. I understand that some hotel and travel bookings are already looking fairly good for 2011.”
Smith suspects that travel will recover in pace with the economy. However, she noted, economists are predicting a slow and prolonged recovery, so that isn’t the best news for travel. There is some pent-up demand, so we may see some encouraging opportunities from that. As a higher-priced award option, travel will be dependent on overall optimism about the economy, but here again, merchandise items may prove to be a good award substitute until budgets rebound fully and perceptions about incentive award travel have dissipated.
Paben also thinks the future of the incentive travel industry will generally follow the economic recovery. “We are definitely seeing significant improvement for next year, and even more going into 2011,” he said. “Companies are definitely seeing the value of incentive travel. What we’re seeing is particularly the companies that measure incentive travel, measure the value and the benefits…when they take this bottom-line approach, they realize travel incentives are an effective marketing tool. And that it’s a great investment.”
But James Feldman isn’t so sure about the pace of the recovery. “Many believe that the economy is now recovering and starting to see growth. I, for one, don’t see it,” he said. “While some industries may show some growth and specific companies such as Apple are having great years, for the most part the gush of new business, and in particular merchandise and travel incentives, have been replaced with cash and gift cards. My personal forecast is that the depression/recession is still active.”
Feldman added these definitions to clarify his position: “A recession is what happens when you still have a job while your company downsizes, and a depression is when you have lost your job,” he said. “Either way, we no longer have the speculative heights we had early in this century and the next few years do not look too promising. As a result of the AIG effect companies have pulled back on meetings and incentive programs. Merchandise companies have all but forgotten this distribution channel and have expanded into more ‘direct to consumer’ offers and discounts. Hotel chains continue to merge, airlines continue to ‘niggle’ the traveler at every opportunity, and service levels for almost every travel and merchandise supplier have all but disappeared.”
Reinventing Incentive Success
Is there an answer? Feldman contends there is. What is missing today, he said, is an understanding of the historical success of incentive programs. Every company that is considering an incentive program has choices: corporate promotional merchandise, travel or cash. What many companies have forgotten is to consider the mission purpose. Instead of focusing on the choice of merchandise, travel or cash, perhaps we need to remember the reason for the program first and worry about the rewards after we create a well-crafted program to help sales, retention and safety. And to provide the winner with an extraordinary experience.
“What needs to happen is that we move from stuff to experiences,” Feldman explained. “The industry needs to remember how to mentor their customers so that the incentive program solves a problem first and makes a sale to the vendor second. Our industry must become solution providers, not sellers of stuff or travel.”
Feldman is calling for nothing less than a reinvention of the incentive industry. “Innovation is the product of discomfort, and we haven’t been this uncomfortable since the Great Depression,” he said. “Too many marketers from travel and merchandise are guilty of the same attachment to their brands, assuming that every brand needs life.”
Merchandise companies have now embraced gift cards that are really another form of cash, Feldman contended. “Since I started in this industry ‘cash’ was never considered a true incentive. Now I realize that is a drastic departure from the way gift card companies and merchandise companies have operated in the past, but these are not the same times.”
Travel has very low margins, Feldman explained. However, in the past few years the margins from merchandise, which historically were in the 35-to-50-percent range, have eroded. Freight costs have risen and some manufacturers will no longer drop-ship their products. This requires warehousing and fulfillment services to be created by either the incentive company or the client. And this adds to the costs.
“It is time to discover new opportunities using existing resources. It is time for the unification of our buyers, sellers and manufacturers in order to get this country moving again. Without partnerships with the airlines, the hotels and destinations don’t have a good experience to offer. Hotels and destinations are critical of airlines and need to stop. Cruise lines no longer partner with the airlines for that reason. Cruises used to ‘push’ the air/sea package but have backed away.” All these entities have to learn to work together, Feldman said. “Together we can balance the differentiation between various efficiencies and create a competitive differentiation that is mutually beneficial.”
The industry should partner with the airlines and destinations to “increase” the fair market value of what is provided to the winner, he added. For instance, an incentive winner for individual travel might have a package that includes an overweight luggage allowance, changeable tickets, space available upgrade, and meal service included in the flight. That way the cost per ticket cannot be easily compared to the Orbitz or Priceline model. The merchandise should include the “white glove” setup in the home, the hotel should include the upgrade to the best room available, a welcome gift, free use of the Internet, gym, etc.
There needs to be a “competitive differentiation” so that price is not the major determining factor in purchasing the incentive, Feldman noted. Travel is diverse and offers a high level of customization for the winners.
As companies try to reduce overhead, they reduce the experience, but this cannot be acceptable to anyone that offers a “winner” a reward for achieving or exceeding a business goal, he said. “Winners want to be treated as winners; after all they earned it,” Feldman said. “Whether travel or merchandise the supplier must have the same focus on the experience as the sponsor of the program, but that doesn’t happen today. Clients have to partner with someone they trust and who is interested in the experience that their winners receive.”
The aim of an incentive is to provide an experience that can’t be duplicated, Feldman said. Corporate promotional merchandise is clearly a duplicated item. A room stay is the same. “It’s not so much about the choice of travel or merchandise,” he said, “but how the winners feel after receipt of the reward. It should not be a contentious battle for one of the three choices, travel, merchandise or cash, but the strategic alignment of a supplier that understands that an incentive winner is not just another consumer.”
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