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The Green Sheet Online Edition

August 10, 2009 • Issue 09:08:01

Consumers love rewards, why don't sales reps?

By Lori Breitzke
VeriFone

Who says you can't buy loyalty? Not consumers, that's for sure. A recent survey conducted for Colloquy magazine found that despite the recession, "over two-thirds of all U.S. consumers report that they still participate actively in at least one reward program."

But does that apply to the world of sales, where commissions and quotas have long ruled the day? You might be surprised. Experience demonstrates that rewards programs can help you weather economic storms, boost sales, identify and retain your best performing employees and sales reps, and increase product knowledge.

Outshine competitors

Companies with good rewards and loyalty programs outperform competitors, according to retail industry research from the Aberdeen Group Inc. in 2009. "Companies who have a loyalty solution in place, as compared to those without a loyalty solution, are performing at significantly higher levels across a number of important metrics, including a 53 percent higher compound growth rate," said Sahir Anand, Senior Analyst at Aberdeen and chief author of the report.

The Incentive Research Foundation (www.theirf.org) said research proves incentive programs can boost performance by anywhere from 25 to 44 percent. Furthermore, the IRF argued that quota-based rewards programs are most effective.

The foundation also stated, "Piece-rate programs, for doing more of something, also provide positive results, according to the research." Least effective, it said, are "closed-ended programs that reward a preselected number of winners, as opposed to open-ended, quota-based, or piece-rate programs that give everybody a chance at success."

According to the Incentive Performance Center (www.incentivecentral.org), there's a significant problem with relying solely on cash to reward performance. "Because cash quickly gets mingled with other compensation or expenses ... it has very little residual or marketing value," the center noted. "Noncash awards, on the other hand - especially those targeting internal audiences - have a far greater chance of breaking through the promotional clutter than a straight cash award or discount."

The IPC further pointed out that the top 20 percent of staff are self-motivated and will likely outperform their colleagues regardless of incentives. The bottom 20 percent "are either new and on their way up or, in one way or another, on their way out," the center said. However, performance of the remaining 60 percent can vary dramatically, so the IPC pointed out that an incentive program "stands the best chance of affecting performance if it takes into account both the top performers and the middle 60 percent."

The right structure

A rewards program that reflects incremental sales benefits those who meet and exceed their goals and gives a clear picture of who is selling and who is not. Some key principals of a successful rewards program are that:

  • The cost of the program is directly tied to incremental sales and is essentially self-funding.

  • Promotions and short-term offers on specific programs are easily offered - and measured.

  • A robust marketing plan is necessary to promote the program and offers.

  • Rewards can often be anything from cash to travel to merchandise - whatever the participants want - which gives participants more control to get rewarded in the way most meaningful to them.

Rewards can be flexibly structured around a company's objectives and resources and participants' desires. They are most effective when participants are able to exert some control over the types of rewards they can select. Redemption strategies range from allowing rewards to be used for discounts on your own merchandise and services, to travel rewards, to various merchandise, gift cards and cash.

The rewards "host" has great leverage and control over the redemption program and can dictate when points must be redeemed, what the minimum and maximum rewards levels are, and parameters for special contests for bonus points earned when pushing particular products or services at a particular time. Sales reps may be further incented when they can pool points toward bigger items or have the option to redeem them anytime for smaller prizes.

Getting the word out

A successful rewards program requires a good marketing strategy to make it work. Key tools that may make sense to include are:

  • Flyers to introduce the program
  • Web site messaging
  • External newsletters
  • E-mail marketing
  • Event attendance
  • Webinars
  • Promotions to drive registrations and redemption
  • Direct mail

Since rewards generally are directly tied to results, the cost of the program is more controllable and measurable. Plus, companies can identify who the performers are and which areas need work. In addition, rewards may be a valuable tool in retaining the high performers. Those who are earning a significant number of points in a program are less likely to leave the company, especially if they're in the process of pooling points toward a bigger prize.

Participants are highly motivated by the opportunity to acquire items they really want - as opposed to cash that will likely just go toward everyday expenses.

But points can be used toward trips or items participants normally would not splurge on. Rewards programs can be especially successful during tough economic times and a win-win for the participant as well as the companies that offer them. The Green Sheet, Inc.

Lori Breitzke is VeriFone's Director of Marketing for North America. She can be reached at lori_breitzke@verifone.com.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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