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The Green Sheet Online Edition

October 24, 2011 • Issue 11:10:02

Prepaid spot-on for incentives

sellingprepaidA study conducted by the Incentive Research Foundation examining how businesses administer incentive programs shows prepaid cards often represent the top means of delivering rewards to employees and sales partners. Program administrators cited the efficiency and ease of use of prepaid cards as reasons why the cards were chosen over cash, travel and merchandise to facilitate spot rewards programs, according to the study titled The Use of Awards in Organizations.

Survey respondents preferred prepaid cards for "spot rewards" – frequently administered rewards with relatively low dollar amounts – because cards made the programs easy to administer. "When people say that [prepaid] is easy to administer, the data is the primary thing that they are talking about," said IRF President Melissa Van Dyke. "It's very easy to get data, to execute your programs to see how they've been used."

Of the study's 170 respondents, 65 percent used prepaid cards for incentive programs and 26 percent used only prepaid cards for programs that rewarded employees and channel partners.

That data suggests to Van Dyke that businesses are more loyal to prepaid card programs as rewards tools than to either merchandise or travel rewards. "Fifty percent of respondents said that they use only one reward type," she said. "And that was driven heavily by prepaid card users. … That wasn't true with merchandise and travel."

Good for programs on a budget

The research showed prepaid cards were most used for programs budgeted at under $10,000. Just over 35 percent of respondents employed prepaid card incentive programs on limited budgets. As budgets went up, prepaid card usage went down. For budgets of between $10,001 and $50,000, 20.7 percent used prepaid cards, while percentages dropped below 10 percent for bigger budgets.

The most common amount loaded onto prepaid cards was under $100; the second most common amount – loaded only about 1 percent less often than amounts $100 and smaller – ranged between $101 and $500. The number of respondents who loaded larger amounts onto the cards dipped below 10 percent.

The average amount loaded onto prepaid cards was $240. In comparison, the average amounts of cash and travel rewards were $732 and $3,115, respectively. The report said the average travel amount reflects an annual award rewarded for some achievement, as well as a larger budget than that for other types of rewards.

Determining ROI

The report also found program administrators lacked the statistical tools to help them quantify program effectiveness. Over 50 percent of respondents said they relied on intuition or experience to gauge how well programs performed in relation to sales or productivity objectives. In other words, businesses were saying they had no good measure of return on investment (ROI), Van Dyke said.

On its website, the IRF offers the free-to-use Master Measurement Calculator designed to help businesses measure the impact of rewards programs. Van Dyke said the calculator takes users through two phases. The first phase forecasts possible ROI. Phase two calculates actual ROI based on data imputed in phase one.

Van Dyke said, "One of the problems in calculating ROI we've seen in the past, and we've heard when we've interviewed individuals, was that a program might be very, very effective, but the senior management will say something along the lines of, 'I know the program contributed to the success of wellness or sales or retention' – whatever it is they were targeting – 'but I don't think it was the only thing.'"

Therefore, phase two allows for adjustments based on how much a program attributed to an overall goal, represented by a percentage, and the level of confidence senior management has in a program's effectiveness, also displayed as a percentage.

"If the senior management is highly risk averse and says, 'I only have about a 60 percent belief that those numbers are accurate,' then you can adjust for that, as well, to give you your actual benefit/cost ratio and actual ROI," Van Dyke said.

The report and ROI calculator can be found at www.theirf.org. end of article

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