Are you maximizing your ROI2TM?
(Return on Incentive Investment)?
By Brian Galonek
There are many types of incentive programs – sales, peer-to-peer, safety, and loyalty, to name a few. When properly designed, each type of incentive program can, and should, produce a favorable return on investment.
The problem for most companies is knowing how to develop an ROI2 (Return on Incentive Investment) plan. This paper will review several measurement considerations, both quantitative and qualitative, for the various types of incentive programs. This paper will also explore several options for planning and implementing an ROI2strategy as well as ways to use the data obtained to improve future incentive programs and overall company-wide performance.
The Incentive Impact
Properly constructed, implemented, and monitored incentive programs are proven management tools that help to achieve quantitative and qualitative goals such as saving money, increasing sales, rewarding and retaining employees, fostering teamwork, gaining loyal customers, and building brand equity. These measurable results can reveal a positive return on incentive investment that has a long-term positive impact on the bottom line. Unfortunately many companies forgo the ROI2measurement process. Yet, the analysis of measured results helps determine needed procedural improvements (within a company as well as within the company’s incentive program), influences expenditures, and shapes future investment strategies. The omission of an ROI2 measurement process, therefore, is especially alarming at a time when every investment dollar needs to be allocated wisely and accounted for yielding returns. In “The Power of Incentives: Performance Improvement Through ROI,” published in Hemispheres Magazine, Donna Oldenburg notes that, “A tough economy and greater accountability have mandated a change…and managers are increasingly turning toward ROI methods to ensure incentive programs not only motivate but provide a maximum return on the bottom line.”
What to Measure
In “Measuring Up: How to Track ROI on Employee Incentives,” published in Potentials Magazine, Eilene Zimmerman states, “One of the biggest mistakes companies make when it comes to measuring the return on investment on incentive programs is not measuring it at all. If your version of ROI is that employees tell you they think the program is great, you’re not being a responsible manager. The only way to know if your incentive program is working is to quantify what you get for your investment.” She goes on to say, “What you choose to measure should also include how the desired result will impact all parts of the business.”
In a recent Incentive Magazine study, 35% of respondents stated that they do not measure ROI in their marketing programs or their incentive programs. “Insufficient Data” was the reason chosen by 38% of the respondents while “Perceived Complexity” was chosen by 26%, and “Not Required” was chosen by 46%. (Percentages can equal more than 100% due to multiple responses.) Interestingly, only 51% of respondents indicated that they use questionnaires or surveys as part of the methodology for determining ROI. Surveys, quizzes, and questionnaires provide a non-complex way to gather sufficient data to facilitate accurate ROI measurement. Using tools such as surveys, quizzes, and questionnaires is also a great way for those that are not required to measure ROI2, to nonetheless prove the value of their programs.
The type of incentive solution that is put in place greatly depends on the intended goals of the incentive program. Before a solution is decided upon, a company should work closely with their incentive house to outline program objectives and establish goals. These goals should be focused on a particular aspect of business performance and incorporate both shortterm and long-term objectives. Establishing objectives beforehand is essential to determining the best possible solution and benchmarking performance throughout the life of the program. As stated previously, ROI2 goals and measurements vary depending on incentive program. Sales, safety and loyalty incentive programs, for instance, are mainly numbers-driven. Beyond determining the increased revenue, sales incentive program measurements may also include new client acquisition and increased market share, cross-selling, as well as increased brand recognition and awareness. ROI2 goals for safety incentive programs may include fewer lost workdays due to work-related injury or illness, fewer accidents, money saved on insurance claims, less OSHA claims filed, and the completion of safety audits. For loyalty incentive programs, ROI2 may be measured by customer retention, cross-selling, referrals, and new customer acquisitions. Peer-to-peer incentive programs, on the other hand, are designed with mostly qualitative objectives in mind. To measure the qualitative ROI2 goals of a peer-to-peer program, surveys that tap into overall company morale and satisfaction should be administered before, during, and after the incentive program. With a peer-to-peer solution, it may also be beneficial to measure employee retention, increased team performance, and reduced absenteeism to determine overall effectiveness of the incentive program. After all, peer-to-peer solutions are often used to establish and maintain positive morale, as well as to retain and reveal “Star Performers.” For all types of incentive programs, preincentive program planning in the form of an ROI study will aid in the analysis of ROI2.
Methods for Measuring ROI2
With web-based incentive solutions comes the optimal measuring and reporting environment – real-time results. Online incentive solutions can provide up to date outcomes such as participant performance, brand and product preferences, geographic trending, and point accumulation and redemption rates, all of which facilitate ROI2 measurement and reveal “Star Performers.” Instant communication, more efficient point tracking, and immediate product redemption are other advantages of online programs. Donna Oldenburg confirms, “Technological advances have made it easier and more affordable than ever to run ROI incentive programs. The Internet and Intranet have been vital to companies that can now save time and money on communication, administration, award selection, and fulfillment.”
Employing an automated opt-in registration module that stores and builds a database of information is a key component in launching an efficient ROI2 incentive program. The data captured during registration plays a significant role in future sales and marketing efforts. If managed properly, a database can tell a great deal about the participants – including which products they gravitate to and which selling seasons are best driven by the program. Armed with this data, a company can include merchandise and travel awards that will give certain products the extra push they need and maximize the ROI2. As an element of virtually any incentive program, surveys and quizzes that engage the participants will aid in the education process and help capture feedback vital to determining the program’s success.
ROI2: The Formula for Success
There are several resources available to companies interested in measuring the return on their incentive investment. Some companies use third party consultants to monitor, evaluate, and adjust incentive programs. The process of bringing an outside team in and up to speed for ROI2 analysis isn’t as daunting as it may seem but it may add considerable costs to the final incentive program costs. Other companies opt to dedicate internal staff to supervising and assessing the objectives set forth in an incentive program. Whereas this appears to be a cost-saving choice, using the Incentive House that has designed and implemented the solution to monitor and evaluate return on incentive investments is often more cost-efficient, reliable, and accurate.
An experienced full-service Incentive House can provide not only the merchandise and travel awards that will entice your audience, but the technology and expertise to manage your incentive program from implementation through analysis. Be sure to ask your program provider how they plan to help you maximize the benefits of the data that is collected during the life of an incentive program. Sixty-eight percent of respondents to the recent Incentive Magazine study indicated that the average ROI for an incentive program based on initial investment was over 10%, with thirtyeight percent of the respondents indicating the average over 25%. A double-digit return on incentive investment will put a smile on any manager’s face.
Based on successful programs, All Star Incentive Marketing has developed the following strategy to ensure a positive ROI2.
1. Map the Plan
Identify the specific corporate objectives that the incentive program will support. =Benchmark where you are today and where you want to go. Answer the question, “What business challenge do you want to address?” The stated objectives can be aligned with financial (e.g. sales) as well as non-financial (e.g. employee satisfaction) measurement results.
Seek out those audiences with the greatest opportunity for improved performance (e.g. sales force, service, support, etc.) and identify what they value to determine the mix of recognition options.
3. Engage & Communicate
Launch the program with enthusiasm and maintain regular communication updates to keep the momentum.
4. Fulfill Expectations
Deliver what was promised in a timely manner and demand superior customer service.
Ask, “Did we achieve our objective, what was the return on investment?” Evaluate the program and determine how to expand the focus and raise the bar.
About The Author | Brian Galonek
Brian Galonek is President of All Star Incentive Marketing, a full-service Incentive House, and Education Committee Chairman for the Online Incentive Council. For decades, All Star has been improving the development, implementation, and strategic management of customized incentive programs to enhance clients’ business performance by targeting client sales teams, employees, customers, and prospects. The success of All Star’s clients can be attributed to All Star’s “Proven Process” which takes clients from concept through reporting to ensure maximum ROI2.
Brian, who succeeded his father as President in 2001, worked as an Account Manager and Sales Manager for 13 years after graduating from the University of Massachusetts School of Business, where he majored in Marketing. Brian, who is actively involved in the Incentive Marketing Association, was one of the first 25 people in the U.S. to earn the Certified Professional of Incentive Management (CPIM) distinction. He also served as both the Education Chairman and President of Incentive Technology Council (ITC).
Under Brian’s leadership, All Star developed and launched PROPEL, its suite of web-based technology solutions for online program management, which has been widely adopted. The company also developed vertical industry expertise, becoming one of the nation’s top suppliers of safety incentive programs and winner of the Incentive Marketing Association (IMA) Circle of Excellence Award for best safety incentive program in 2007. Brian spends his downtime with his wife and their two sons. He’s also active in his community: coaching youth sports, raising money for local charities and serving as a board member for a local educational foundation and a community bank.
Brian on Motivation
“Now, more than ever, I am motivated by the challenge of making All Star an outstanding place for our employees to work. When we are successful at accomplishing that goal, the rest takes care of itself.”