Every year, Incentive gathers a group of professionals from all sectors of motivation and engagement to talk about the state of the industry. This summer, 12 participants gathered at the spectacular St. Regis New York on Fifth Avenue to discuss topics ranging from the growing power of experiential awards to the increasing number of non-sales employees included in incentive programs, as well as what's happening in the merchandise, gift card, and travel awards categories. What follows are highlights of that discussion.
More detail and insight can be found in the full transcript available for download here.
STATE OF THE INDUSTRY
INCENTIVE: What is the state of the incentive industry now?
WAYNE ROBINSON: As an end user, I see a good market for incentives right now. I've never faced board challenges internally, [but] there was a time when I would actually walk into the C-suite with a proposal, not letting them know how much it would cost. I can't do that anymore. I've got to let them know how what we're spending money on ties into company objectives, into company themes.
Because we're so driven by world events [as a commercial property insurance company] that's more challenging than, "What are we going to do that's new and different, and how are we going to incent not only our clients, but also our internal sales force and our brokers?" We have offices in 30 countries. The company's doing well, but world events and how they affect our market, our bottom line … will affect our incentives.
CHRIS GALLOWAY: We work on the solution-design side of programs for clients -- from the inception of the program all the way through to the execution and reward. We are seeing new business, and by that I mean programs that didn't exist before. That's welcome and a sign of growth in our industry.
There's a shift more towards employee incentives, as opposed to employee recognition. We are seeing a few of our clients moving frontline service employees onto full-year incentive plans.
MICHELE LEE: In the last few years, it's been trending upward. I've seen a lot of requests for proposals (RFPs) -- not just for Singapore, but for Asia in general, so it's very competitive for us, but the future looks bright.
COSIMO BRUZZESE: Some [industries] are returning to the old days of incentives -- we've done a few programs now that include full-blown concerts for high-end groups as small as 60 guests, which we haven't seen in seven years. I think the biggest shift we're seeing is that the focus now is less and less on the traditional incentive elements like the décor. The experience is the primary focus. What is the Instagram moment? What is the Facebook moment?
KAROLYN GRAVES-RHODES: There's a younger generation of incentive winners, so you have to shift what you're doing to keep them engaged.
INCENTIVE: According to The Conference Board, U.S. CEOs' top concern for 2016 was: "What is the role of inclusion in fostering a culture of innovation?" How can incentive, loyalty, and motivation programs help?
MARY MACGREGOR: A culture of innovation starts with a culture of inclusion and a connection to the organization. Incentives and recognition programs are a prime tool and a driver that can really help create that connection. Those programs need to be diverse and they need to be broad. It's not just the sales channels, it's also the frontline -- those individuals in the call centers on the phone with the customers, those account managers who are responsible for retention. Make sure that the programs are broad and diverse enough and I think, ultimately, that inclusion does lead to a culture of innovation. When the programs are inclusive, we're also seeing the middle-of-the-pack incentive participants perform better, and the upside is greater for the clients.
JANET TRAPHAGEN: An Incentive Federation study demonstrated that organizations that reward idea generation produce 250 percent more ideas than those that don't recognize it. In this industry, as we all know, what gets recognized gets done.
DENISE DORNFELD: We just ran a small incentive for a company that rewarded the people who produced the most cost-saving ideas or the ideas that brought the most innovation to the firm. That's how they earned the award. It was an added incentive they gave so that everyone could experience it. I thought that was very ingenious on the company's part.
SHEREE THORNSBERRY: We've done some research that shows a correlation between the level of employee engagement and innovation. And obviously, the higher the level of engagement, the better innovation the company is going to see. Traditionally, innovation is an employee's second job after servicing clients or whatever his or her primary responsibility is. How do you bring innovation to the workplace? I think focusing on engagement, and using incentives to do that, is really important.
INCENTIVE: Do those CEOs understand the importance of incentives?
GARY SLAVONIC: We've gone a pretty long way from 2008-2009, when a lot of CEOs would say, "You're lucky to have a job," and that's about as far as they looked at it. Now, they're certainly starting to see that they need to do as much as they can to engage workers and retain everybody -- especially the good performers.
BRUZZESE: The 2016 Society for Incentive Travel Excellence (SITE) Index survey found that 90 percent of CEOs now acknowledge the importance of incentives, but less than 50 percent understand why they work. The goal is to increase the level of understanding of the importance of incentives.
DORNFELD: We've got to find the data to support that and we've got to supply them with it. They need their employees and they need them to be engaged in order to deliver to the stockholders, but the "why" is missing. I found that statistic alarming, but so true.
INCENTIVE: More companies seem to be including non-sales employees in their incentive programs. Why are they doing that?
CHRIS REED: We're breaking the traditional barriers. We're relying on each other in different operational departments, so it's not just that same top 10 percent that goes to a destination every year. Now the goals are tied in from sales and operations together. Big organizations are starting to recognize people who were never really recognized in that way before.
GALLOWAY: We're seeing an increase in employee incentives as opposed to employee recognition. One client is a branch-based distributor, and they run two incentive programs. One is for sales, but the team incentive is what's providing the most growth, the most impact. In each branch, everyone from the warehouse manager to the front desk administrative person is awarded if the branch reaches its goal.
Another client, a residential and commercial services business, traditionally took the top 3 or 4 percent of their organization, primarily the sales organization, on the incentive trip. But their service organization is half the company and has the lowest levels of engagement. So they created a second-tier program, a points-based program. In addition, service staffers can qualify now for the big travel award. They're broadening the scope and they're leveling the playing field for everyone. They understand that revenue growth starts by fixing your leaky bucket -- customers that keep falling out for bad service. Service is critically important to growth.
INCENTIVE: How are Millennials changing the way we see incentives?
TRAPHAGEN: At the Incentive Research Foundation's (IRF) Annual Education and Incentive Invitational conference this summer, we did a Millennials panel -- they range from 18 to 35, so now there are newer Millennials and there are more senior Millennials with management-level responsibilities. One man got a little passionate and said, "You keep telling us we're entitled. You keep telling us we don't act like grown-ups. That's because that's how you treat us. Stop treating us like we're fragile and treat us like professionals." Engagement is a two-way street. I think we have to treat them like adults, and say, "We're expecting you to engage with us just as much as we are going to commit to engage with you."
THORNSBERRY: Millennials value what they do outside of work as much as what they do at work. I have a real respect for that, coming from a generation that spends a lot of hours working and may not always have great work-family life balance. It's a different perspective.
ROBINSON: We're seeing more of these community give-back programs -- not just build-a-bike but going somewhere, painting a school, and things of that nature. Actually, people in our planning committees are asking us to find teambuilding activities that mean something.
MACGREGOR: The interesting part of this conversion is that the broader population is just as interested in participating in meaningful activities -- it's not just Millennials, though they are driving it. The opportunity to earn an incentive trip doesn't mean that at my phase of life I actually want to go with this group of people to this destination. I'd love a choice of six or seven places. You might want to go hiking in Machu Picchu and I'd like to take my grandkids on a cruise.
TRAPHAGEN: All of our participants are hungry for an authentic experience and to really immerse themselves in the destination at its most local level. That's not exclusive to Millennials.
ROBINSON: I think it's the more experienced attendees who want authenticity, they've been there and done that. It seems like the further out of the box a program goes, the more interest you get now. The Millennials haven't done as much or experienced as much yet, so just being in a destination still might be a big thing.
INCENTIVE: Another CEO top-three concern The Conference Board uncovered is promoting a culture of engagement. That's a core strength of this industry. What can we tell those CEOs?
GALLOWAY: From my perspective, the very definition of incentive gets to why the programs exist, not the end result. Incentive programs, designed right, can align values from the top of the organization right down to the frontline. When they do, everyone's running in the same direction and they get the best results, so to me the design of the program impacts engagement.
TRAPHAGEN: When we are talking to our clients, to that C-level, about the culture of engagement, I think on an intellectual level, some of our clients really understand that. There's been a lot of research showing that engagement matters -- it boosts profits and morale. But often, when we're talking about strategies, it's an awkward situation because the client thinks we're going to help them create a culture. That's not what we do. We create programs that help shift or reinforce a culture. Culture is not imposed. Culture is what's there and a company's culture starts at the top.
THORNSBERRY: Not enough CEOs understand how impactful culture is in an organization. That plays to the strategic business objectives and knowing what their culture is and then, if there needs to be a change, how to make those changes. That's a place where we can add value and connect the dots with employee engagement, and then with incentives.
INCENTIVE: Are travel budgets up? Where are people spending that money?
ROBINSON: Budgets have increased. I'm beginning to realize that it's not 2008 and that's very helpful.
TRAPHAGEN: The IRF Pulse Study did show that budgets are up, and spend per person is up. It didn't drill down to exactly where companies are spending it.
REED: I think the good news is five-star-level hotels and resorts are back. I'm definitely seeing a resurgence of RFPs in these five-star hotels, where a couple years ago that wasn't the case.
DORNFELD: It's not a dirty word anymore. A lot more families are coming, too, now, because people want their families with them. They've been away from their families working so hard, so they want their family to appreciate them: "This is what you get, family. Now support me in this role."
TRAPHAGEN: I'm going to say it's very client-dependent. We have a customer in the gaming industry -- app-based video games -- whose participants are super young, but the company is doing very, very well. They're going to put their money primarily in a lot of adventure travel. Others are rewarding the top 15 percent, but they're upgrading the top 5 percent to suites or to first-class airline seats.
REED: The spending inside the hotel is less. I think that a lot of the groups are doing more experiences outside of the hotel.
LEE: We do see a trend with larger programs that there is a choice of activities -- they can choose what kind of experiences they're going to go for. It's about customization. It's about how do you engage in different parts of your incentive group.
MACGREGOR: Those optional activities are taking a little more of the budget. Individual incentive travel is, for us, one of the fastest-growing segments. We have a do-it-yourself product that is a point-redemption for travel. Then we have a travel reward solution with customized packages at various price points. In some cases it's part of a tiered incentive travel program. Sometimes it is replacing a traditional President's Club group trip with a selection of options.
BRUZZESE: One of the biggest shifts is that we're competing against the experience within the city as much as we are with other cities. We're now seeing groups looking to come into New York to see the Tribeca Film Festival -- that's the driving force. It's the Festival against Monte Carlo's Formula 1 race, against the Adele concert in London. "What is the experience that we can tie into the client's goals and objectives?" is a question we're getting a lot.
INCENTIVE: How are the current safety concerns about terrorism impacting your incentives?
ROBINSON: We are having those conversations, and it is affecting us right now. Terrorism is a major concern and, obviously, everything we do, whether it be incentives or internal meetings or client meetings, is revolving around that conversation at this point. There are company protocols put in place and things of that nature. But it's almost like it's happening so fast right now, we can't keep up with it. We are asking our vendors -- the hotels and other third parties -- to beef up their security protocols, absolutely.
BRUZZESE: In the past, a destination that had a terrorism attack would be forgotten by the incentive industry for two to three years. But our memories are getting shorter and shorter. The media is talking about it every day, so we're overexposed.
GRAVES-RHODES: It always surprises me that on RFPs there's a question about when was your last renovation, but there's no question about what you are doing for safety and security in your property, or in your city. I think it's a topic that needs to be discussed and taken seriously.
EDMUNDS: Having properties in the Caribbean and Mexico, we have definitely dealt with Zika. We haven't been asked yet to put Zika as grounds for cancellation in a contract, but we've lost groups over it.
MACGREGOR: Zika has not dramatically impacted buying decisions to date. Certainly, it's a consideration, but I can't point to specific destinations that customers are avoiding now because of Zika -- or because there's been an act of terror. It's really all about awareness and making sure that you're doing all of the right homework and putting all the right protocols in place.
INCENTIVE: What are the hot international destinations this year?
MACGREGOR: We've been seeing a resurgence in Australia and New Zealand -- New Zealand, in particular. African safaris tend to be cyclical with our clients, and they seem to be popular again. Then, of course, there's always Europe.
TRAPHAGEN: I can say the same -- long haul is back. We're seeing Dubai and New Zealand, South Africa is back in the mix. Unfortunately not a lot to Asia, but I think that's a cyclical scenario as well.
EDMUNDS: Iceland is huge.
REED: From the hotel perspective, our company's based in Hong Kong and is very Asia-Pacific heavy, and we're seeing a lot of interest in that region right now. I really see a resurgence for the Asia-Pacific market.
LEE: I think that the competition in Asia is heating up. The markets have opened and the economy has turned around since the downturn of 2008 to 2009. Companies are spending more and willing to go farther. The competition in Asia is really unbelievable. Thankfully, all the countries in Asia have their own identity and different things to offer. Singapore and Hong Kong are always compared because of size and many other aspects. Hong Kong has been doing great, as well. Japan, Korea, and Shanghai are also destinations we always find ourselves competing with for business.
We are seeing more and more of the smaller groups, the 30- to 50-person kind that are more nimble and able to fly the long haul. We're also trying very hard to see how we can target the 50- to 200-person groups -- how we can incentivize those groups. It's not just with financial support, but how can we, as a CVB, curate an experience for you, how we can give you something that's typically Asia or typically Singapore. We find that's an attractive thing.
EDMUNDS: The destination that people are most curious about is Cuba. On the hotel side, everybody asks, "Are you opening something there?" It's going to take a few years before the infrastructure to handle the large masses of tourists is in place. Then it really becomes an incentive destination. But I think once the cruise ships get itineraries scheduled there, it'll open up.
DORNFELD: SITE and the SITE International Board went to Ljubljana, Slovenia, in January for the SITE Incentive Summit. I had to look it up on a map. I would pick it for an incentive destination in a heartbeat based on the service level. The food was amazing. And it's so close to Venice, so you can do Venice and Croatia. I think emerging markets are the ones that you need to look at -- wonderful places that people haven't been to. Isn't it all about bragging rights?
INCENTIVE: How's Las Vegas doing?
GRAVES-RHODES: Las Vegas is an incentive destination in its own category. It constantly changes -- you blink and something else is happening. It has a price point for everybody. Obviously gaming is there, but the value placed on incentive and corporate groups is strong.
MACGREGOR: Some of our clients didn't consider Las Vegas for their incentives because that's where they would always go for their annual sales meeting. They would think to themselves, "Well, you go to Las Vegas for the meeting, how is that going to be an incentive?"
There are now all of these great new off-site venues, from Top Golf -- a 108-bay, climate-controlled driving range -- to the 550-foot-tall High Roller observation wheel, and all of those kinds of things. You can really create this view-from-the-top experience in a transformational way. So now we're having conversations with incentive clients who didn't want to consider it.
GRAVES-RHODES: We are seeing a lot of meetings including incentives, even if it's for one day. We have [a leading multinational tech company] that's coming for a full-property buyout because they like the self-contained aspect. This client is holding a global meeting, but one of the objectives of the client was incentive. All of these people don't get together but once a year and they want to make sure the quality of the hotel and the events is high, and they don't have to go off property. They're using the nightclubs for opening receptions. You can create a meeting and an incentive all in one.
INCENTIVE: Are all-inclusive hotels still gaining favor?
TRAPHAGEN: Definitely, they've come a long way. All-inclusive hotels went from tacky to definitely classy. The product has so improved, and for the right customer it is a great buy.
EDMUNDS: You're seeing a resurgence of people wanting to take advantage of that because it is price effective and the quality is there. When you think all-inclusive you might think back to the days in the '90s, but it's not that concept. All-inclusive hotels have had to evolve, especially the food. You have to get away from the buffets. When you create the restaurants on property you have to have an Asian Teppanyaki restaurant.
We're in the process of building a luxury, adult-only property that will be boutique style, Unico Riviera Maya. You'll think that you're not at an all-inclusive. You'll think you're at some Miami-esque hotel, and you're getting that experience. You see brands like Hyatt coming in with the Ziva that is, again, a lifestyle concept. They're probably one of the biggest competitors that our all-inclusive Hard Rock Hotel properties in Mexico and the Dominican Republic have, moving forward.
INCENTIVE: What are you seeing in the cruise segment?
MACGREGOR: We continue to see cruising popular. It tends to be more of the smaller, more intimate, high-end ships versus the big mega-vessels. Groups still can't wrap their heads around how they can create that feeling of intimacy in some of these big ships. It has the same appeal for the customers who do all-inclusives.
GALLOWAY: Cruises tend to be prevalent in programs where you have choice of destination. If you're winning an incentive trip, cruises meet the need for a certain segment of your population. But you wouldn't, in many cases, recommend a cruise for everyone. When it is a whole group thing, it typically is the buyout situation.
TRAPHAGEN: I would say river cruising is the fastest growing cruise segment with us. It's more intimate, unique, and highly experiential.
Questions or comments? Email [email protected]
This article appears in the September/October 2016 issue of Incentive.
INCENTIVE: What are the hot award categories?
GALLOWAY: TVs are still big. From an electronics standpoint, everyone's already got their mobile phone and their iPad. PCs are going away. It feels like the category is moving to the wearable side.
SLAVONIC: Health and wellness items seem to be popular right now -- things that can make the employee feel good, physically and mentally -- whether it's wearable technology, or even things like scales. That's one of the areas that we get a lot of requests for.
MACGREGOR: That wearable category, the Fitbit and Garmin activity trackers and those kinds of things, are absolutely one of our hottest merchandise items. GoPro action cameras are also big, and anything with a Bluetooth component. But our No. 1 redemption item continues to be movie tickets. It's experiential and inexpensive.
TRAPHAGEN: The new Polaroid cameras are interesting -- it's sort of a throwback, it's experiential. Instant-print cameras have become a huge hit with people who may not have ever seen them before. Clearly what you want to post on Instagram or Facebook you can still do with your phone camera.
GALLOWAY: In one of our programs, the audience is predominantly Millennials -- they're retail sales associates. You would think electronics would be the top category for redemption in that program. It's near the top, but the top is actually home goods. They're starting out and they don't feel they can afford the Keurig coffee maker with their own dollars, but they're okay redeeming for it with their points.
THORNSBERRY: I would say that probably our top five most redeemed merchant-issued gift cards are in the home category. Lowe's is No. 1.
SLAVONIC: One of our suppliers that does safety items -- extinguishers and things like that -- is coming out with a line of connected home products because they're seeing a lot of traction in that area. We're starting to see some action in that area.
We're getting inquiries for drones. We've talked to some companies and they'll say they love them and then I've talked to some others who would say, "Ehh, not so much." If incentive participants who are not very accomplished at drones redeem a bunch of points for one and all they're doing is crashing it, then their reward experience isn't that hot.
KEVIN EDMUNDS: The thing about drones is that when the government comes down and makes laws and policies on it, you know it's going to be big. It already is big. We see people bring drones to our hotels every day. Sometimes you'll see two or three on the beach.
INCENTIVE: Are "merchandise bars" still growing more popular?
ROBINSON: We were in Hawaii and we had Maui Jim sunglasses there, and we also had Tommy Bahama -- they took one of the junior ballrooms, and went in and basically made a store. Attendees could go in and literally shop -- select a shirt or a dress or something for themselves. Of course, everything we put in there had a certain price point. That went over really well.
EDMUNDS: We all know Maui Jim and one of their biggest mantras is "the gifting experience." You have people on-site that do fittings and offer style advice. I think you're seeing that more and more now from other merchandise companies in the incentive world.
TRAPHAGEN: Now Revo sunglasses have added the give-back component: For every pair that you, the corporate buyer, purchases for your winners, they're giving "the gift of sight" to someone via a charity whose spokesman is the rock star Bono. There's a social component to your gift.
BRUZZESE: What we're seeing -- and we'll probably see this grow dramatically -- are custom individual experiences. We'll bring a group to the Armani store and do a dinner there, and the participants will all have a custom Armani shirt shipped to them.
GIFT CARD AWARDS
INCENTIVE: What trends are you seeing in gift card awards?
THORNSBERRY: In the last year, 64 percent of consumers in the U.S. purchased at least one prepaid card product. It's really a booming business, and the more we see that in the consumer space, the more you will see it in the corporate space. Gift cards offer a lot of choice without a lot of the headaches that you see with fulfillment and delivery of merchandise, or the heavy planning around travel. It's an easy option for employers.
I would say about 75 percent of our card volume is for credit card, branded, "open loop" products usable anywhere. Generally, when you're selling to a corporate incentive client or a client doing a consumer promotion, they're going to want something that resonates with everyone.
TRAPHAGEN: Gift card awards are definitely part of the mix. We counsel our customers to remember that how the award is presented and how it's leveraged as a recognition opportunity is still key to the recognition's impact on the employee. You're recognizing -- presumably -- targeted behaviors you'd like to see, and when you do see them, you're making that a moment of recognition. They're not simply distributed.
THORNSBERRY: The way that the card is presented also provides a lot of opportunities for the corporate client to brand -- the card carrier, the inserts, the envelope itself, and they often take advantage of that. When it's presented to the employee, you're reinforcing your brand, or the brand that the consumer bought from.
MACGREGOR: They're typically part of an overall award mix. Gift cards have a little more of a cash feeling, and if the experience is really what engages and creates the motivation, it'll be interesting to see how that reward mix shakes out as the demographics of our employee base shifts in the coming years.
In spot awards, it's that immediate gratification: "I see you doing something," "Your behavior is exemplary," "It's where we want to take the organization." That's how gift cards are used by most of our clients. The number of these awards given out was up 22 percent during this past fiscal year.
THORNSBERRY: Lots of manufacturers that we work with use them to give rebates to consumers. All of a sudden I'm getting this card and all these materials from this provider of my eyewear, for example, then I'm more apt to ask for that brand the next time I go to my provider, because I had some kind of affinity with that manufacturer or that brand. So that level of customization really does resonate.