Steps for Launching a Successful Incentive Program

Dana Toland of IT Exchange Group shares a blueprint for implementing effective employee rewards initiatives. 

Incentive programs and rewards — be it gift cards, merchandise, monetary bonuses, travel or any other venture — are important tools for enabling companies to successfully achieve their business goals. Following are 10 complete steps for creating a successful incentive program with proven ROI. By following these steps in crafting your own incentive program, you will be sure to see long-term success. 

1. Determine Goals and Objectives

Before announcing to the masses any type of incentive program, brainstorm with the main stakeholders and discuss your company’s overarching objectives. What are the short-term versus long-term goals? How close are you to achieving these goals? What specific areas or markets need to improve? By how much? These questions will vary depending upon your business. Companies might also involve employees in establishing goals, which helps to foster greater understanding and buy-in.

By creating an open dialogue with key stakeholders and employees, you will better gather the necessary information to set specific goals for your incentive program. Some common goals include:

  • Increase overall sales or specific vertical markets
  • Increase sales in a poor or over-saturated market
  • Increase market share
  • Create new markets
  • Launch a new product
  • Promote a current product
  • Build customer loyalty
  • Improve employee loyalty

Keep in mind that goals must be "SMART": specific, measurable, attainable, realistic and timely.

2. Identify Participants

You will need to identify eligible participants prior to launching the incentive program. Rule of thumb: The greater the reach, the more effective the incentive will be.

To better do this, determine the productivity ratio for your company. For many groups, the trend is 80/20 — 80 percent of company profit originates from 20 percent of employees. Determining your company's ratio will help you structure an effective program and determine whether to offer a large reward to just the top few performers or feature smaller rewards at several, varying qualification levels.

3. Establish Program Details

Determine what type of incentive program and budget you will offer. Generally, there are two types of programs to choose from.

  • Closed-ended incentive programs have a pre-set budget and a guaranteed number of winners. The advantage to this structure is that it helps companies know their exact costs from the start and helps to save on expenses.
  • Open-ended programs have no limit to the number of winners. Program expense is tied to the performance of the participants, although increased sales generally pay for rewards.

4. Create a Budget

The profits generated by a well-structured incentive program will cover the program’s costs. Following are some important facts and figures to keep in mind.

  • 5 to 10 percent of the profits the program generates should be earmarked for the cost of the program.
  • 15 to 20 percent of the total program costs should account for administrative budgets. 
  • The promotion budget should stand at a firm 20 percent (communicating with participants is integral to success).
  • The higher the participant's income, the more the reward. Typically, the prize should equal 3 percent of the winner’s income.

By far, the largest amount of the budget should be allocated on the award itself.

Note: A trip offered to employees in a qualifying program is treated as income to the employee and should be reported at its fair market value on the employee’s income statement. It is common, however, for companies to reimburse winners for the taxes due on an incentive award.

5. Outline a Reward

Make it Unique
"People are individuals with unique preferences and needs," says Susan Adams, vice president of engagement for Next Level Performance and trustee of the Incentive Research Foundation.

"We see this day-to-day in our own lives with every gift that we purchase, every restaurant we select. Logically, it makes sense that the participants in an incentive program would be just as unique... This is why so many incentive programs rely on choice to emotionally connect to program participants."

Read more at Northstar Meetings Group.

The reward is undoubtedly the most important part of an incentive program. You need to select a reward that your audience will strive to achieve and remember long after they have accepted it. 

Focus on the hopes, dreams and aspirations of the winners-to-be. When it comes to an incentive travel reward, take the time to ask what destination, activities and level of luxury will push them to excel. Your decision should take into account several factors about your target audience including demographics, lifestyle and experience. Once you've slated a destination, work with a local and seasoned DMC to outline trip specifics. 

6. Report on Results

Before handing out rewards, there must first be results. Translate the results you want from the program into a simple formula of behaviors — increase in sales, new customers, up-selling, lead generation, employee loyalty — and decide how often your results will be reported. Typically for short programs, results should be reported biweekly, and for longer programs, monthly.

Participants' enthusiasm feeds off the knowledge of how they are doing in comparison to their previous performance and their competition’s performance. By determining how and when these results will be calculated and displayed, you will further entice employees to stay "on top of the ball."

As an example, some companies create formal systems for capturing, implementing and tracking ideas for improvement. Employees don’t work for money alone, but they do respond to incentives — and individuals usually enjoy challenging themselves to meet goals that they understand and have helped establish. 

7. Launch the Program

Now that you have defined the goals and objectives of the program, identified participants, created a budget and selected a reward, it is time to launch your incentive program.

A compelling communication plan will maximize the motivational impact of a campaign, drive participation, build momentum and establish a benchmark for future initiatives. In launching your program, the goal of communications should be to keep the attendees constantly reminded about the reward at hand. 

First impressions strongly impact program participation. You should begin with a central theme, which should appear in all collateral materials and be fun, engaging and universal. Promotional tools used to highlight the program should include a website, an email campaign, direct mail pieces and promotional teaser items. Your job is to create excitement, so be creative!

When communicating the rules of your incentive program, make the wording as clear and straightforward as possible. For added assurance, run your rules by a panel of potential participants to make sure they are fair and easily understood. No matter how simple the rules, expect the unexpected — such as a tie between the top two participants — and have a contingency plan in place.

8. Monitor Success

Continually monitor the incentive program as it unfolds, and update your marketing plan accordingly. Planners have an opportunity to optimize results by taking a proactive approach. Continuously share results with the key stakeholders and participants to keep the feeling of excitement alive.

9. Deliver Rewards

Once the winners are determined, be sure to allow them to enjoy their glory. Send letters congratulating winners on their achievement. Get participants excited with a care package that highlights the upcoming reward’s activities and events. 

Upon arrival at the destination, greet guests with a gift that ties in the incentive theme. Also arrange for regular in-room gifts that become grander as the trip progresses. Reinforce the program and its theme with signage, branded menus and programs — little details can make a long-term impact.

10. Complete a Post-Program Assessment

Upon completion of the incentive program, be sure to do an audit to measure the results of the incentive. This is crucial, because it will give you insight into how you can improve future programs. In your review, carefully analyze the results of the winners and the record of those who did not qualify. Feedback is essential, so be sure to poll participants on all aspects of the program and calculate their responses.

Questions you should ask include timeliness of the program, the rule structure and qualification requirements, the clarity of communication, the award mix, and the quality of promotional materials and activities. Keep in mind that, even with the most successful incentive programs, there is always room for improvement.

Dana Tolland, president, IT Exchange Group, has more than 15 years of business-to-business marketing experience with a concentration in creating and executing high-level meeting and events with proven ROI. She and the team at IT Exchange Group provide business support to corporations hosting meetings, including site-selection services, meeting program development and meeting planning services.