PLAY YOUR CARDS RIGHT

Whitbread’s vouchers can now be redeemed at more than 3,000 outlets such as Country Club resorts and Thresher Wine Shops

The use of vouchers and catalogues instead of merchandise as a sales incentive has been growing in recent years and the companies supplying such services are keen to make their products more flexible and easier to administer. Does this mean straightforward merchandising will lose its appeal or is there still room for a variety of incentive premiums?

There are several reasons why merchandising can cause difficulty compared with other forms of incentive.

“One main drawback is probably the lack of control you have once the order has been placed and problems start to happen,” says Martin Banbury, managing director of sales promotion agency Communicator. “Questions like, ‘Is the premium late because the sourcing house has given the wrong delivery to the manufacturer?’ start to fill your mind.”

The biggest reason for the move away from merchandise, however, is not the practical concerns but the fact that objectives may be best served using other methods.

“The difficulty when you’ve been running motivation campaigns for any length of time is that the range of award currencies is restricted,” says John Fairbanks, director of agency marketing at Sunlife of Canada.

“Once you’ve used merchandise for a while, it loses its appeal because there’s a strong chance some of the people will already have whatever you’re offering. We still use merchandising but we’re focused in how we use it.”

The company has instead recently been using Capital Bonds, the scheme run by Capital Incentives in which bonds have a cash value in a wide variety of outlets.

“We decided to concentrate on Capital Bonds because they give us the opportunity to run continuous sales campaigns in areas where merchandise would be inappropriate because we could only offer low-cost prizes,” says Fairbanks.

“The potential to use, for example, small awards on a monthly basis gives us the ability to reward sales staff for developing a regular performance pattern in areas such as prospecting and the follow-up of sales leads. This regularity of performance encourages everybody to follow a responsible sales approach, which is so important in financial services.”

The big appeal of bonds/vouchers is that they are easy to understand, can be awarded and redeemed instantly and administration is relatively easy.

David Evans, chairman of The Grass Roots Group, producer of both incentive catalogues and bonusbonds, the other leading bond scheme in the UK, believes that although bonds have benefits, catalogues too can take the heartache out of providing rewards. “Vouchers are intended to give successful people the simple principle of choice; catalogues give them a different form of choice where the shop window is in their home,” says Evans. “To some degree, these tools of the incentive industry are a function of participant income. Clearly if the annual salary is 30,000, most of what a catalogue offers is within the reach of their disposable income. For the lower-paid, the greater sector in the UK, a catalogue has much more impact and appeal.

“In general, an income of 15,000-plus will encourage using a multistore voucher where their choices are the whole of the high street. But if you want tangibility of presentation and impact on the family, the incentive catalogue still has no peer.”

One user of Grass Roots’ Options By Mail catalogue is Suzanne Melling, product development manager at MFI Financial Services. She explains her strategy: “Before June 1995 we used bonusbonds, but we have now introduced the catalogue because we found that a lot of participants were using the bonds as cash – an effective top-up to their salary rather than for special purchases. Catalogues encourage them to be more aspirational – to aim for something. They also work well for both full-time high earners and our part-time people.”

For business-to-business use, bespoke catalogues are also becoming increasingly popular, because they offer all the advantages of a well-run merchandising operation such as high-quality branded products, but also include an element of choice.

“We have, for example, produced a catalogue for Coca-Cola to tie in with its sponsorship of Euro 96 [the European football championship],” says Terry McCarthy, managing director of Product Plus International.

“We handle the supply and fulfilment to all of Coca-Cola’s divisions, including bottlers and affiliates, in 38 countries across Europe. They can draw on any of the items from VIP packages to customer merchandise to meet their corporate requirements. The advantage for such big multinationals is that they can be sure that whatever goes out with their name on it is going to be of suitable quality.”

Another argument put forward by those promoting the use of bespoke catalogues is that there is more focus on what is offered to the customer. “Promoters’ increasingly sophisticated research in target markets creates greater design and innovation opportunities,” says Micky Rodrigues, marketing director of promotional clothing company DSL.

“We can create a catalogue for a specific audience and we know exactly what will appeal. Occasionally this will mean a narrower audience but the premium products have greater impact.”

The one problem with catalogues, particularly bespoke versions, is that they are not suitable for small-scale promotions. A company with a small salesforce or customer base would not find it cost-effective to produce specialist print and merchandising and administer the promotion. In such cases, coupons and vouchers offer greater appeal.

One of the fastest growing areas in vouchers is those which are redeemable in the leisure and entertainment industry.

Whitbread Leisure Vouchers, for example, has, says Bill Brown, general manager of the scheme, outperformed other reward mechanisms recently: “Where we score against other vouchers is that we are not seen as an extension of the shopping budget. Our product appeals to the other side of participants’ lifestyles. If you didn’t have the voucher you probably wouldn’t take the family for a meal at a Beefeater restaurant or take your partner for a weekend break to a hotel.”

Whitbread’s vouchers can now be redeemed at more than 3,000 outlets such as Beefeater restaurants, Pizza Hut, Country Club Resorts and Thresher Wine Shops.

It is, however, the communication of this range of outlets that Brown believes to be the biggest obstacle to wider use. “The vouchers themselves work very well but we’ve had to work hard to explain to people where they can redeem them. If you have a Marks & Spencer voucher you know exactly where you can use it. As people begin to appreciate the full potential of our product it is becoming more popular.”

Leisure is also a growing area for the use of discount vouchers as a promotional tool. The advantage of such products is that they can offer a high perceived value and yet cost the client no more than a low-value reward, as Harry Williamson, managing director of MKM, explains. “If you take a standard holiday voucher from, for example, Thomas Cook, it may give 100 off,” he says. “It can only be used at Thomas Cook and the chances are that the client will have to pay a sum approaching that amount. Our approach is that we have an in-house travel agency. We can, therefore, offer a vast range of holidays for which we don’t charge the agency commission to the client. Instead we pass on that saving to the client in the form of the voucher but charge a small commission for each voucher taken. This means we can offer the client a 100 voucher for as little as 1. The advantage is that the client can offer a very high perceived value offer to staff or customers at a very low cost.”

Arguably the most innovative development in the field of promotional incentives is Capital Incentives’ Capital Card. Although not a credit card, it is a Visa charge card and can be used in more than 10 million outlets worldwide.

When issued to participants, it is effectively charged up with reward points and a normal monthly statement is sent to holders showing purchases made and the amount available to spend.

“Electronic currency such as Capital Card appeals to a different audience but from a participant’s point of view it is even more convenient than bonds,” says Allan Brown, managing director of Capital Incentives.

“The currency is only half the story. An effective campaign needs a strong administrative background to make sure the awards get to the right people as soon as possible.”

So far the card has been available for 18 months but most of Capital’s clients have been using it for a year at most.

Kimberly-Clark’s sales professional club manager, Graham Landi, is running the card scheme on a continuous basis and says it is possible to keep track of what’s happening because there is no need to convert points into cash. “It’s easy to work out the real cost of the incentive.”

With so many different incentive products on offer it will be interesting to see what impact Capital Card has in the long term. It is likely to become popular as a continuous programme with merchandise, catalogues, bonds and other products available for tactical use. Such variety certainly gives the client the ability to choose very carefully according to need.