Once upon a time, not that long ago, incentive packages were aimed fairly and squarely at sales reps in an effort to drive revenue. “Beat your sales target for the month and you’ll receive 50 worth of gift vouchers.” You know the kind of thing.
But the truth is we all need incentives. Especially at work. From post boy to senior management, a simple compliment about the job we’re doing can work wonders for morale. Dangle the carrot of a trip to the Bahamas and performance is likely to soar.
This is something companies have increasingly latched onto. Incentives are now being used not only to motivate the sales staff, but the whole distribution chain. The incentives may include everyone from an account manager, to the shop floor and through to a network of dealers, if a product is being sold through third parties.
Incentives today can even go as far as the consumer – after all, it doesn’t take Einstein to work out that customers are, for example, likely to remain loyal to British Airways if they can gain free flights by collecting Air Miles.
The philosophy is that if management can motivate staff, that in turn means better customer service, which increases the likelihood of retaining customers. Throw in a few perks for those customers and companies strengthen their position even further.
Focusing on the value of motivating staff on the shop floor, Page & Moy recently developed an in centive travel package (a trip to Jamaica) for Britvic, in an attempt to improve the company’s all-round performance.
Stephanie Kingsley Smith, corporate groups manager at Page & Moy, says: “Britvic decided that commission on sales wasn’t really motivating people enough and they looked at travel as an alternative.
“What we were looking for was a scheme that incorporated its direct salesforce, account managers, and even went out to individuals who were working as field sales reps. The idea was that by making them all feel part of the company, that would improve performance and help them to work together in a more coherent structure.”
She believes the Britvic example is indicative of how a lot of companies now view employee incentives.
“Measurement of performance is on a broader scale now, so companies are addressing and rewarding performance across a whole range of areas, be it customer service or pure shop floor, rather than simply focusing on people who go out and sell the product.
“I think this trend is growing. It’s all very well someone performing outstandingly at selling a product, but if the customer service is bad that product won’t be bought again, so increasing performance has to be across the board. And just because incentive schemes work on one level in a company, that’s no reason why they shouldn’t work elsewhere.”
While there companies which see the benefits of broadening out incentive schemes to a greater cross-section of staff, some in the industry believe this is still more an exception than the norm.
Peter Nicholson, joint managing director at Charterhouse Promotions and Incentives, believes company-wide incentive schemes are being introduced but are still rare. “We developed ‘Reward the Best’ for all of House of Fraser’s 26,000 employees,” he says. “Every staff member was given a weekly performance target and all those who achieved their objective qualified for entry into an incentive draw with 1,000 prizes available every week.” He argues that any company where individuals have performance targets set as part of their job descriptions, can quite easily develop an effective incentive programme for all staff. However, the short-sightedness of senior personnel is often restricting the implementation of company-wide incentive schemes.
“Sales and marketing directors are well aware of the boost which a salesforce can gain from a short- or medium-term incentive scheme, but the rest of the board seem to believe that an annual bonus and pay rise are sufficient to bring the best out of production and administration staff,” he says.
Like Nicholson, Randle Stonier, Motivforce chairman and group managing director, argues it is still predominantly sales staff who receive the benefits of incentive packages.
However, he argues that some companies are looking beyond their own staff and instead, trying to enhance their relationship with distribution partners, again through the use of incentives.
“Trade loyalty is a big avenue. Look at Ford, for example, with about 750 dealerships up and down the country: it has to win their hearts and minds. Not just sales people but the motivation of after-sales people, in the workshops and so on,” says Stonier.
This is an example of the way in which incentive packages are now being viewed as a means of maintaining customer loyalty. Ford relies on those dealers to sell its cars, so it’s the dealers who need to be rewarded by way of incentives.
And while the work Motivforce does may be dressed up as an incentive programme for a company’s trade partners, it is also providing the sponsoring company with vital information about those trade customers. “What we’re providing for the client is market intelligence of its distribution channel, allowing it to develop the relationship. Without the incentive programme it wouldn’t have been able to capture that information,” says Stonier.
“In many respects it’s not that different to the Tesco Clubcard which gives Tesco the opportunity to understand its customers and the shop’s performance. We’re doing the same but looking at the trade distribution channel.”
The belief is that if you treat customers well, they are more likely to stay loyal, and while motivation of the shop floor drives a company’s performance, so does knowledge of its customer base.
Stonier makes the point that to successfully develop the right incentive package, knowledge of the performance problem is vital. “Unless you can track and measure people, you shouldn’t be trying to incentivise or motivate them in the first place. So we have to find the solution to the performance problems if we are to achieve the intended goal.”
But what is the view of the clients themselves? Mike Caldwell, corporate communications manager at Vodafone, explains that Vodafone’s incentive schemes cover a variety of routes to market, from salesmen on the road and in Vodafone retail shops up and down the country, through to major retailers such as Granada and Woolworths and individual dealers.
“It works on all levels across many activities. It is especially important in the ultra-competitive mobile phone market. Customer retention and loyalty has grown massively over the last four years as people have realised it’s cheaper to keep a customer than acquire a new one. And I see no signs of customer loyalty slowing.”
In its fourth year of Derby sponsorship, and as sponsor of England’s one-day cricket team, Vodafone will offer discounted tickets for major sporting occasions to shareholders and mobile phone users alike. Vodafone Advantage also allows users to collect air miles. Caldwell says: “It’s important to keep finding new ways of trying to retain customers. When brand loyalty is involved, incentive schemes are a major part of that.”
Jerry Smith, marketing and strategy director at The Marketing Organisation (TMO), also understands the vital role played by incentive schemes in building brand loyalty.
He says: “Incentive packages are becoming a major part of building brand equity. Motivating staff to meet consumer expectations is key as it’s that which builds loyalty.”
So investing in staff by using incentive packages as a means of motivating them allows companies to gain a competitive advantage.
Smith cites statistical evidence indicating that up to 68 per cent of all customers leave a brand because staff didn’t treat them well enough. “You have to look at customer retention. You need to be looking at the next sell as well, so qualitative issues are coming to the fore.
“As consumers we have become far more knowledgeable and our needs must be met by the entire sales process. But the requirement to sell products will always be there, therefore sales incentives will still happen. Travel has become a key motivator.”
Smith, like Motivforce’s Stonier, also makes the point that companies still need to make sure the reward is the right motivation and is built around the expectations of the staff.
If a company can choose the right incentives for staff, it follows that a motivated team equals good customer loyalty. “Basically, companies want to ensure they are retaining customers. To do this they must satisfy them and for this to happen you need to ensure staff are motivated,” says Smith.
It seems incentives must now extend not only across the shop floor, but also encompass a product’s route to market and – when brand equity is at stake – to consumers as well. Companies have reached the conclusion there is no point building external corporate image when the brand is undermined by the staff’s lack of enthusiasm.
Incentive packages are crucial if a company wants to get the best out of its staff, and the right incentive can be an effective weapon in the biggest battle of all – the pursuit and retention of that most vital of commodities: a company’s customers.