Cash vs. Non-Cash Incentive Programs – What works best?

May 2, 2015 Claudio Ayub

Incentive programs with non-cash rewards?

Incentive Programs cash vs.non-cashManagers of incentive programs are sometimes skeptical that a non-cash reward – a reward that does not have an explicit dollar value – can drive added performance than a cash equivalent reward – such as gift cards, or debit cards. However, research demonstrates that non-cash rewards are stronger motivators and are a key element of best-in-class organizations. The study, conducted by Aberdeen Group and distributed by the Incentive Research Foundation (IRF), finds that best-in-class firms are much less likely to focus solely on financial incentives than they were a year ago.

The study, titled “Incentive Success: Best-In-Class Sales Management,” drew on the responses of 245 B2B sales professionals. Aberdeen found the industry average for organizations that consider non-cash rewards important was 45%, yet best-in-class companies responded at a rate of 63%.

Sales incentive programs target at an individual’s psychic income needs (their desire to grow as individuals, as well as their self-esteem). Cash, not surprisingly, directly fills monetary needs. Therefore you should select rewards unique and relevant to the participant, so they gain tangible evidence of their achievement and fulfill their need for acceptance, recognition and personal esteem.

Each type of incentive triggers different feelings and reactions, and each type of reward has distinct strengths and weakness which have to be considered when designing incentive programs, because the type of rewards you include in your program will directly impact the results.

Trophy style rewards stand out in the memory of the participants on an incentive program, both while they are working to achieve the incentive program’s goals, and long after they win. Trophy value works because it triggers recall. Travel sets high expectations, and frequently enrolls spouses or others into the motivational process. The more people think about the awards, the better they work.

Incentive programs with non-cash rewards drive greater results.

Aberdeen found that just as top companies took a more holistic approach to their incentive programs – incorporating non-cash as well as cash rewards – were more comprehensive in how they measured performance. Here the industry average is that 47% of B2B firms measure both “quantitative and qualitative goals,” compared to some 63% of best-in-class firms doing the same.

gift card use in incentive programsCash equivalents (debit cards) are easily understood, and provide immediate gratification, but have little or no lasting trophy value. Trophy style awards cover a wide range of items, from a $20 Starbucks gift card to a Smart TV or an all-expenses-paid trip to a Caribbean resort. Merchandise and travel carry similar trophy value, because they offer experiences; and people are motivated by experiences.

There is no trophy value in cash. When was the last time you bragged about a $100 dollar bill?

Cash goes in one pocket and out the other to pay bills. If you ask participants what they earned in cash on an incentive program on a given year, they won’t remember. Ask about an incentive trip they may have taken in the last 5 years, and they’ll remember every minute of it.

Recognizing award winners publicly – in person, newsletter or via social media – by sharing what they won and how they won it will be compelling to the participating audience and allows you to highlight existing best practices within your partner or sales rep base, motivating others to do the same. Other participants will be inspired to replicate top-performers’ success, stepping up their game to get recognized, not just rewarded in subsequent quarters.

Understanding what motivates the right behavior helps you recognize and reward not only achievements, but the actions and activities that accelerate the desired result. Participants are interested in different things, so you must offer a choice that is meaningful to them to build loyalty.

A balanced approach.

Keep in mind that a business owner is motivated by financial incentives that directly impact their bottom line, whereas sales reps are more often motivated by name brands, experiences and “Lifestyle Reward” options; making it necessary to offer a range of options through a points-based incentive program featuring a catalog of rewards to choose from.

Choice is the right answer, with a balanced approach to a selection of non-cash and some cash awards. Keeping in mind that participants are already receiving cash as an incentive in the form of commissions.

63% of best-in-class companies use non-cash awards in their B2B loyalty programs! What are you using? 

I'd love to hear from you!

 

About the Author

Claudio Ayub

Chief Strategy Officer Claudio Ayub brings over 20 years of global channel marketing experience to Perks.He has executed major go-to-market programs for a variety of vendors, including Bing, Cisco, Dell, EMC, IBM, Kaspersky, Lenovo, Microsoft, Motorola, Seagate, Symantec, and VMware among others.

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