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Why are incentives important today,isn’t pay enough?

Doing more with less, incentives are more relevant than ever More and more, the conversations RedBalloon consultants have with clients are sales or performance related. Businesses are asking the questions: How can we sell more? Win more customers? Strengthen our relationships and gain market share? How can we improve profitability? The underlying question for businesses in challenging economic times is; ‘How do we do more with less?’ Tougher times, squeezed margins, fewer resources for the same results and the need to be perceived to be reigning in any non-essential spend make any non-cash incentive program seem vulnerable to the untrained eye. The perception that incentives are a ‘nice to have’ could not be further from the truth. Effective incentives deliver obvious ROI because the programs pay for themselves when people hit their targets and are busy creating long term value. The basis of most incentive programs is very simple - do this and get this. Incentives are proven to increase team performance by up to 44% and individual performance by 25%. 1 This obviously has a direct influence on the bottom line. There is another dimension (even in tough times) to consider and that is the effect the program has on employee and client engagement. A program that works will not only achieve short term sales, but will be an inspiration and an investment in the future.

Engaged employees deliver better bottom line results Gallup statistics show that businesses with a higher than average engagement score deliver 50% lower turnover, 56% higher than average customer loyalty, 38% above average productivity and 27% more profitability. Incentive programs are strategy, not nice-to-haves. Whilst this paper focuses on internal incentive programs the same principles apply to building an effective customer program as those created for your employees.

Get your clients to willingly shout about your brand In the same way an engaged employee applies discretionary effort to the business, an engaged client will become a brand advocate. According to a global Nielsen survey2 of 26,486 Internet users in 47 markets, ‘consumer recommendations’ are the most credible form of advertising among 78% of the study’s respondents. Given the opportunity, brand advocates willingly recommend the business in favour to other people as though it is second nature. A non-cash incentive or reward program is not a replacement for sales commission. In the same way the money that its costs to offer a discount or price cut can be better invested to enhance the long term customer relationship and the chances that your customers will refer you to others. This white paper unpacks the mystery of building a successful incentive program into five key elements and demonstrates that process driven creativity is what really delivers results. RedBalloon’s domain is all about creating a strategy that can be easily applied and maximises returns. RedBalloon consultants work with clients imparting their experience to achieve extraordinary sales performance, profit and in doing so establishing the foundations for unbreakable relationships through engagement.

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Introducing the 5 C’s

How to create incentive programs with impact and long term results, the RedBalloon way.

Collaboration Understanding and involving your audience to ensure that there is buy-in to your big picture is easy – and makes getting traction easier

Communication

Making sure everyone knows what they need to do, what they are playing for and how they are progressing – then repeat on loop

Captivation Using language and prizes that inspire everyone no matter their age, sex or status – everyone can be a hero

Combination Getting the structure and reward opportunities right for the business and right for the players – a program that is greater than the sum of its parts

Celebration Maximise the ROI with an injection of fun and improve performance, engagement and the bottom line – story telling is what makes it work

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Collaboration

With your overall company strategy in mind, set program goals that are both achievable and measurable and identify key areas where your employees can make a difference. Research your audience and understand what life is like in the field. Get into your customers shoes and be present to their decision-making processes.

TIP: Simplicity of message Don’t try to solve 800 problems with one program, choose a few behaviours you want to influence and create long lasting change.

Negotiated targets and rewards criteria are more likely to be realistic and relevant; the people in your business that talk to clients everyday of the week, the ones who are the business day in, day out, are the best barometer for your world. James Wright, Account Director at RedBalloon stresses to “know your people. Rather than going top down, go bottom up. Understand the individual skills and interests of the team and translate them into a strategy that aligns with your business goals.” Set the rules of the game and stick to them Is it too easy to make budget or hit targets? Should thresholds be higher? Does the program deliver profitable business and maximise the value of customers? How much flexibility do you have if the market gets tougher? These are all relevant questions to be asking, and they apply in all economic climates not just in a down market. Whilst the budget for your incentives will be set by the business with return on investment in mind, think carefully about what is on offer for each individual. Not only do you need input from your people on the rewards they want to strive for, you need to make sure the perceived value of your rewards amounts to the effort and contribution made by those involved. Use facilitated workshops, surveys and market research to identify the appropriate opportunities for reward, possible behaviour changes and the right kind of prizes.

TIP: Make it achievable for all Don’t just recognise the top performers - include the middle 50% who are capable of achieving outstanding results too.

Understanding why people work, gives a better insight into how they like to be acknowledged. People want to be acknowledged in different ways, so give them choice such as having rewards that enable the recipient to spend time with their family, help them progress their career development, or give them the chance to experience what they love the most but never have time for. Input from the ground up leads to innovation Here’s a simple example of collaboration from another sphere but it demonstrates why the participant perspective can be so valuable in designing a solution. Company A decides it will save a few thousand dollars a year by ceasing to buy chocolate biscuits for staff. Uproar ensues. Company B asks employees for ideas as to how they might shave a few thousand dollars off costs, staff volunteer to give up their biscuits and take it turns to bake instead; cash saved, relationships strengthened. Give your employees the chance to work it out for themselves and you’ll find you get some pretty incredible results. A major factor that has contributed to RedBalloon’s Employee Engagement score of 97%3, and it’s ranking as one of the top ten Great Places To Work4 in Australia, is collaboration within the organisation. Communicating the feeling of ‘we’re all in this together’ will strengthen teams with a strong mateship culture, intensifying collaboration and resulting in greater efficiency and innovation. Naomi Simson, RedBalloon CEO says “transparency and accessibility, like ensuring free flow of unfiltered information allows individuals to feel empowered to make decisions. It is a question of having a shared sense of purpose; people thrive when they feel part of something.“ Agreeing to the rules of the game before you start playing, and sticking to them, as much as possible means you’ll achieve better results and everyone will have more fun playing.

Get buy in from all sides and involve the people at the coalface in the design of your program from day one.

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Communication

RedBalloon clients are typically spending between 10-25% of their program budget on communications; not just to launch activities but sustained efforts to report, reinforce and explain again the nature of the game they are asking employees and customers to play.

TIP: Launch it - Live it - Talk about it A program must have a life and personality if it is going to gain traction with your target group. You’ve got to start the fire, watch it burn and continually stoke it.

Tools to bring your program alive Even as an online business, RedBalloon is committed to maximising the physicality of client programs in their workplaces by equipping managers and team leaders with the tools to bring things to life. One size does not fit all, and often segmenting groups of employees or customers is required to ensure everyone is on-board. As well as from the more traditional communication options such as emails, posters, post-its, videos, calendars we recommend taking advantage of all media options, the majority of which are low cost and usually already in place. At RedBalloon we take advantage of all options available: The company blog is a forum for everyone to share

their stories throughout the day, from positive client feedback, interesting conversations to new business wins.

A flat screen overhangs the reception desk displaying the number of people the business has given an experience to, in real time. (Plus fun photos of staff on experiences)

Team Huddles happen every Monday and news is cascaded throughout the business, if something great has happened everyone hears about it.

At monthly company meetings, the CEO Naomi shares individual good news stories and also reads out the monthly peer to peer nominations for those who have demonstrated the RedBalloon values.

Communications Checklist 1. Have a plan 2. Regular reminders of the what, when and how 3. Make it interactive 4. Do not rely on e-mail – use a range of mediums 5. Keep it fun! Responding quickly to pockets of disengagement One RedBalloon client was recently having specific issues around ‘buy-in’ to their program. The excitement that had gathered pace in the rest of the business was not evident in one particular site and intervention was required. RedBalloon’s internal creative agency worked with the client’s staff and combined personal letters, on-site posters, all-staff e-mails and a series of explanatory workshops to engage with a specific demographic and witnessed response rates more than doubled over a four week period.

TIP: Keep it consistent People get disconcerted when you change the program and the rules too often

Leadership’s influence on the success of your program There is not always the budget available to deliver actual rewards everyday or every week, but with effective two-way communication the perception of success can be intensified, performance enhanced and engagement improved. Gallup research suggests that we forget a thank-you just seven days after it’s given and Hays Group research shows that 70% of engagement is determined by the direct manager.

TIP: Authenticity Be authentic and honest about why you are running the program and about your objectives.

The best performing programs are clearly communicated, completely inclusive and interactive.

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Captivation

Find a metric that turns your people on The Sales team get that they have to hit their revenue numbers. The contact centre get that it is all about getting call handling times down and delivering exceptional service. Be creative and come up with some big picture numbers that get your people excited. What’s your B.H.A.G? At RedBalloon our ‘Big Hairy Audacious Goal’ is to change gifting in Australia and New Zealand forever and when we’ve delivered 2.2m experiences we will have done it! The big screen in the office tells us how close we are getting and everyone no matter what they are doing at work knows they are contributing to this end. How many more customers do you want to win? How many widgets could you sell? How many on-time deliveries can you achieve? Telstra Business recently saw an uplift of 10% in sales as a result of their RedBalloon incentive program. Georgia Lee, General Manager of Sales Programs at Telstra Business said “it created excitement because it was something different that everybody could relate to. It made the actual campaign about Telstra Broadband stand out amongst many other internal campaigns going on at the same time”. Another client program recently delivered 1,000 extra customers, which equated to a 25% uplift in trade sales and sending over three quarters of their sales team on experiences. Why experiences as rewards? RedBalloon use experiences as the prizes in our programs because they are proven to work best and they are more cost effective. As a comparison, it takes an increase of up to 8% of an employee’s salary to change behaviour and only a cost of 4% of the employee’s salary if you are using non-cash incentives as the lever to influence5.

Experiences as rewards are immediately more impactful than cash. This is largely due to the fact they are something we would not normally spend our disposable income on whereas cash gets lost in bank accounts or eaten up by credit cards and quickly forgotten.

TIP: Give people choice in rewards Keep the rewards range as broad as possible. Not everyone wants to skydive! You’ll be surprised at the number of participants who want the opportunity to enjoy their reward with a loved one, friend, family or even colleagues.

Make dreams come true Incentives and reward programs are as much about acknowledgement as they are about prizes or commissions. The Wishlist feature on the RedBalloon program is one of the most powerful ways to capture the individual’s imagination. Each person creates a Wishlist of their dream experiences from RedBalloon’s selection of 2,500. They are updated every time they receive points (incentives) from their manager, telling them how much closer they are to achieving their dream. Managers also have the visibility of knowing their employees Wishlists and being able to give specific rewards for the experience of their dreams. The role of the Executive Sponsor The Executive Sponsor or Senior Level figure is crucial for any incentive program to achieve maximum results. It is this person who needs to launch the program, defend the budget at the board table and be the visionary for its impact across the business. Recently to launch a program, RedBalloon filmed two Senior Execs from a Financial Services organisation having a helicopter lesson and flying a Tigermoth. They were just doing something they had always wanted to do and having fun, at the same time delivering an important message to their people. It’s stories like these that entices others in the business to keep adding to their wishlists and striving to achieve more.

Use a variety of tools and techniques to ensure you touch every participant of a program regularly.

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Combination

Playing with your employees There are four central combinations available with any internal incentive program, Structured or Ad hoc; and Individual or Team. The best performing programs include elements of all four because they are capable of engaging with as many of the potential players as possible by offering multiple ways to win.

STRUCTURED ADHOC

Revenue based targets each quarter / annually for individuals and the team

Number of decision maker presentations delivered

New clients signed Number of service

contracts renewed

CEO special

recognition Deal of the week in

each state Peer to Peer support Largest/most

profitable client to date

Most creative pitch or presentation

Best customer service

Mix it up By offer a variety of individual and team prizes you can keep employees engaged in the incentive. We play this at RedBalloon across our non-cash incentives by mixing up the experiences delivered through our points program, with tactical milestones along the way. For example every time someone writes the largest invoice ever, we celebrate with French champagne for the whole business – it is team effort after all! This type of social recognition is just as important as the tangible reward on offer. Every few months there is an opportunity for each team to celebrate achievements together, and each trimester and annually we share in a company wide experience.

Playing with your customers When we apply the concept of combination to a customer incentive program the central tenants are Instant gratification VS Earned gratification; and Something for everyone VS Something for a few. The mix between the four depends on a number of factors: 1. Purchase price and expected frequency 2. Customer demographics 3. Budget constraints and desired ROI 4. Relationship with audience Whether your mechanic is a gift with purchase, new business referral program or game of chance, the age old question “what’s in it for me?” needs to have a compelling answer. The point about combination, without complicating the rules of the game or muddling the communication is that it provides for a number of different games within the game; there will always be some good news stories to share across the team or channel to keep it fresh and the momentum going. RedBalloon ran a promotion through a client’s distributor channel recently where every invoice for a specific product was entered into a monthly draw for three months. By the end of four weeks the client’s sales team had real winners to talk to their customers about and drive more unit sales. At the end of the quarter every invoice went into a grand draw with a fantastic story to replay to the whole channel once the winner has been of their experience of a lifetime.

TIP: Instant wins work A guaranteed reward or a handsome instant win in relation to the products value is the most desirable consumer incentive.

Structure your program with a combination of reward goals to engage with as many participants as possible.

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Celebration

Maximising the ROI and performance with an injection of fun allows you to deliver an incentive program that ticks all the performance improvement boxes and enhances employee and client engagement. You have invested in stories – so tell them, again and again As human beings we replicate the behaviours of those around us that are applauded and receive praise. It’s pretty simple stuff really and it began in the playground at school. If someone does something good and is made a hero of then we are likely to copy their behaviours so we can be a hero too. By developing an incentive program and a communications strategy to support it, that captures and replays hero like behaviours to a wider audience by celebrating their achievements you’ll ensure that your investment is maximised. Using RedBalloon’s range of experiences with something that appeals to everyone as your rewards or prizes is a double whammy for ROI. People love to share their stories about they do with their rewards and will share the reasons why they were rewarded too. Story telling is how we learn about each other and who we are, so we develop stronger ties and greater levels of engagement.

TIP: Use the power of conversation It’s not what you tell them, but what they tell you that propels your program. What people in the corridors laugh about and compare with each other – experiences they did on the weekend, hero boards, photos, and stories.

A few ideas to consider At RedBalloon we are continually coming up with exciting new ideas to support our client programs and here is just a few of these. Landed helicopters outside a conference in the

Barossa Valley and whisked two unsuspecting employees off for adventure to get the stories started

Built SMS into a points program so that every time the sales team reported closing a deal their Director responded with an uplifting message

Added landing pages into program websites where employees talk about their RedBalloon experiences and the fun they have had

For Macquarie University we created a mini-experience Expo with sword fighting, sushi making, massaging, circus skills training and a whole lot more to bring a program to life for over 100 managers

Abbott Pharmaceuticals use ‘Roving Reporters’ to

collect success stories and experience testimonials and replay them across the business.

Cummins Power use Wishlist and redemption

reports to create email communications that inspire extra sales efforts at the end of the period.

Ericsson runs roadshows to communicate the

rewards on offer in their Excel program to make the link between discretionary effort and having a good time.

TIP: Go for it! Don’t be afraid to think big and try something new. Remember, if you do what you have always done, you’ll get the results you’ve have always got. Most importantly have fun in the process!

Have some fun and celebrate to reinforce success, improve engagement and to maximise the ROI

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Just to recap… Good incentive programs look at the behaviours of all the stakeholders and the ripple effects those behaviours have. Good incentives seek to permanently change behaviour to win market share, improve processes or relationships with lasting impact through the activity chain. The programs that RedBalloon support our clients with, are always designed with the long term relationship in mind, to add value rather than displace it and contribute to sustainable business growth. Businesses in the know are using non-financial incentive and reward programs as the cornerstone of their ‘do more with less’ strategies. A recent study by the University of Chicago6 showed non-cash incentives were 25% more powerful at boosting performance than cash incentives. The process RedBalloon employs to deliver incentive programs includes facilitated workshops to aide program design, integrated communication strategies aligned to client culture and regular review and refresh of activity.

About RedBalloon for Corporate RedBalloon Corporate transforms workplace cultures through Employee Engagement, Incentive and Reward and Recognition Programs and Sales Promotions. Using RedBalloon’s unique resource of over 2500 amazing experiences in Australia and New Zealand we specialise in creating attachments between employees and their employer and winning clients more sales and new customers. Contact us for more information and case studies: AUSTRALIA 1300 850 944 query@redballoon.com.au redballoon.com.au/corporate NEW ZEALAND 0800 555 029 query@redballoon.co.nz redballoon.co.nz/corporate

References 1. Stolovich, H, Clark R, & Condly, S. Incentives, Rewards and Workplace Motivation (2002) Society of Incentive & Travel Executives Research Foundation.

Sourced from Iloverewards.com Nov 2008 2. Word of Mouth the Most Powerful Selling Tool, Nielson Online Global Consumer Study (April 2007) 3. International Human Capital experts Hewitt Associates awarded RedBalloon with an engagement score of 97% in 2008, the average score in Australian

businesses is 54%. 4. The Great Places To Work Institute survey involved 220 Australian businesses. RedBalloon was named the ninth Best Place to Work in Australia in April 2008. 5. Jeffrey, S Dr. (2004) The Benefits of Tangible Non – Monetary Incentives Study, University of Waterloo 6. University of Chicago study, 2004 sourced from Increase Employee Performance by Meeting Psychic Income Needs, www.globoforce.com Nov 2008