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Designing an Incentive Program

in•cen•tive program: Incentive programs are systematic internal or external marketing campaigns that require specific actions on the part of a specific audience. Incentive programs produce measurable outcomes through integrated motivational strategies.


Examples of Incentive Programs:

Sales Incentives Sweepstakes Service Awards Frequency Programs
Loyalty Programs Gifts with PurchaseAttendance Programs Performance Improvement Programs
Safety ProgramsTraining ProgramsWellness ProgramsCorporate Gifting

10 Steps to Design an Effective Incentive Program

  1. Establish Objectives
  2. Analyze the Audience
  3. Fact Finding & Involvement
  4. Create Rules Structure & Develop Budget
  5. Select Awards
  6. Communicate the Program
  7. Operate & Track Results
  8. Fulfill the Awards
  9. Evaluate/Measure
  10. Celebrate Success

Tip: A more in-depth look at how to create an incentive program can be found in The Art of Motivation – An Incentive Industry Primer- available at www.incentivemarketing.org.

  1. Establish Objectives – The Blueprint
    Identify what goal or objective needs to be accomplished (increased sales, improved attendance). Objectives must be obtainable. Objectives should be simple to understand and to communicate, yet specific so they can be measured. Make sure these objectives are communicated to all participants at the onset and throughout the entire length of the program.

    Tip: 
    The goal must be attainable and fair to everyone.

  2. Analyze the Audience
    • Who is the target audience?
    • Who has the ability to impact the desired change?
    • Who is eligible to compete in the program?
    • Size? Demographics?
    • Close-ended or open-ended?
    • Individual goals, team goals or both?

  3. Fact Finding and Involvement
    • Understand the playing field and how external factors may affect results.
    • What actions will be necessary to yield the desired results?
    • Involving the participant audience in the planning phase will ensure greater participation in the program.
    • Decide what elements you will measure.
  4. Create the Rule Structure & Develop the Budget
    • Will you create a team structure or individual program structure?
    • Define the rules of the program for each segment of participants; program length, qualifications, communication methods, tax implications of rewards, etc.
    • Will you use points or other reward currency?
    • What will the program structure be? Open-ended, closed-ended or a plateau approach
    • Make sure the program rules are fair and do not give an advantage to any participant group
    • Define fixed costs, estimate program budget based on desired results.

      Typical Break Down of Budget
      • Awards 80%
      • Communication / Promotion 10%
      • Administration 5%
      • Training / Research 5%

     

    Tip: Determine the Award values based on unit or dollar performance improvement. Many companies allocate 5% - 10% or more of the value of incremental improvement.

    Example: For the first $1,000 in incremental performance, the participant gains $50 in award points. For non-sales programs (ie. Attendance, Safety), determine what the "value” to the company is when the goals are met.

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  5. Select Awards
    It is important to select the right award because if the individual is not emotionally vested in the incentive, they will not pursue the goal. Involve employees in the award selection. Keep in mind the employee's income; most likely, a highly compensated employee needs to be motivated by a high value item, not a $20 portable radio.

    An effective incentive award....
    • is appropriate for the goal;
    • reinforces the organization's values;
    • has a high perceived value and Trophy Value;
    • creates excitement amongst the participant base.

    Tip: Brand name merchandise has a high-perceived value and satisfies the need for trophy value.

    Tip: Check out the Award Selection & Administration Series Topics available at www.incentivemarketing.org. SeePrinciples of Results Based Incentive Program Design:

    • When to use Branded vs. Promotional Products
    • Motivational Merchandise ROI Measures
    • Cash vs. Merchandise
    • Why do Lifestyle Incentives Work
    • Learning the Science of Reward Selection
  6. Communicate the Program
    • Develop an enrollment kit
    • How will you kick off the program? Meeting, via email or other announcement?
    • Is there training involved for any of the participants?
    • Social media applications?
    • Print or electronic media plans?
    • How will you communicate progress?
    • Will you need to develop announcement or update messages?
    • How will you communicate results?

    Tip: Encourage your client to use promotional products to announce the program and to keep participants' interest high throughout the program.

  7. Operate and Track Results
    • Results measures track outcomes; Process measures track actions that lead to desired results
    • Based on the rule structure, measure the processes that were identified
    • Two to three outcomes or process measures are the most effective
    • What is your basis for comparison?
    • Decide unit measures, point values and award level per improvement unit
    • Assign weights to each level of improvement
    • Implement a timeline
    • Collect data and report in a timely manner
    • Track redemption costs
  8. Fulfill Awards
    • The more immediate, the better
    • A formal presentation with peers can be as important as the award itself
    • Is there a credit process to complete with the award supplier?
    • What reporting will you require?
    • Who will develop and maintain the database of program participants?
    • Who will handle shipping notifications?
    • How will customer service be handled?
  9. Evaluate and Measure
    • Include qualitative (can be counted) and quantitative (opinion or perception) measures
    • Did you achieve the desired result?
    • What outside factors contributed to the results?
    • Assess the processes and outcomes
    • Calculate the return on investment
    • What will you do differently next time?
  10. Celebrate success!
    • How will you celebrate?
    • Presenting the award in person from a top executive can be effective
    • Consider delivering the award with a hand-written or
    • Publicize in any available, appropriate medium
    • Will there be a banquet or formal award ceremony?

Tip: IMA's Principles of Results Based Incentive Program Design has a chapter dedicated to the measurement of ROI available at www.incentivemarketing.org (Members Only):

  • Measurement Series Topics
  • Overview of ROI Measurements
  • ROI Incentive Programs: Driving People, Driving Profits
  • Overview: ROI Measurement Approaches
  • The Master Measurement Model of Employee Performance
  • Tracking the Long-Term Impact of Incentive Programs Using Readily Available Employee Data
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