Anthony F. Chelte, Professor

Knowing when to use travel, merchandise, or cash to
reward your salespeople increases the odds
of a successful incentive

Choosing an incentive program shouldn't be like playing a game of three-card monty. When managers select one of three reward options--travel, merchandise, or cash--too often the final judgment resembles a guess more than a well-informed choice. And in this case, the wrong decision will cost a manager more than a few bucks and a little embarrassment.

"An incentive program can play an important role in whether your people meet their sales goals," says Bill Sullivan, manager of key account administration and the coordinator of the Outstanding Performer program at Eveready Battery. "As much thought should go into it as any part of your marketing plan. Everybody crosses their fingers and hopes for the best, but it's better to do this after doing some homework."

The best information comes from the salespeople themselves. Regular surveys and other forms of communication will prove invaluable to sales managers. But before distributing any surveys, executives should understand the main advantages and disadvantages associated with travel, merchandise, and cash programs.

WE ALL HAVE egos. We all can feel extremely competitive. But salespeople often are particularly driven by vanity and a burning need to be better than everyone else.

"The best salespeople like to wow others with their sales numbers," says Bob Commins, manager of corporate sales administration with NEC Electronics, a Santa Clara, California-based semiconductor manufacturer. "And when it comes to their reward, they have to be wowed. I've found that travel does this better than any other incentive."

Salespeople enjoy telling friends and relatives that they're going gambling in Monte Carlo or spending a week at one of the most exclusive resorts in Hawaii. As much as they delight in regaling friends with their accomplishments, however, top performers value peer recognition above all else. Others can ooh and aah over the trip itinerary, but only their coworkers know exactly what it took to qualify. "Possessing the bragging rights to impressive travel rewards helps salespeople establish themselves in the sales force pecking order," Sullivan says.

A trip to an exotic destination or high-end resort is desirable in itself, but it is probably something top performers could do on their own. However, planners can arrange activities for groups that individual travelers wouldn't experience. A couple of years ago, for example, the top salespeople from Stamford, Connecticut-based GE Capital Insurance Services-Auto Dealer Services Group took over Adare Manor, a private castle in Ireland. Earlier this year, high performers from Hormel Foods Corporation based in Austin, Minnesota, enjoyed a 1950s-themed road rally in Southern Florida, complete with motorcycles and convertibles.

"Doing stuff like this makes people feel incredibly valued and appreciated," says Don Deuser, president of JNR Inc., an Irvine, California-based incentive firm. "You want your top salespeople to think that you went to a lot of trouble to make sure they had a good time."

Patrick Kelly, chief executive officer of PSS/World Medical in Jacksonville, Florida, has seen firsthand the value of impressing the best of his sales force. During a recent trip to Italy, his people happened to stay at the same hotel as Sylvester Stallone. "They liked the idea of rubbing shoulders with a celebrity, even though we never saw him," Kelly says.

While possible Stallone sightings make for a fun story, the real value of travel programs is the chance to create a camaraderie difficult to develop in the office. Since salespeople spend all their time competing with each other, Kelly says, they rarely have the opportunity to interact and bounce ideas off coworkers. "But once they spend some time together and let their defenses down, they start learning from each other," he says. "Not only are they making friends, but they're solving problems-my company's problems."

As motivating as travel can be, it can also be a bad choice for a sales incentive. One of the biggest criticisms from salespeople is that travel programs are just another business trip for them. "They are on the road so much as it is, often a travel reward is the last thing they want," says Tom Simonian, president of Incentives Inc. in Naperville, Illinois.

From the planner's perspective, a travel program can be the most difficult reward to offer because so many factors are out of their control. For instance, because of riots in Indonesia this past spring, Commins switched the second stop of his incentive from Bali to Thailand at the last minute. Everything went smoothly during the trip, but his participants were slightly disappointed since they had been looking forward to visiting Bali. "That's the rub with travel incentives, the risks are sometimes as high as the rewards," he says.

Another problem with travel: Programs sometimes don't meet participants' expectations. When the budget doesn't support a planner's best intentions, the winners end up feeling dissatisfied. Recently this happened to Bob Weber, one of the top salespeople for an office machine manufacturer. "I knew the trip to Florida wouldn't be on the same level as our big trip, but I was still disappointed," he says. "We were only there for a long weekend, but I would've been happier staying home."

If you plan well, however, even a tight budget can work. MSI Insurance couldn't afford to take all of its top performers to Europe last year, but it also couldn't afford to alienate a significant number of past qualifiers. The answer was a two-stop incentive. Everyone who reached a certain sales level traveled to New York for a few days; those who achieved a second goal then continued on to Lucerne, Switzerland. "I didn't end up spending more than if the entire group would have stayed in New York the whole time," says Jim Melchior, director of agency sales, at the St. Paul, Minnesota-based firm. "Plus the Lucerne goals were significantly higher than those just for the New York trip, so we came out way ahead."

WE LIVE IN an acquisitive culture, in which we constantly compare possessions. And no one is more acquisitive than top performing salespeople. "Merchandise programs satisfy their need to be able to point to something as a symbol of their superiority," Simonian says.

Will Hafer, vice president of sales with New York-based Bowne Publishing, clearly remembers each of the merchandise awards he earned at a previous job. "The big screen TV was my favorite," he says. "I already had a TV, but I didn't have a big screen. Actually the main reason I wanted it was that it was the top prize. I could afford to buy a big screen, but it wasn't the same as winning it."

Another benefit of merchandise awards: Winners feel more control over how they are rewarded. Most of these programs offer a selection of merchandise and the participants choose what they want. "With travel programs, if a participant doesn't like the destination choice, he may not be as motivated," says Dennis Borst, president of Western Motivational Incentives Group in Los Angeles. "Consistently top performers will qualify out of ego, but those on the fence will be lost."

While merchandise is regularly featured as a top prize, a number of planners find them most effective as momentum builders toward a larger reward. To help keep her salespeople focused during the entire qualification period for a travel award, Liz Van Dzura, a meeting and incentive planner with Bridgeport, Connecticut-based Mitsubishi Fuso Truck of America, sent elaborate food girls to participants' homes when they reached certain goals. "By bringing the family into it I put an extra set of eyes on the final prize," she says.

Using merchandise awards during the program also motivates salespeople who won't achieve the grand prize, but whose contributions are necessary. "You have to reward your steady, consistent but not star producers or they're going to start producing for somebody else," Borst says. "Also, your future talent is going to come from this close-but-not-quite group."

Since everybody likes getting stuff, what could be the down side of merchandise incentives? Well, with the exception of very high-end items, merchandise simply doesn't elicit the same excitement as travel, Commins says. "Which excites you more, a laptop computer or a week in Greece?" he says. "Top salespeople can always buy a laptop, but they're not always going to have a week in Greece just waiting for them."

Part of this second-best attitude is based on cost differences. It's difficult for participants to gauge exactly how much a trip costs, but they have no trouble comparison-shopping merchandise awards. The perceived value of merchandise has depreciated with the proliferation of discount outlets such as Best Buy and Price Costco; it's discouraging for incentive winners to see the stereo or watch they worked so hard for on sale at a marked-down price. "Once a participant attaches a dollar amount to his reward, unless he's bowled over by the price, he's going to be disappointed," Simonian says.

The best way to battle this problem is by carefully evaluating how you market your programs, says Barry LaBov, president of LaBov & Beyond, a Fort Wayne, Indiana-based performance improvement company. "If you're always placing travel as the top award, merchandise of course will come in second. But if you start offering some high-end merchandise items as grand prizes, the perception of merchandise overall should improve."

Administrative issues can also kill a promising merchandise program. Planners must constantly introduce new products into tiered merchandise incentives so participants don't get bored. Product delivery is another hassle. The longer it takes for participants to receive their award, the lower the item's trophy value. "It should be as easy for a winner to choose and receive his award as if he were buying it himself," Deuser says. "You want your people to remember the thrill of receiving the award, not the hassle getting it."

IN THE 15TH century, appreciation for money was ably expressed with the saying, "Blessed is he that cometh in the name of gold and silver." Joel Grey in the original Cabaret put a modem spin on this sentiment when he crooned that "money makes the world go 'round."

Simply put, cash is an effective reward because everybody wants it. Money provides an immediate thrill and feeling of appreciation for hard work. While Hafer enjoyed the merchandise he earned with a previous employer, he likes even more the cash awards available at Bowne. "I loved getting that stuff, I still have lots of it," he says. "But tell that to the bank."

Jim Farrell, vice president of business development at Farmers National Company, a $130 million farm-management firm based in Omaha, Nebraska, formerly used travel incentives but switched to cash awards in 1996. The main reason? It's easier. There are no hidden costs that pop up during the program and little to no paperwork or planning is required. "A few people have asked about the trips, but far fewer than I expected," he says. "I use merchandise awards for my two-month program, but the award for my bigger incentives is cash. The fact is, I'm getting better results using cash, and it's so much simpler."

Using cash incentives also relieves the sales manager of any demographic worries. In the United States, money crosses all of the gender, age, and racial barriers that can trip up travel and merchandise awards. The 50-year-old white male will use the cash as readily as the 30-year-old Asian woman.

Cutting top performers a check is the most common method, but LaBov suggests using real money. "The shock element can't be underestimated," he says. "It's the same thrill you get when you cash in your winnings after gambling. How often are they going to have $2,000 cash in their hands?"

But, as exciting as money is, cash rewards are fraught with problems. Most troubling is that money has no trophy value. Recipients tend to lump it with their commissions and other entitlements and rarely remember how they used the cash.

"The point of an incentive is to reward the salesperson for their work but also to make them connect the award with the company, to create some kind of bond," says Keith Robinson, an avid travel incentive user and vice president of sales at Symantec, a Cupertino, California-based software manufacturer. "Money doesn't make this connection. It's great in the short term, but it has no staying power because people have no specific memories of how they enjoyed it."

Money also fails the ego test. Since it's considered in poor taste to brag about money with friends and relatives, top performers must keep mum about their monetary rewards. "Cash still gives you peer recognition since the people in the program know. But even then top performers don't talk about it the way they do merchandise and travel," Robinson says.

But you can be sure top performers will discuss their cash awards if they find them insufficient. By putting a clear dollar amount to the incentive, planners run the risk that their people will feel undervalued. "A salesperson's first thought when they look at the check amount is, 'So this is what my work is worth,'" Simonion says. "If they aren't happy, they're going to start looking for another job."

Tom Burnside, director of marketing in the grocery division of Houston-based TeleCheck Services, finds this problem most prevalent with top performers who have high salaries. His salespeople earn approximately $85,000 a year plus commissions. "My best people generate about $1.5 million in sales each," he says. "When you think about their salary and commissions, an extra $5,000 or $6,000 isn't going to make them jump for joy. They respond better to my travel and merchandise awards."

Admittedly, no amount of preparation and analysis will guarantee a successful program. In the end, the sales manager is still gambling when choosing one reward option over another. However, the more informed the decision, the better the odds.

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By Nora Wood

Illustrations by Darren Thompson

Inset Article

WHILE TRAVEL, MERCHANDISE, and cash receive the most attention, gift certificates and debit cards can be effective rewards for salespeople. Gift certificates work especially well for spontaneous or personalized rewards. Tom Burnside, director of marketing in the grocery division of Houston-based TeleCheck Services, uses certificates that tap into his people's personal interests. For instance, the person who loves Jamaican coffee got a trip to Jamaica and the one who dreams of Cuban cigars traveled to Canada so he could stock up. "Since I personalize the certificates to their special Interests, they feel that I know what they need to be happy and successful," Burnside says.

Debit cards have been described as cash with trophy value. Participants enjoy the cards because they have control over how and when they choose to reward themselves. Also, since the card usually bears the company's or program's logo, users connect their purchases with the incentive. Administration is easy for the planner since everything is handled by the vendor.

However, gift certificates and debit cards suffer the same flaw: Managers have no control over the reward experience. "Will they remember they bought a pair of shoes with the certificate? Are they buying gas and groceries with the debit card?" asks Barry LaBor, president of LaBov & Beyond, a Fort Wayne, Indiana-based performance improvement company. "Planners really have no idea. If you restrict the debit card to certain retailers so they can't buy everyday necessities, are you doing them a disservice? After all, it's their reward points. Debit cards and gift certificates are better than cash, but they still have their problems."

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By Nora Wood

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Source: Sales & Marketing Management, Sep98, Vol. 150 Issue 9, p70, 5p, 4 cartoons.
Item Number: 1056881