Cold Truth Its mid-year. Do you know where your financial goals are? Locked In Looking Good So-So Sideways Who Came Up With These? Look For Culprits Run Screaming Into the Night
Outline Credentials Applications Will Do/Wont Do Immutables: OB, P/R and Permanent Change Non-Cash Awards Vs. Cash/Derivatives Performance Primer: Lift, Shift, Payback Case Histories Rules Not For Fools GP Rules Recommendations
Steve Erickson Credentials CEO, The Performance Alliance, Inc. Director of Sales and Marketing, Winsert, Inc. (alloy mfgr.) Director of Marketing, Motivation Excellence, Inc. Senior Vice President, S&H Motivation, Inc. Director of Marketing, Carlson Marketing Group (PIC) President, Avenue North Organization, Inc. (lead generation) Marketing Director, Dahlberg Electronics, Inc. (Miracle Ear®) 2,500 incentive, performance and loyalty programs designed and operated
What I Did Applied: Creative non-cash awards Innovative, interactive communications Sophisticated performance measurement methods To one product: Programs that generated maximum performance in a clearly accountable, financially-justified and carefully orchestrated system. In Short, Moved the Performance Needle. 2,500 Times.
Core Principle In the pursuit of Performance Excellence: Participant knowledge is not enough Product and price parity are not enough. All the marketing research, data and intelligence you can create & deliver are not enough. Action plans and initiative platforms are not enough.
Knowledge Without Motivation = Competent Inertia. Conversely: Motivation Without Knowledge = Energized Incompetence. The foundation of Performance Excellence: Knowledge X Motivation (incentive) = Performance.
All Performance Paths Cross at the Same Point: Causing your people to do what you want, but for their own reasons. Everyone applies conscious or unconscious optional behavior to every choice, every opportunity. Every business challenge faces that reality.
The people you depend on to make your future have other plans. Your customers and their customers. Your employees, reps, vendors. Every point of influence over your future, all with different agendas. They opt in or opt out. You and your objectives are not their primary concern. You have to change that. We will help. Optional Behavior
Superior achievement can't be mandated. It has to be sought. Major Difference Between Incentives and Performance
What Are Some Dependable Performance Applications? Conventional sales and/or market share improvement Employee performance systems Quality improvement Customer relationship building Product introductions and reinforcement Training reinforcement... and much, much more.
The Average Workforce is Out of Work 45.5% of the Time Its Employed. Over $900 billion is lost annually through non- productive use of time on the job. The average worker only uses 4.4 hours productively out of every eight BUT, they know how to save money, reduce cost and improve efficiencies, if its worth it to them to tell you.
Consider a few stats… An average organization loses 50% of its customers every 5 years But, a 5% increase in customer retention results in profit increases of % Costs 5-10 times more to acquire a new customer than it does to retain one Repeat customers spend 67% more than new customers Avg. firm has 60-70% probability of selling again to active customers 20-40% probability of selling to lost customers 5-20% chance of a sale to prospect After 10 purchases, a customer has referred up to 7 people
My Skinner Box
Not a simple issue resolved by simple means Incentive devices (the awards) are not the solution and are not the program 2-dimensional approaches like "loyalty systems, contests, sweeps & promotions don't work Loyalty programs are passive by definition
What do we mean by a program Working? 1.Measurably improved performance that stays that way 2.The real solution must pay for itself, predictably and acceptably, out of clearly defined performance improvement.
So, What Does Work? Do you really want to do what everyone else does (contests, gift cards, cash, passive loyalty programs) and expect your points of influence to react differently? Those are simply defensive tactics. Or, do you want to create an environment that will seize true, sustainable performance advantage tailored to your circumstances? Take the offensive. Create and keep demand.
Heres What You Can Do Capture all the optional behavior you can stand. You supply the challenge and the courage and we will build a 3-dimensional performance solution. Enjoy eye-popping ROIs you can trust. Delight your people and baffle your competition.
Preachy Part: NON-CASH AWARDS VS. CASH (Including Gift Cards, Discounts)! Non-cash award programs stimulate the imagination and raise sights. Cash is not an award in itself – its effective only in terms of what it buys. Non-cash awards eliminate guilt Cash is dissipated into everyday expenses. Non-cash awards are demonstrable A singular benefit of a non-cash award is its visibility... allowing the recipient to boast of an accomplishment. You wont flash a bank deposit
NON-CASH AWARDS VS. CASH (Including Gift Cards, Discounts)! Non-cash awards are once-in-a-lifetime –A trip to Rome or Cancun creates buzz like nothing else, and the experience keeps paying off for you Non-cash awards are something extra" Cash awards = increased income... easily confused with normal compensation Cash (and equivalents) cost 100%, bill on redemption maybe 80% Simply put: non-cash costs less and does more. Remember, loyalty programs are simply for defensive purposes, because everyone else has them
Planning for Performance First, Go For The Lift. Practically anyone can run a contest, call it an incentive program. So what? Contests create winner(s), but mostly losers. Contests reward top performers, who tend to always be the top performers anyway, or the lucky. Unintended consequences: Demotivate good people who cant win. And, they dont work. Everyone qualified to participate should be qualified to earn.
The Greatest Opportunity For Lift? Always in the middle. Not with the top people, firebreathers who will be leaders no matter what. Not with bottom-feeders unless theyre rookies and need time to develop.
The middle is the breadbasket of your performance prospects. Tailor an appealing program to them and things start to cook, even in flat or declining markets. Play offense in the middle and defense at the top (take care of the 600-lb. gorilla, but know hes not going to grow).
Second, Go For The Shift. Another axiom: There is always room to move. There is always discretion. Employees and customers pick their own spots and set their own dials in terms of time and effort. Thats optional behavior. We all use it. We know where acceptable is. Optional behavior is the big idea. You just need to know how to tap it.
Enrolled Category A Category B Category C Cat. P Total Volume $100,000+ $25,000 - $99,000 $2,500 - $24,999New Base period$66,107,068$37,899,198$19,823,635($1,029)$123,828,873 Program period70,902,80949,240,73135,385,6322,052,347157,581,520 Change4,795,74011,341,53215,561,9962,053,37733,752,647 % Change7.20%29.90%78.50% 27.20% Real Life: Actual Outcomes from Segmented Performance
Category Base Period Purchases Program Period Purchases Variance (-) or + Enrolled customers$123.8MM$157.6MM$33.8MM+ Non-enrolled customers$83.5MM$77.6MM($5.9MM) Total$207.3MM235.2MM$27.9MM More Actual Outcomes: Compare Performance From Enrolled vs. Non-Enrolled Customers. No better proof that expertly designed performance plans deliver!
Third, Make It Pay For Itself. Performance Improvement is an art and a science. The science used to create a program that pays for itself out of incremental performance is an art. Its not the travel award, its not the toasters or the virtually unlimited choice of merchandise awards. Its not the award-winning creative communications and robust information technology. Its all of these things, and its pure magic when its done right, of course.
Independent Distribution Performance Programs? Heres How: Set clear & realistic financial and human goals. Dont stop with the principal. Ensure top-to-bottom channel participation by all points of influence: Your field sales (assign enrollment and dollar goals) Distributor or Dealer principal Distributor/Dealer sales managers & branch managers Distributor/Dealer Outside Sales and Inside Sales representatives Ultimate customers (consumers) Distributor call center/customer service staff
Include all qualified participants. Yes, we repeated that. Formal, active (not passive) enrollment is mandatory. Automatic enrollment = passive response and wasted dollars. Make it a big deal for field reps/mgrs. to get enrollment done. You will not believe the difference in performance between enrolled/unenrolled. Offer the opportunity for everyone to earn. Offer an appropriate performance/reward balance. Without it, nothing else counts.
Keys, continued Visible backing from the client sponsor THROUGHOUT is indispensable. Dont let your CEO intro and then forget it. Its a full-term commitment from all your own people: Dont kick off, then forget. Give participants a chance to accumulate award points/credits.
Find A Fully-Integrated, Full-Service Performance Marketing Company Or, an expert who knows the difference between ho-hum loyalty drills and permanent, tub-thumping performance
Your Performance Expert Must Have: Incentive program design and operation skills Promotional communications and creative services skills Group incentive travel program planning and operation skills Merchandise awards - catalog, custom & online Program administration and superior information management skills (this is overwhelmingly different from simple data management) An extraordinary sense of customer service throughout
Your Expert Must Demonstrate This Performance Process Start with extensive situation analysis. Present a cost-justified performance program recommendation. Design, launch and manage the program. Measure performance and provide activity intelligence/reporting.
3 Components A legendary, blow-the-doors-off performance solution? It must be motivationally, operationally and financially sound (all 3). Motivationally sound means it must create a compelling proposition and subsequent, active demand. Operationally sound means it must be fast, simple and efficient. Financially sound means it pays for itself out of incremental performance.
The Seven Smoking Gun Questions - Lifeblood Of A Good Incentive Program 1.What is your objective? 2.When do you want it achieved? 3.What is it worth to you to achieve the objective? 4.Who are the people who must achieve the objective for you? 5.What portion of that gain are you willing to share with the people who get it for you? 6.What do you realistically think theyll produce for you if you dont run a program? 7.What are the obstacles in the way of achieving your objective, if any?
EVERY INCENTIVE PROGRAM IS UNIQUE Unique Blend of Four Distinct Variables: Objectives... Budget... Timing... Participants EVERY INCENTIVE PROGRAM IS SIMILAR Basic Rules Development Elements are Simple and Few BUILDING THE BASIC RULES STRUCTURE Define Unit of Performance (UOP) - Smallest Measure Select Participants - Rank by Impact Select Award Type - Straight-line, Escalated or Plateau Rules Not For Fools
AWARDABLE PERFORMANCE CATEGORIES Sales Distribution Non-Sales QUOTA-BASED AWARDS Benefits Typical Quota-based Structures CLOSED-END vs. OPEN-END INCENTIVES EFFECTIVE CLOSED-END RULES STRUCTURES Straight Competition Plus-Performance Contribution Beat-the-Average, etc. BONUSES, SPECIAL EVENTS & SPURT ACTIVITIES
How Much Does Performance Cost? Nothing, really. The real question is, How much is it worth? Cough up some up-front for communications/promotion and the right kind of performance measurement (IT, web). Plan on 20% of incremental GP (its not that simple, but its good for starters.)
What Do These ROI Snapshots Have In Common? Prog. investment as % of: Total sales1.19%0.62%1.59%0.56%0.23% Total GP$3.72%1.35%3.63%3.25%0.94% Incremental sales7.15%6.30%12.16%4.38%3.43% Incremental GP$22.34%13.69%27.82%25.63%12.66% Theyre all Correct.
If Your Agency Sees No Difference Between the Award and the Program, Shoot Them Now. When the boss asks, What did you get for all that loot you spent on that incentive program?, you need to know what I know and your agency must:
A good motivation agency gets paid for performance, not proposals. They have a major stake in program success. They win if you win. If they dont get it, they dont get the business. A great performance agency doesnt cost you a dime.
Do you want to talk about it? Contact us: The Performance Alliance, Inc