FEATURE ::
 

When and How to Use Merchandise-Based Incentive Programs

Done right, these programs can be a powerful strategic tool for driving business results.

Leading companies have found that merchandise-based programs can play a critical role in engaging employees, driving sales, rewarding customer loyalty and attracting consumers. But in the order to get the most out of these programs, you need to understand the unique benefits they provide, and how to use those benefits to your advantage.

By Adrienne Hedger

The right recognition at the right time is a best practice that will
improve the performance of any organization. And in the spectrum of recognition tactics, merchandise-based programs play a special role.

Why do these types of programs work so well? It has to do with four unique factors that merchandise-based incentive strategies offer. Namely: Value, choice, and engagement.

Benefit #1: Perceived Value (and Why it Matters)

Why offer merchandise when you can offer cash? After all, wouldn't people prefer a cash reward?

It's not that simple, says Jessica Erdman, marketing manager at Top Brands. "Cash incentives are often used to pay for necessities, so they don't create a lasting memory," she notes. "The other concern is that cash becomes viewed as compensation as opposed to a reward."

Indeed, an Incentive Federation study found "three of five respondents agree a cash payment is perceived to be part of an employee's total compensation" and more than half agree "employees tend to look at bonus payments as something they are due as part of their compensation package."

"There's no trophy value," Erdman explains. "With a merchandise-based program you can create an experience that someone will remember, and they'll be reminded of the positive experience each time they see the item they received."

Branded merchandise can be particularly effective, especially if the brands are well known and carry a high perceived value. In fact, in many cases the perceived value of merchandise can be higher than the actual price point.

Benefit #2: Why Choice is Essential to Success

Another unique aspect of merchandise programs: Typically there is a great deal of choice. This allows a company to tailor rewards to the specific interests of each person.

"Tailoring the rewards and recognition is the best strategy for engaging employees in a post-recession economy," says Karen Renk, CAE, executive director of the Incentive Marketing Association (IMA).

According to the findings in the IMA Recognition Council's recent white paper, Pump Up Employee Engagement: Fuel Prosperity with Strategic Recognition, the recession and changing workforce demographics have created a more complex set of employee expectations.

"Today's workforce is more diverse than ever and is recovering from the
effects of being overstretched and under-rewarded," says Renk. "Companies need to prove that employees are individually appreciated, and recognize that each employee has a unique set of interests and influences."

This is where a merchandise-based program can deliver unique value. Because it offers a wide range of choices, one merchandise program can fit the needs of many different groups.

"It's not a one-size-fits-all solution," says Erdman. "Whereas cash or gift certificates might be viewed that way, merchandise programs are in a different category. The rewards are more personal and unique. Through the same program, two employees can earn vastly different rewards that mean something to them."

Benefit #3: The Key to Engaging People

Merchandise-based programs have a powerful ability to engage people, particularly when the program is personal and easy to use. Often, an interactive Web site is at the heart of this effort.

"Participants love being able to easily check the status of their award points, the products that are available, and any updates about shipping or delivery," says Erdman. "They can be greeted with personalized messages when they enter the site and find information specific to them."

This high level of engagement means that employees visit the site repeatedly, turning it into an effective channel of communications. Companies can post information about goals, highlight milestones, celebrate successes and more, all through the Web site.

For external users, such as customers, potential customers, dealers and more, a personalized Web site is an easy way to stay connected to the company and the program from anywhere in the world.

There's a benefit to the company as well. "Activities can be easily managed online," says Erdman. "This dramatically cuts down on any paperwork or manual activity."

Putting It All Together

"They liked the flexibility and customization of a merchandise program, and they built their recognition strategy around that," says Erdman. "The reward choices created excitement, and this encouraged people to recognize one another. Now the program has expanded to include a social networking site where people can post accolades for others to read. The entire program has enhanced the company's culture and made the employees feel valued."

All the benefits of a merchandise-based program--value, choice, customization and engagement--can work together to motivate and inspire people to do their best. And this is particularly important in today's business climate, says IMA's Renk.

"As we emerge from the recession, we'll see a gap between the companies that value their people and those who think of employees as a cost center," she says. "The companies that have been rewarding employees are far more likely to see those employees stay and contribute to the company's goals. And they are more likely to have a distinct competitive advantage."