Considering the wider implications of a sales incentive? Can your business handle the growth?

Thats the word of warning sounded by the Incentive Research Foundation. Soaring sales figures from incentive activity can put a strain on the rest of your business processes, creating a snowball effect on other aspects of the business that you should might not have considered:

"Developing an incentive program with a focus on sales growth alone is myopic," says Dr. Gopalakrishna. "Their impact extends well beyond the sales function to other constituents and processes within the organization." A preoccupation with sales growth with no consideration for other business functions can produce a domino effect including: 1) an adverse affect on cash flow, an important business metric; 2) a possible disruption in supplies leading to unforeseen procurement expenditures because of the need to procure additional raw materials, often at short notice, to support higher sales arising from the incentive program; 3) extra shipping costs of ordered merchandise; 4) acquisition of new accounts may involve other subtle aspects such as customer quality. For example, some new accounts may delay paying their bills, causing an increase in accounts receivable which can hurt bottom-line profitability, specifically cash flow and the management of short-term capital; and 5) planning for additional workers (even though it may be temporary) involves considerable expense including the cost of hiring and training new workers."

While the article offers good advice in the need to consider the wider implications of a hike in sales figures, these are nice problems to have, in our opinion.

(Snowball effect image by Flickr user Bikeclimbsail)

Anyone who has ever played Dungeons and Dragons will know that it comes with its own points based reward system. Players amass Experience Points for solving puzzles, rescuing dragons and slaying damsels, that sort of thing, in a Tolkienesque fantasy realm.

The promise of Experience Points, which allow players to go up levels and gain new abilities and powers, provide the incentive for players to perform heroic deeds and pursue picaresque adventures.

In memory of Gary Gygax, the inventor of D&D, who died last month, we have been thinking about whether a reward system is a form of game. The operator of the incentive is the Dungeon Master, who creates a scenario, ie sets up a number of situations, such as selling products, for which players - End Users - can earn points.

But to take this further, adding a game element to a incentive campaign is a great way to add interest and competition to the incentive, and provide a framework or theme for marketing and communication material.

In the past we have created bespoke games as part of incentive campaigns for clients, including ones based on the theme of the World Cup, and pop music Christmas Number 1. They are a great way to add interest and topicality to ongoing incentive campaigns.

If there is anyone who wants us to create a Dungeons & Dragons or World of Warcraft style incentive for them, then please get in touch.

In a move which may have big implications for the incentive industry, a couple in Utah are suing Starbucks and Apple for patent infringement for selling giftcards at a bricks-and-mortar retail store, which are then redeemed online.

As described here:

"James and Marguerite Driessen of Lindon, Utah say they developed in 2000 (and successfully patented in February 2006) a utility dubbed RPOS, or retail point of sale, for Internet merchandising. The concept, which forms the heart of the infringement lawsuit, would allow gift cards for pre-defined items that can be sold at a brick-and-mortar store but used online; customers could redeem a card for a dining room set or a DVD, for example."

When Apple released iTunes Custom Cards, allowing customers to buy a specific artists album or songs, the Driessens asked Apple to license their patent. In response, Apple pulled the cards from the US, but kept them in the UK.

However, in November 2007, Apple launched the Digital Release Album, a gift card again tied to a specifc song or album, and designed to be sold in Starbucks for download in store.

"Starbucks is said to be a complicit partner in the infringement as a willing distributor, selling the cards across the US and holding its "Song of the Day" promotion to encourage purchases of the allegedly infringing iTunes cards."

As well as illustrating the ridiculousness of being able to try and patent a retail model, and the patent trolling which seems to dominate the US technology sector, it may hamper the development of incentive gift cards for specific online purchases.

But in many ways, buying a gift card at a retail store for online redemption is a complete inversion of the logic of retail-online transactions. Surely it would be much better to use an online transaction to gift an item, that the recipient can then choose to have home delivered, go and pick up at a store, if they desired?

This would offer the ease of use and reporting capabilities of an online system with the instant gratification that the retail shopping experience offers.

The Monday after the first weekend of December has been dubbed Mega Monday. It's been identified as the busiest day of online sales of the year. This year, according to The Times, the online tills will ring to the tune of £5 billion, with total online sales for December 2007 estimated at £15 billion.

"Monday is the traditional big day for online shopping because buyers usually turn to the internet after having failed to find what they wanted in shops at the weekend. They also go online to see if they can find a better deal on an item seen in a shop."

As an online incentive company, we see a similar pattern to e-commerce sites. Users of our iD-points products are redeeming points faster than ever - this week will see more points redeemed than any other week in our history.

Meanwhile this video news article on the BBC shows that some people still like going to the shops. "It's all about the shopping experience", claims a John Lews spokesman. But online shopping is now firmly established as an alternative to those for whom battling the madding crowds down the high street is not a positive user experience.

Online incentive solutions are to vouchers as e-commerce is to high street shopping. And the growth of web-based incentive schemes is set to follow the growth of online shopping.

Transport for London have announced this week, that London Underground are ready to launch a system to enable passengers to pay for their train journeys with a mobile phone. The system would initially be launched with handset manufacturer Nokia and phone network O2, but would almost certainly extend to other mobile makes and networks.

This inevitable step follows the launch of the Oyster contactcard payment system, and last month's launch of a combined credit card and Oyster card from Barclaycard.

Over 50% of all phones sold in Japan have the embedded RFID chips that enable this technology. Contactless payment by mobile phones is set to become part of everyday life.

At IncentiveDirect, we believe that the future of incentives are mobile and connected, combinining the freedom of choice of vouchers, with the communication and reporting features that a mobile, online solution can offer. We continue to monitor developments in this sector, and evaluate tools and technologies.

In findings that would make Karl Marx proud, research by Sarah Brosnan and Frans de Waal of Emory Univerity suggests that while monkeys may work for peanuts, they do demand an equal wage.

Researchers taught brown capuchin monkeys to swap tokens for food. Usually they were happy to exchange this "money" for cucumber. But if they saw another monkey getting a grape - a more-liked food and thus a higher level reward - they took offence.

Researchers found that when levels of rewards were not distributed evenly, some disenfranchised monkeys would refuse to work, while others took the food and refused to eat it. Productivity was highest when the fruits of their labour were shared out equally.

"One of the most interesting areas is the recent suggestion that human cooperation is made more effective by a sense of fairness.", said Sarah Brosnan.

Again, applying these findings to the field of motivation is difficult. But we believe giving everyone a chance of receiving some reward, and not just rewarding the top performers is vital to ensure that everyone benefits from an incentive campaign. Otherwise, as the monkeys teach us, you may demotivate those that feel rejected.

Something for Jeffrey Archer to bear in mind next time he sets his typing pool to work on a new novel.

According to this research published on the BBC site, scientists have determined an area of the brain which responds to rewards. Researchers used Magnetic Reasonce Tomography, to monitor brain activity when 2 subjects performed a test task simultaneously, and compared the activity to those who performed best against their test partner.

This is the latest piece of research from the Neuro-economics Lab at Bonn University, published in the latest issue of Science.

'Neuroscientist Dr Bernd Weber explains: "One area in particular, the ventral striatum, is the region where part of what we call the 'reward system' is located. In this area, we observed an activation when the player completed his task correctly."'

Not only this, but this area "lit up" greater when the subject received a bigger reward than their test partner.

'This indicated that stimulation of the reward centre was not merely linked to individual success, but to the success of others.'

Applying these conclusions to the field of motivation and incentives is difficult. But it is perhaps self-evident that a reward is truly motivating when everyone has an equal chance of receiving it, with the best performers receive more.

"Everyday, once a day, give yourself a present. Two cups of good, hot, black coffee"

See more here

As the Calvin and Hobbes cartoon goes: "I like to verb words." says Calvin. "What?" asked Hobbes. "I take nouns and adjectives and use them as verbs. Remember when 'access' was a thing? Now it's something to do. It got verbed. Verbing weirds (sic) language." Hobbes commented "Maybe we can eventually make language a complete impediment to understanding."

Incentives are rife with verbing, ie nouns turned into verbs. Hence giving a gift becoming 'gifting', creating an incentive becomes 'incentivising', just two examples of the horrible corruptions of the English language.

Part of this convolution of English is a deliberate attempt by incentive agencies to make the subject of incentives and motivation seem more elaborate, an arcane practice with secrets known only to the sorcerous experts. But it's a sham, a cover up, a pernicious attempt to put distance between an 'expert' (the agency) and a lay-person (the client).

Be very wary about any company or organisation that starts banding around phrases like "empowering the gifting experience' or "delivering incentivising opportunities". At IncentiveDirect we try to talk straight, and aim not to bamboozle our clients and customers with a secret jargon.

Remember, "Language is a virus", as William Burroughs once wrote.

As anyone with a gym or health club membership knows, the hardest part of going to the gym is getting through the door.

Lao Tzu tells us that even a "journey of a thousand miles starts with a single step". You've got to start somewhere, but taking that first step is the hardest part.

The answer lies in establishing a routine, getting into the habit. Once you've taken that first step, it's easier to keep going.

The same applies to incentives. Making motivation a habit is the key to successful incentive activity. Smaller, regular rewards and communication are much more effective than big, infrequent rewards. Motivation happens via a series of small steps.

We have always believed that rewards and incentives are a key to open a channel of communication between an organisation and its staff and partners. So it's vital that this channel stays open, supplying a stream of regular communication and rewards. A steady drip-drip is better than an occasional gush follow by months of drought.

Make motivation a habit, not an occasion.

Barclaycard have recently launched the OnePulse card which combines a credit card, cashless payment card and an Oyster card for contact-less payments including travel on London Transport.

You can find out more at Barclaycard's faintly ridiculous Institute of Future Living.

We continue to track new formats for payments, which will trickle down to the incentives, creating new ways that they are distributed and redeemed.

As we have stated previously, the future of incentives is connected and mobile.

As reported in the Observer, the British government is proposing to give a grant of £120 to pregnant women:

"All expectant mothers are to be given a one-off payment of around £120 that they will be encouraged to spend on fresh fruit and vegetables as a way of protecting their children from diseases and incurable conditions later in life."

Not only is this totally misguided from a health and nutrition viewpoint, but from a motivational and incentives perspective it is hopelessly flawed.

"The payment - the first by a government that is allied to a specific health target - would be given to women when they are seven months pregnant. It would be linked to them receiving professional health advice on how to maintain a proper balanced diet, and give up drinking and smoking."

Unfortunately, as it is a cash payment, it means the money could just as easily be spent on booze and cigarettes. Being a one-off payment during the seventh month of pregnancy will do little to counteract a poor diet in the preceding month. Fruit and veg might be good for you, but they are not a magical elixir that can undo years of poor diet. The Observer article continues:

"There is also little published research to show that a financial incentive, combined with nutritional advice, is sufficient to persuade mothers from the most deprived areas to change their lifestyle."

This government badly need some advice on incentives. They need to understand that, as previously discussed, not only is cash a very poor incentive, but motivation comes from regular, sustained activity, not one-off payoffs.

What would be more likely to achieve the result the government want? A one-off £120 cash payment, or a monthly box of organic fruit and veg from a home-delivery box provider such as Abel and Cole, accompanied by supporting information and literature?

How much would you value not having to do a 2-hour round-trip commute to work?

Flexible working practices are gaining ground as the means of improving employees work-life balance and improving staff retention. Mobile telecommunications and cheaper laptop computers mean that knowledge workers no longer need to be chained to a desk.

But a study by the UK's City & Guilds and Institute of Leadership & Management has concluded that many managers are suspicious of employees working from home.

As reported in Management Issues, managers may outwardly support more flexible working patterns:

"but scratch the surface and managers remain deeply unhappy about letting employees out of their sight, much preferring to manage a team that is physically sat there in front of them.

The research has found that, while nine out of 10 managers said they trusted remote workers and three quarters recognised they were more productive, a significant minority admitted they were still unable to break their old-fashioned "presenteeism" management style.

This was despite the fact that new technology was making remote working a much more viable option."

As we have previously asserted, work is not somewhere you go, it's something you do. Attempting to enforce mid-20th Century working practices based on Taylorist time-management principles is doomed to fail.

The old image of the 'helicopter' boss, hovering demonically over his staff, will give way to a more enlightened, assertive boss, using communication technologies positively to monitor performance and productivity, and engage with staff.

Incentives are an essential part of the new work ecomony, rewarding productivity, encouraging proactive behaviours, and helping staff set their own goals. Online systems such as iD-points can operate seamlessly across a distributed organisation, wherever it's staff may be.

But these systems can also to build an element of community amongst users. Using the news feature to announce winners of monthly performance awards, for instance, is a good way to highlight the success stories of the company, and to emphasise a shared endeavour.

In 50 years time, the idea of a corporate office building may be as alien as a Victorian workhouse is to us today. The rules of engagement between staff and employers are changing. Heads-up companies will plan to promote self-sufficiency, look to hire self-motivated staff, and inspire them further with well structured, tactical incentive campaigns.

Remember, iD-points can be spent on IT equipment for that tricked out home office!

It turns out the fact we prefer 'instant gratification' is not rocket science, it's neuroscience.

Neuroeconomicists (now I'm guessing you never knew there was such a thing) have been looking at what happens in people's brains when they make seemingly economically irrational choices.

It's not so much the heart ruling the head, but the midbrain dopamine system holding precedence over the prefrontal cortex - in other words the 'emotional' brain ruling the 'rational' brain.

Part of the research, has been looking at rewards and incentives:

"In a 2004 brain-imaging experiment led by Samuel McClure of Princeton, people were asked whether they wanted a low-value Amazon gift voucher now or a higher-value voucher in two to four weeks. McClure wanted to test a specific assumption of classical economics: the idea that we apply the same calculus to the future and the present. If that were true, then the same brain regions should become active whether we are thinking about the results of economic decisions in the future or in the present."

"This isn't what McClure found. When his subjects contemplated receiving gift vouchers in the future, brain areas associated with rationality (such as the prefrontal cortex) became active. These cortical regions seemed to urge people to resist temptation and wait for the more valuable vouchers. On the other hand, when people started thinking about getting a gift voucher right away, brain areas associated with emotion -- the midbrain dopamine system, for instance -- were also turned on. By manipulating the value of vouchers in each situation, the researchers could compare the levels of activation in the different regions. They discovered that the relative amount of activity was "directly associated with subjects' choices". People whose 'emotional' brain areas were more active opted for the spoils of immediate gratification."

We also know the instant gratification rule when spending money too - we'll happily pay a bit more to have something right now rather than wait and have it slightly cheaper.

What does this mean for incentives? It is that lower cost rewards that offer instant gratification have a higher perceived value than higher cost rewards with a deferred gratification. Which means that if you can shorten the cycle from a user receiving their award and being able to spend it and get their prize, then you can actually acheive a better result for less money, providing a better Return on Investment.

At IncentiveDirect, we work hard to ensure the reward-redemption cycle is as short as possible. We're making the redemption process as simple as possible, and working with our suppliers to improve stock availability, lead times and delivery.

Only when a user receives their reward, and they can connect their prize with their performance, does motivation occur. Reducing this time gap as much as possible is the key to successful ROI of incentive activity.

Work is no longer a place where you go, but something you do.

Stories of organisations using rewards as a means of reducing absenteeism, such as the scheme implemented for the Royal Mail, are usually heralded as demonstrating the power of incentives to change behaviour.

I've always felt a bit uneasy about this kind of incentive, and at first I though this was because it's not rewarding a positive behaviour. But I've realised that the real problem is that it rewards attendance rather than performance.

An interesting article at Business Week looks at how American electronics retailer Best Buy has implemented a Results Oriented Work Environment at its' corporate headquarters, judging people on their performance rather than the hours they are at work.

Work place productivity is a myth, generally based around paranoid management who believe they can't control what they can't see. But there are so many distractions in the workplace, from web surfing, dealing with e-mail firestorms to water-cooler summits and office chair jousting, its possible to spend a day at work without getting any work done..

With ROWE, people are not only free to work when they want, but where they want. There are no mandatory meetings and no schedules, which leaves employees to manage their jobs around their lives, not the other way around.

"The official policy for this post-face-time, location-agnostic way of working is that people are free to work wherever they want, whenever they want, as long as they get their work done"

Many organisations are also realising that freeing their staff from their desk is a great way to reduce the requirement for office space:

"Sun Microsystems Inc. calculates that it's saved $400 million over six years in real estate costs by allowing nearly half of all employees to work anywhere they want. And this trend seems to have legs. A recent Boston Consulting Group study found that 85% of executives expect a big rise in the number of unleashed workers over the next five years."

With ubiquitous wireless networking, cheap laptops, and mobile telephony, the idea of commuting to a central office space to spend all day on the phone or computer terminal seems more and more archaic. The role of the office will doubtless change to a more informal, fluid zone for face to face exchanges and collaborative working.

Can a ROWE model also be applied to a retail environment or shop floor, where staff do not have the same flexibility of work patterns? Yes, according to Phyllis Moen, a sociology professor at the University of Minnesota, in this article:

"It's not about being free to come and go," she says, "but being free to come and go based on getting the work done, so covering the show floor will necessitate coordinating with others. It's a revolutionary idea."

Modern performance rewards and incentives will need to adapt to the new realities of the new workplace. With the work-life balance that ROWE offers, incentives will be used to target different behaviours, and assist in helping employees acheive their self-set goals.

I'm getting tired of reading that gift cards, and other incentive rewards, have "trophy value". Imagine Paolo Maldini holding aloft a small piece of plastic that allows him to visit UEFA headquarters to pick up the European Cup the following week, and you'll get an idea of the ridiculousness of this kind of statement.

What articles like this are trying to suggest is that receiving a giftcard or voucher, or points, is somehow inherently rewarding, not to mention motivating, and inspiring.

But try leaving a gift token under the Christmas tree for your kids and see the reaction you get.

Of course, gift cards, vouchers and online points can be exchanged for all sorts of wonderful goods, experiences and memories. But they are not motivational in themselves. It's a deferred gratification, with a time-delay between getting your placeholder and then substituting it for something you want.

At this point I'm not going to argue whether vouchers or points are better in this respect - they each have strengths and weaknesses.

But, if we continue the concept of a trophy, the place at which receives the actual item itself, the iPod, the bike, or the tickets to the concert, is crucial.

If you're redeeming a gift card or voucher, this is likely to be in a shop somewhere.

But if you're redeeming points, the point of delivery is usually at the workplace, where the gifts are received and opened in front of colleagues. This is genuine trophy value.

One of our clients recently told us: "When that first box of stuff arrived for the sales team, and people started opening their prizes, you could see everyone gathering around, and wanting to know what they needed to do to get them. That's when our incentive really took off."

Never underestimate the motivational power of opening a present in front of work colleagues. Gifts have trophy value, tokens do not.

Cash is very ineffective as an incentive reward, not only for it's motivational benefit, but for it's cost efficiency too. The bottom line - it costs more to reward with cash than non-cash incentives.

"It takes $7 in cash for every $1 spent on non-cash incentives to get results" reckons Darryl Bach, distributor relations manager for Quality Incentive Company

As set-out in this article at Manage Smarter, here are ten reasons why cash isn't always king:

1. Cash Becomes Compensation
2. Tough to Take Away
3. Buyer's Remorse
4. No Trophy Value
5. Not Promotable
6. Cash Satisfies Needs--Not Wants
7. Nothing Personal
8. One Size Doesn't Fit All
9. Managers Prefer Noncash
0. No Global Parity

When it comes to incentives, it's not all about the Benjamins.

Games consoles are always popular incentive rewards, and here at IncentiveDirect we have had plenty of iD-points End Users contacting us to ask when they will be able to buy a Nintendo Wii console in the iD-points store.

The truth is, we still don't know. While we knew we were unlikely to get any stocks when the Wii first launched back in December 2006, we thought that new stocks would be arriving by late February, early March, and that there would be availability in the incentives channel. But for there to be no units available by the end of April, shows something is up.

As we discovered with the Sony Playstation and the PSP, the incentives channel is hardly the top priority for the console manufacturers. Getting hold of units is tough. Even so, the shortages of the Wii, both in the retail and incentive channel, is unprecedented.

Occassionally units do come online for sale - there are a number of online stock trackers that will alert you whenever a Wii is in stock - these typically sell out in a few minutes. But for there to be so few units available 5 months after launch either shows either a disastrous manufacturing schedule by Nintendo, a complete disregard for the UK market, or ... a deliberate tactic to keep demand for the Wii high.

On the Freakonomics website, Paul Kimmelman ponders the Freakonomics of Wii shortages, and wonders whether such acute shortages of Wii's are good or bad for Nintedo's PR and marketing, and long term sales. Elsewhere, conspiracy theories abound.

In the laws of supply and demand, scarcity increases demand, and can keep a product 'hot' longer than when there is a surplus in the sales channel. But there is only so long before consumers will switch off a new hot product comes along. That demand for the Wii has survived the European launch of the Playstation 3 is testament to the desirability of the product.

Of course, we're looking to get one for the office too, for, uhhh, evaluation purpose.

According to this BBC news story, young women in the Western Isles may be offered incentives, both financial and non-cash, to encourage them to stay on the islands.

Currently, many young women leave to the mainland to work and study. While the overall population of the Western Isles is predicted to increase, the forecast is for fewer schoolchildren, people of working age and women of child-bearing age. The Hebrides Migration Study found that 71% of those coming to the area were male.