Mondays are the best day of the week for us. Why? Because that’s when all the new music and DVD’s come out. Fridays are also great because that’s when new games hit the shelves.

I’ve never forgotten that feeling of dashing to the record shop to buy the new album from my favourite band on the day it was released. With the modern advent of digital downloads and online shopping, these rites of passage may be less obvious, but the feeling doesn’t go away. It’s why people wait all night to buy the latest Apple iPhone, or queue to buy Windows 7, on the day it is released, or that line up outside games shops to get the latest must-have title. The power of modern marketing, creating launch-day fever, makes the simple act of purchasing a product part of a greater cultural event or communal experience.

At IncentiveDirect, we don’t just sell stuff. We love stuff. We love learning about new releases, researching new products, and finding out about the great gadgets coming down the line. This time of year is when all the big hitters are released, for the most important retail quarter of the year. We’re busy adding new entertainment titles, and getting excited about each week’s new batch of products.

A core part of our business at IncentiveDirect is supplying aspirational products from leading brands. This is what drives our customers End Users to improve their performance – to up their game, to work harder, to work smarter, to sell more, to do more. Without great products and prizes to aim for, the motivation is lost. Points mean nothing – it is what those points can be exchanged for that determines their value.

Aligning an incentive with phenomena such as new product launches, cultural events and sporting contests, allows a company to tap into the zeitgeist. It can be a great help in providing a theme and rich source of imagery and copy for creating marketing collateral such as flyers, e-mails and other communications. But it can also allow you to feed on the buzz and build upon it, adding competitions, quizzes and associated activities and prizes to carry your users along.

Associating your activity with aspirational brands and new releases is a powerful way to drive powerful user engagement and keep your incentive activity fresh and timely.

On one level, IncentiveDirect are a logistics company. We ship stuff, all across Europe. We have a deep and wide relationship with an array of couriers, box shifters, men with van, and postal services, both for deliveries and collections.

We’ve seen delivery charges rise sharply over the last year. Perhaps due to the recession, perhaps due to rising fuel costs, it seems that these days delivery companies are less happy to lose on the swings and win on the roundabouts. In other words, few couriers will now accept that they will make less money delivering to the out of the way destinations than the closer to home destinations. Instead, not only have they ramped up overseas delivery charges, they have brought in an array of additional surcharges to deliver to anywhere off the beaten track in the UK. It seems that if they have to cross a body of water, then the price increases dramatically. Deliveries to the islands of Scotland for instance, will attract surcharges, as do the Scilly Isles and the Channel Islands, but now so does Northern Ireland. Some couriers even add a surcharge to deliver to the Isle of Wight. We’re even seeing the Scottish Highlands being treated differently from the rest of mainland Britain.

In our iD-points online incentive system, the price that users pay in points needs to cover the cost of shipping, so we need to know the cost to ship an item to the users destination, before they order it. This year we have spent a lot of time tweaking our system so we can manage these additional shipping costs to non-mainland UK destinations.

The only provider which still offers a ‘universal service’ to the whole of the UK is the Royal Mail, which is bound to deliver to the whole of the UK for the same cost. Meanwhile an array of providers have come in to cherry-pick the lucrative mail contracts, which may be able to offer a cheaper service for some deliveries, but whose costs and surcharges rapidly escalate if the delivery is beyond central England. In a deregulated business environment, this is perhaps inevitable, but it is not a level playing field for the Royal Mail.

On the whole, the Royal Mail offers a fantastic service, at a price that no other provider can match. It’s in everyone’s interest that we have an efficient national postal service in the UK, offering a universal service, and that can continue to provide a quality service at a reasonable cost. We hope that its staff and management can resolve their differences, and work together to help Royal Mail to improve its service further.

In an interesting presentation from the July TED conference, career analyst Dan Pink makes a convincing case that incentives are ineffective at enabling innovative thinking. This is something that social scientists know, argues Pink, but that business seems keen to ignore. Incentives are only effective at improving performance along already established paths, not in enabling the forging of new paths.

It’s an interesting presentation because it should force all operators of incentive solutions all to think about whether they are stifling the behaviours we are trying to promote.

There is a flip side to this, and this is the success of prize funds such as the X-Prize, or the Netflix recommendation engine prize.

Called the Netflix prize, a reward of $1 million dollars was offered by the movie rental company, to any team that could improve film recommendations that were 10% better than those produced by its current system. Earlier this year, a team managed to achieve this, after nearly 3 years and a massive collaborative effort. In fact, thousands of people entered the competition, many of whom would have had no chance of winning, but saw the opportunity to learn about machine intelligence with a state of the art set of test data.

So the question is whether the prize hindered the finding of a solution, or enabled it? Certainly Netflix has earned marketing and PR coverage and respect from the development community to more than justify the $1 million prize, but how many teams would have persevered if there had been no prize at the end of it.

Perhaps the answer lies in a blog post by one of the participants of the Netflix contest, Justaguyinagarage. In his post, Reflections on the Netflix competition, he gave kudos to Netflix for running the competition in such a well structured way:

“It was run in an exemplary fashion throughout and should, I believe, become the model for other competitions that people might choose to run. Some of the key features that made it such a success are:

a. A clear, unambiguous target and challenging target. How a 10% target was chosen, will I suspect, remain forever a mystery but it was almost perfect – seemingly unattainable at the beginning and difficult enough so that it took almost 3 years to crack – but not so difficult as to be impossible.

b. Continuous feedback provided so one could identify whether the approaches you were investigating were going in the right direction.

c. A forum so that the competitors could share ideas and help each other (more about that later).

d. Conference sessions so competitors could meet and discuss ideas.

e. Zero entry cost (apart, of course, from the contestant’s time).

f. A clear set of rules.”

As a set of guidelines for anyone looking to run an incentive, these could hardly be bettered. An objective, unambiguous target, a clear set of rules, feedback and discussion forums to promote knowledge sharing – these are surely the ingredients for successful incentives, whether the objectives are simply to sell more stuff, or something that requires creativity or innovative thinking.

For Dan Pink, the answer lies in what he calls “intrinsic motivators”, understanding peoples inner desires, which Pink subdivides into three categories: autonomy -”the urge to direct our own lives”; mastery – “the desire to get better and better at something that matters”; and purpose – “the yearning to do what we do in the service of something larger than ourselves”, which can be achieved giving employees more freedom to choose their own destiny. So is it possible to use incentives to drive people to achieve these goals? The Netflix prize would seem to show that it can.

The low risk of incentives make it easier to fail often, and fail better.

People are conditioned to try and avoid failure, but this often prevents them taking chances. In looking to create a marketing promotion, too many companies avoid creating memorable and effective campaigns because the costs of implementing the campaign are so high that they can’t afford to get it wrong. “Not getting it wrong” is more important than “getting it right”, so the results are often just “kind of okay”. Or worse still, having invested so much money into a marketing campaign, more money is poured in, trying to turn a donkey into a racehorse. Economists call this a sunk cost fallacy.

The low cost of implementing an incentive campaign, using a system like iD-points, allows a company to try different approaches to drive sales. If one approach is not working, it’s easy to change the parameters, to move the goalposts, to create a different set of drivers and incentives, until an effective one is found. It’s possible to take a risk, get the feedback and measure the success, without incurring high sunk costs where the temptation is to keep plowing in more money. If something isn’t working, try another approach. Crucially, if the effectiveness of incentive activity starts to fall away, the parameters can be shifted and the activity refocused.

Incentives are the low risk marketing option.

A prospect recently said that a customer loyalty program was not needed because they got 80% of their revenue from 20% of their customers.

This company wasn’t unique – most small companies’ business also fits the 80/20 rule – also called the Pareto principle or the law of the vital few

Like any other small company, they get the majority of their income from a small number of regular customers to whom they probably have to give exceptional service for fear of losing them. There’s no requirement to run a loyalty incentive for those customers.

But that is exactly the point – how does a company engage with and increase it’s business with the other 80%?

How about an incentive for those customers that may buy occasionally? A customer loyalty incentive is something that could turn an intermittent client into a regular, valued customer.