Since the Bribery Act 2010 came into law in July 2011, there has been a large amount of Fear, Uncertainty and Doubt that incentives, promotions and reward programmes could fall foul of it, and that companies operating such activities may be prosecuted for it.

It’s a situation that is not helped by a lack of clear guidance from lawyers, and the incentive industry itself. Nor do sensationalist headlines in the tabloids help, such as this ridiculous Daily Mail story that claims that tips for the postman could land them in jail. It’s a story that manages to contradict itself, concluding with a Royal Mail spokesman saying:

” ‘As has been the case for many years, postmen and women are able to accept Christmas tips. ‘They cannot, however, be accepted in return for favours or preferential treatment. It is entirely up to customers if they wish to give a tip to postmen and women at Christmas and to what value.”

Under section two of the Act it is an offence if a person requests, agrees to receive, or accepts an advantage, financial or otherwise, with the intention that they or someone else perform a “relevant function or activity” improperly. Under the Act, the maximum penalty for individuals found guilty of bribery is 10 years’ imprisonment and an unlimited fine. But employers can also be liable for their employees actions.

One of the main concern of the Serious Fraud Office, whose job it is to enforce this Act, is of companies using gifts to influence behaviour of individuals without their employers knowing about it.

This article at Out-law.com tries to make sense of the Act, and includes advice from their anti-corruption expert, Barry Vitou:

“The Bribery Act makes it an offence for businesses to fail to prevent bribery by people working for or on behalf of a business. Companies can escape liability if they show that they have ‘adequate procedures’ designed to prevent bribery in place.

Vitou said that it was “key” that business make “fully transparent” any incentive arrangements. Richard Alderman, SFO director, has previously stated that giving incentives can be justified but that businesses should declare what they issue.

“Incentive payments are normally designed for commercial reasons and are commercially justifiable,” Alderman said in a speech in May.
“There are risks though. What we have been talking about with corporates is the need for transparency and, in particular, the need to know where the money goes and the fact that it is justifiable. We also talk about the need for a senior person at the corporate’s head office to have visibility of what is happening and to be satisfied that what is happening is justifiable,” he said.

Alderman has also previously encouraged ‘whistle-blowing’ by corporates.

Vitou said that businesses issuing ‘special payment incentive for fast sales’ (SPIFFS) or similar incentives should only do so if the gifts or payments are made transparently in writing and with the knowledge of the employer of those receiving the incentive. “

Vitou also operates a website dedicated to the Bribery Act, www.thebriberyact.com, and there are several pages looking at incentive programs, such as this one on incentives and promotions, and this on SPIFF prizes.

A look at a history of bribery cases shows that successful prosecutions have all been as a result of clear cut misdemeanours by the offenders, all for cash payments. The first successful prosecution under the new Bribery Act was to a court clerk who took a £500 bribe to ‘get rid of a speeding charge’. So far there have been now cases against a corporation under the new act.

Back to incentives, and the key word emerging from the SFO is ‘transparency’. As long as all parties are clear on what incentives are being made, to whom and for what, then incentive programs are a commercially justifiable part of a company’s sales promotion and customer loyalty strategy. The need for transparency makes it even more important that prizes are distributed as part of a structured incentive programme that can be tracked and audited. IncentiveDirect’s iD-points system makes it easy for our clients to see what points have been distributed to whom.

Where we are seeing a change is in our clients ensuring that the employers of the recipients are aware of the incentive campaigns that are being run. Some of our clients running third-party incentives are choosing to only allow prizes to be delivered to a business, to be clear that these are B2B rewards for business customer loyalty.

Stop the sabotage from The Wow Company on Vimeo.

To summarize:
Ian the fishmonger wasn’t upselling.
Barbara the cashier wasn’t registering users to the mailing list.

Whilst Stein was there that Saturday notionally to “keep his hand in”, ‘Botty’ understands that he was there to stop the inadvertent sabotage of his business. While he is at pains to point out that the staff were otherwise very good at their job, they weren’t going the extra distance. This is because they did not see it as part of their job, there was no benefit or motivation for them to do that. As a consequence, the business was losing out on valuable custom. Rick Stein was prepared to go the extra mile, because he could see the bigger picture, and understand how he could add value to the customer relationship. As the owner of the business, he also had the vested financial interest, of course.

Rewards can change this staff default modus operandi by providing a direct benefit to go beyond the job description. A structured incentive program like iD-points can go further still – to reinforce the behaviours with communication to help staff understand the ‘why’ as well as the ‘what’. It can supplement the basic reward with additional rewards for their ideas and feedback too.

While Botterill is right that no-one will ever care as much as a business as the business owner, incentives can at least help to make them care a lot.

Social media, a term that didn’t exist 5 years ago, is now one of the key means for brands to connect with the customers, and for people to connect with friends and peers. Now social media is moving beyond the currency of ‘friends’ and ‘followers’ and adding new measures of engagement, new ways of motivating participation, and new ways of rewarding success.

The most obvious way that rewards and motivation are filtering into the social media landscape this is through the introduction of game-like elements, such as points rewards, unlocking achievements and abilities (levelling up), and then measures of success such as high score tables, leaderboards, badges.

A great example of this ‘gamification’ is Nike+ from Nike. This takes the usually solitary pastime of running and turns it into a social experience as well as a motivation tool, by recording data from your runs and then uploading them to the Nike+ site from a range of devices, including iPhone and iPod.

As well as allowing you to track your runs and review your running history, you can set goals for distance or time, and reach levels based on total distance covered. You can also tweet or update your Facebook status with details of your activity, set challenges to your friends and also join public challenges. The iPhone app and new Nike+ SportWatch GPS also allow mapping of your runs using GPS data.

Fans of Nike+ (of which I am one – here’s my profile) find that the positive feedback loop it creates encourages them to run more, set targets, and ultimately perform better. The game-like elements help to make users more proactive and provide a support network for ongoing encouragement as well as celebrating achievements

Another great example that has recently launched is the Heineken Star Player iPhone app This allows users to play live alongside Champions League football matches and try and predict when a goal will be scored, to earn points. There are also other opportunities to score points by guessing the outcome of free kicks and corners, plus quiz questions. It provides a new angle to watching a football match with friends and an added level of interest. There is the inevitable connection with Facebook and Twitter and the opportunity to build mini-leagues of friends, alongside the global league of all users. The Heineken branding is ever-present but fairly low-key. Whilst points don’t represent anything other than your score which can be compared against other users, perhaps future versions will translate points into a virtual currency which can be used to acquire Heineken merchandise.

Gamification

Star Player manages to avoid the biggest problem of adding game elements to social networking, which is that they add the reward mechanisms of games but with no real underlying gameplay, or compelling raison d’etre. In Gamification and It’s Discontents, Steven Poole highlights the problems in adding a thin game layer over real life, in that it can provide a virtual presenteeism rather than any real degree of engagement:

“isn’t the idea of being ‘mayor’ of your local Starbucks or indie equivalent, as is possible in Foursquare, rather strange? You don’t become mayor in real life just by turning up at the town hall more than anyone else.”

Poole also discusses a new social game, Chromaroma, based on users travelling habits around London. By using the journey data from your Oyster card (the contactless ticketing technology used on buses and the Underground in London), and now also your Barclays Cycle Hire (aka Boris-bike) travel data, it aims to add a game-like dimension to commuting around London. Users, once signed up, choose to be on the Blue, Green, Red or Yellow team, with the aim of taking ownership of certain stations or lines, based on where they start or complete their journeys. But does anyone really play Chromaroma?

I joined Chromaroma, and it seems rather pointless, if you’ll excuse the pun. In its current incarnation I can’t see it changing the way users travel across London, nor does it turn London into some kind of consensual game-space the way that, say, Streetwars or NikeGrid did, or PacManhattan does in New York. Earning points for completing a travel journey is unlikely to change anyone’s travel habits or which station they travel too, and so rewarding users for doing what they do anyway is rather meaningless. Perhaps Chromaroma will morph into a more narrative, ARG game route like Perplexcity rather than the check-in based Foursquare model.

Gamification, or ‘pointsification’, as Margaret Robertson of Hide and Seek insists it should be called, does not create a full game experience because there are no meaningful consequences from the choices the player makes on the game itself. In other words, if you don’t go for a run, Nike+ will still be waiting there for you when you do.

“Games give their players meaningful choices that meaningfully impact on the world of the game. Deciding to run two miles today rather than one, or drink two liters of Coke instead of four are just choices of quantity.”

The choices you make don’t affect the game at all; the process is all one way rather than being fully interactive. A game should a series of unfolding series of actions which have consequences, positive and negative.

“Games offer fail conditions as well as win conditions. They are able to deliver the high levels of emotional engagement they’re famed for because they’re also adept at delivering the lows of loss, humiliation and frustration. The world of user experience design from which the concept of gamification has arisen has spent the last twenty years erasing loss, humiliation and frustration from its flows. A world of badges and points only offers upwards escalation, and without the pain of loss and failure, these mean far less. And when this upward escalation is based only on accumulation of points, rather than on expressions of my choices and my skills, then this further strips out the sense of agency and competence, so crucial to the emotional and neurological buzz we get from gaming.”

1-Up or 2-Up

Robertson is rightly critical of such a restrictive view of gaming because it can obscure the deeper potential that games may offer not only social media but also customer loyalty and brand engagement. Games like Heineken Star Player show the way that social games can provide an a interactive side-channel, an approach that I can see becoming increasingly commonplace for brands and for business. There is also massive potential for games to become much more integral to the incentives and motivation market, to move beyond the simple game-like elements of rewards, points and achievements to a more dynamic in-game experience full of choices and consequences. These can be used support not just competitive play based on sales performance or other indicators, but also co-operative play such as team-building, training and knowledge sharing.

Facebook has recently launched a service called Deals, which allows users to get special offers at retail destinations when they ‘check-in’ to that location with their Facebook account.

“When you’re looking at the Nearby Places list on your mobile phone, certain places will display a yellow ticket next to their name. Clicking through will show you the details of the offer, and then checking in will display a voucher that you can show to the person on the till to validate it. Types of deal include charity giveaways, freebie giveaways, loyalty card-like counters and deals that require you to check in multiple people at the same time.”

Deals is like a combination of FourSquare, with its social currency of ‘check-ins’ and discount voucher sites like Groupon, and represent the new face of customer loyalty. Beyond simple loyalty cards and rubber stamps, the emphasis is on broadcasting your customer loyalty to your ‘friends’, and is most apt for restaurants and coffee shops.

But perhaps more than genuine customer loyalty, Deals could simply encourage a kind of consumer nomadism, a rootless shifting customer base that constantly moves to where the best offer is. It smacks of presenteeism rather than engagement, a flash mob of punters showing up expecting a discount rather than genuine loyalty between a retailer and its customers.

As some retailers who have used Groupon have discovered, suddenly having a herd of new, temporary customers is a Faustian bargain that doesn’t necessarily translate into long-term, full-paying customers, and whose main winner is Groupon itself. And there’s always the chance that genuinely loyal customers may get shoved to the side by the stampede of coupon waving bargain hunters.

Discounting is always a risky proposition – especially with emerging ecosystems such as Groupon, where a misjudgement can lead to big losses for a business – and can rapidly become a race to the bottom. At IncentiveDirect, we believe incentives that reward sales generation are a low risk way of driving sales and growing business in a manageable, sustainable way.

Watch this amazing animation from RSA illustrating a talk by Dan Pink, a theme also covered in his book Drive.

Pink’s hypothesis is that the path to true motivation comes from within, and the desire of a person to achieve autonomy, mastery and purpose, without which man feels incomplete.

For individual inner peace, that’s a great credo, but for businesses, how can they help foster the behaviours they want to see from their workforce. How for example can a company encourage its staff to be more environmentally friendly at work? This requires instilling a collective sense of purpose and responsibility, a shared vision, and individual autonomy, mastery and purpose has very little to do with it. Incentives are great for those little nudges in the right direction that can result in a major shift in corporate behaviour.

The recession has changed the marketplace forever. The New Consumer will change the way that business and consumers think and behave. From now on, there is a permanent shift in the consumer mindset, and this will translate into the way that businesses operate in order to survive and prosper.

So what does the New Consumer look like

• The New Consumer is more careful about what they buy.
• The New Consumer want to feel connected to the things they own.
• The New Consumer is looking for long term value rather than short term cost saving.
• The New Consumer will only buy once they are convinced it is the right product for them.
• The New Consumer values their time more than ever.

The continued growth of companies like Apple is an object lesson that people are willing to spend, and often pay more, for items that they believe will last longer, serve them better, and save them time. Consumers are growing tired of cheap, poorly made stuff that doesn’t last, clutters up their houses, and makes them feel guilty when they have to throw it out. The new consumer wants to own fewer but better things that have a deeper resonance with them.

A report by Price Waterhouse Coopers states that this mindset is likely to remain even after the recession has ended.

“Companies need to recognize that there will not be a wholesale return to a pre-recession shopping mode and will need to adapt to the changed behaviors and patterns to win in today’s changed marketplace”

This should represent a seismic shift in how businesses sell to their customers. Customer service is becoming ever more important, in helping consumers find the product which is right for them, rather than trying for the quick sale.

This is not just about the High Street, but online retailing too. A recent report by Fast Company shows that bad customer experience when buying online leads to not only a negative impression which is unlikely to lead to repeat custom, but that ‘cart abandonment’, the termination of the sales transaction, could be costing US businesses up to $44 billion a year.

This also needs to filter through to incentive programs. Incentives should focus not just on rewarding the sales team for making the sale, but rewarding everyone involved in making the customer feel like a king. Smarter sales incentives look at the bigger picture and focus on building longer term relationships with customers. Most customer loyalty programs, rubber stamping a card for a chance of a free coffee or a discount, are lazy choices. They are no match for a structured internal incentive solution that empowers employees to offer killer customer service, by:

• rewarding them to improve their knowledge so they can offer better advice
• rewarding them to improve their skills so that they are better employees
• rewarding them for going the extra mile
• making the right sale to the customer
• recognising the lifetime value of a customer

For an inspirational video on how far customer service can take you, check out this video, Creating Lifetime Customers, from Chris Zane of Zanes Cycles. It’s over an hour long but it’s well worth it, and at the end of it you may feel like you want to open a bicycle shop.

What’s also fascinating about Zane’s presentation is that Zanes isn’t just about B2C retail, as they also fulfil bikes for a number of incentive programs for clients including American Express and Tropicana. The same lessons apply to the incentives market. As a provider of incentive services and product fulfilment, we are representing our clients to their customers, and sitting in the middle. To be successful, we need to provide great service both ways.

There’s a fair amount of discussion around at the moment about motivation and incentives, largely inspired by the recent book “Drive” by Dan Pink (of which more another time).

Paul Hebert at the i2i blog has got an interesting observation, that what Dan Pink regards as motivation is not the same as what drives behaviour within companies.

So how do we at IncentiveDirect define motivation and incentives? To us, motivation is about personal desires and drives. Incentives are about behaviour and performance.

Incentive programs drive behaviours, provide direction, and they can help feed motivation.
But motivation, like The Force, only comes from within.

A fascinating article in BusinessWeek looks at the unique culture of online shoe retailer Zappos. The company, founded and run by Tony Hsieh, and now part of the Amazon retail empire, believes it has a unique corporate culture that in itself is a marketable commodity. Visitors pay to tour the companies offices and get an insight into the DNA of the company.

As on online business, all you have is your reputation. You have no physical presence. So Zappos goes out of its way to show a human side to the organisation.

Lots of companies like to make out they’re wacky places to work in order to disguise actually how drone like the work is, and where Zappos fits in this picture is uncertain. It’s definitely not something that would come naturally to a British or European company.

If there is anything to learn from Zappos, is that making a unique company culture can be not only good for staff loyalty but also PR and marketing. Motivation systems have a part to play in building a unique company culture, by rewarding the behaviours you want to encourage.

Progressive companies can target certain actions, for instance internal show-and-tell sessions that help staff communicate and build understanding, and reward good presentations. Prizes for internal company team competitions, logged on an online leaderboard, can act to focus everyone’s attention on key issues and create a healthy competitive atmosphere. Many organisations suffer loss of staff morale when employees do not get a sense of the bigger picture and their place in it, and what else is going on around them, Instead, cliques, petty politics and internal dogfighting – negative competitive aspects – undermine the organisation.

A big part of what Zappos do is to try and make work like play. At IncentiveDirect, we believe a more powerful concept is to try and make work like a game.

Discounts reward the people who pay for goods or services, not the people who buy or use them, and if they are not the same person, are an ineffective form of incentive. This is one area where a B2B incentive is very different to a B2C incentive, where the consumer is usually both buyer and user of the service or product being sold.

An incentive scheme aimed at increasing sales should always be aimed at those who make buying decisions.

Extending this further, it is clear that an incentive that is based on rewards rather than on discounts should be targetted at individuals, not organisations. If the people making the buying decisions are not the ones receiving the reward, then it is obvious that the reward has no influence to the person buying that service or product. There is no added incentive for them to buy that brand, or from that supplier, or to buy more, or a better model – the reward has no effect.

Only individuals can be influenced to change their behaviour through the emotional lure of a reward. Considered in the abstract, organisations make decisions based entirely on logic. But individuals within that company will still act emotionally. Buyer Decision Processing is still an emerging field of cognitive science.

There is no point in rewarding a company, you should be rewarding the person within the company who makes the choice to buy from you. Rewarding customer loyalty involves engaging individuals.

Attracting a fair amount of press coverage recently has been the publication of a book Scroogenomics: Why you shouldn’t Buy Presents for the Holidays by Joel Waldfogel. In it, Waldfogel argues against buying gifts at Christmas, suggesting that people consistently value the gifts they receive as less than their actual cost.

“When other people choose for us they do a poor job compared to when we choose for ourselves,” explains Mr Waldfogel, and calculates that “dollars on gifts for you produce 18 per cent less satisfaction, per dollar, than dollars you spend on yourself.” As an economist, Waldfogel views this as value destruction, to the tune of about $12 billion per year in the US alone.

There’s some interesting ideas here, and it’s tempting to think that it leads to the conclusion that cash makes a better gift choice than a present. However, studies have consistently shown that cash gets absorbed into satisfying needs rather than wants, making it harder to justify buying something they really want. ‘Buyers remorse’ is the name for the guilty feeling that people feel for treating themselves.

Waldfogel isn’t a total miserypants – “my beef is not with level of spending at Christmas but rather with the waste that this generates”, and acknowledges that presents, if well chosen, can actually add value,

Interestingly, Waldfogel proposes that giftcards could potentially be a less wasteful way of giving, if the amount that is wasted via non-redemption (euphemistically called ‘breakage’ by the voucher industry), could revert to charitable donations when they expire. But there is a greater chance of Christmas being cancelled before retailers adopt this practice,

We believe that our online points system iD-points provides the best of both worlds. It provides a mean for a recipients to choose their own gift, and get something they really want but without the buyers remorse that comes with cash. Recipients have no alternative but to treat themselves with great products from leading brands.