“If A is a success in life, then A equals x plus y plus z. Work is x; y is play; and z is keeping your mouth shut.”
Albert Einstein

Usually motivation is driven by rewards for success. But here’s a site, Lose it or Lose it, that helps people to lose weight by punishing them (in the form of lost money) for failing to achieve the targets they set themselves. It’s choosing sticks over carrots

It’s an odd premise, especially since users must stake their own money which they ‘win’ back by meeting the weight-loss objectives they set themselves over the 10 week program. The theory is that by declaring publicly the goal (which requires 2 or more ‘accountability’ friends to verify your weigh-ins and support you) and putting something tangible at risk, ie hard cash, you are more likely to achieve them.

But a counter argument is that announcing your plans may make you less motivated. For some people, declaration of action can provide a “premature sense of completeness”, which then results in a reduction in the drive to achieve those plans.

Lose it or lose it is an interesting experiment in try to externalise a process of self-motivation by creating a game-like condition. Self-motivation is a fascinating subject area, full of the little cheats and rules we set ourselves to try and compel us to achieve the goals we desire.

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.

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.