Sunday, November 27, 2005

Nine Basic Steps To Building the Right Incentive Program

According to the Incentive Marketing Association, there are nine basic steps involved in developing well-designed incentive programs:

#1 Establish Objectives

Identify what goal/objective needs to be accomplished; for example: improve attendance, increase customer satisfaction, foster teamwork and reward long-term employees. The objectives must be specific, measurable and obtainable. Begin with a clear, briefly stated objective and communicate it to all participants.

#2 Outline the Strategy

Build the foundation of the incentive program carefully, expanding on the methodology to be used. The program structure should identify the exact target audience, and anyone else who will be influenced by the program. The size of the group is important to the budget of the program, as well as the ability to communicate clearly and measure the results accurately. Other considerations are geographic boundaries or regions, legal considerations, family issues, the length of the program and timing, individual goals or team goals, and of course, the reward.

#3 Measure Performance

Define both quantifiable and qualitative goals that can be measured, and keep it simple. It might be necessary to look at historical data and come up with an average in order to define a particular goal. The goal needs to be fair to all involved, and obtainable by everyone.

#4 Establish the Budget

In general, the three elements of budgeting include: number of participants; length of program; and expected results.

There are two types of award budgets: 1) closed-ended, and 2) open-ended. You need to determine the maximum costs involved with a closed-ended program, and an estimate of costs involved for an open-ended program. The budget is then determined by the "value" the company will realize from the improvements made by the incentive program.

#5 Budget Elements

There are four main budget items. Each item becomes a percentage of the total program cost as detailed below:

Awards: 80%*

Communication/Promotion: 10%**

Administration: 5%**

Training/Research: 5%**

#6 Select the Perfect Award

It is important to select the correct award because if the individual is not emotionally vested in obtaining the incentive award, he or she will not pursue the goal. Spend some time speaking with the target group and select an award within the framework of the budget that will be important to the group.

#7 Administer the Program

Administration is approximately 20 percent of the program budget, and a good 50 percent of the planner's time. The target group needs clear, consistent communication and timely feedback on measurement of their performance.

#8 Celebrate Success

The end of the program should be celebrated with the target group, and performance measurement by individual or team should be provided at this point. Individuals should then receive their awards.

#9 Analyze the Success

Did the incentive program achieve its objectives? Were the participants motivated to change their behavior? Remember, an incentive program provides a short-term gain, and follow-up programs are important. Start planning the next one today.

* For merchandise awards, this includes shipping (about 10 percent of the cost of the items) and taxes (about 6 percent of cost).

**The last three categories are fixed costs comprising 10-20 percent of incentive program costs.

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