Incentive program
An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. Incentive programs are particularly used in business management to motivate employees and in sales to attract and retain customers. Scientific literature also refers to this concept as pay for performance.
Types
Consumer
Consumer incentive programs are programs targeting the customers of an organization. According to research from 1990, increases in a company's customer retention rate as low as 5% tended to increase profits by 25%-125%. Consumer programs were becoming more widely used as more companies realized that existing customers cost less to reach, cost less to sell to, were less vulnerable to attacks from the competition, and bought more over the long term.Employee
Employee incentive programs are programs used to increase overall employee performance. While employees tend to approve of incentive programs, only 27% of companies have such programs in place. Employee programs are often used to reduce turnover, boost morale and loyalty, improve employee wellness and safety, increase retention, and drive daily employee performance.Sales
These programs are primarily used to drive sales, reduce sales costs, increase profitability, develop new territory, and enhance margins. Sales incentive programs have the most direct relationship to outcomes. A sales incentive plan is a business tool used to motivate and compensate a sales professional or sales agent to meet goals or metrics over a specific period of time, usually broken into a plan for a fiscal quarter or fiscal year. An SIP is very similar to a commission plan; however, an SIP can incorporate sales metrics other than goods sold, which is traditionally how a commission plan is derived. Sales metrics used in an SIP are typically in the form of sales quotas, new business opportunities and/or management by objectives independent action of the sales professional and are usually used in conjunction with a base salary.SIPs are used to incent sales professionals where total sales are not a precise measure of sales productivity. This is usually due to the complexity or length of the sales process or where a sale is completed not by an individual but by a team of people, each contributing unique skills to the sales process. SIPs are used to encourage and compensate each member of the sales team as they contribute to the team's ability to sell. It is not uncommon for the members of such teams to be located in different physical locations and for the product introduction to happen in one location and the purchase of such a product to occur in another location.
Dealer incentive programs are used to improve performance for dealer, resellers, channel partners and other types of brokers using sales incentive programs. These programs help companies capture market share, launch new products, reduce cost of sales and provide momentum for new launches by incenting an external party to drive additional sales.
Reward types
Selecting the appropriate rewards is vital to any program's success. The goal in choosing rewards is to select items that will spark the participant's interest or feelings, and support the program's objectives. Effective rewards will both motivate short-term behavior and provide motivation over time. There are several types of rewards.Cash
While incentive program participants often state that they prefer cash to non-cash rewards, research has shown that cash is a poor motivator due to its lack of "trophy value." In a recent study conducted by the Center for Concept Development, three of five respondents agree that a cash payment is perceived to be part of an employee's total compensation package and not as part of an incentive program. Additionally, cash is quickly forgotten as many participants tend to spend it on everyday items or use it to pay bills. Given that most people do not generally talk about cash awards, cash programs do little to generate the interest required to create an effective incentive program.Research shows that pay for performance often gives only short term gains, frequently gives no gains at all, and may give reduced performance.
These are usually the simplest reward websites from the user's perspective, since the reward website will usually display a task and the amount of cashback that will be rewarded for completing the task. Cashback websites are often rewarded for online shopping and there is usually a threshold on when a customer can withdraw their earnings, driving loyalty to the cashback website.
Points
Points-based incentive programs are a type of program where participants collect and redeem points for rewards. Points programs may be used to incentivize both employees and consumers. Depending on the program type and the organizational objectives, points can be awarded on a number of criteria including positive employee behavior, the demonstration of organizational values, repeat customer purchases, the sale of new products, increased overall sales, or even the use of proper safety precautions. In addition to point awarding, the levels at which points can be redeemed can be customized by the organization. Points programs are a way for organizations to motivate behavior over time while improving the organizations’ overall performance. Loyalty programs are a frequently used points-based incentive program in which customers who exhibit a certain behavior are rewarded with points, reinforcing that behavior.The reward website will usually only display the reward for performing a task in terms of points. These points can then be converted, for example, into online gift vouchers. Alternatively, for each point collected, or after reaching a points' threshold, customers sometimes receive an entry into a sweepstake. This means that the website only ever gives away a pre-determined prize, regardless of how many points are given away.
Shares in the company
Share rewards websites operate on a model where customers can become stakeholders in the platform or a related company by simply registering as members. Upon becoming shareholders, users have the opportunity to increase their ownership stake by completing various tasks. These tasks often involve actions such as participating in online shopping, completing surveys, or engaging with promotional content. As customers perform these tasks, they earn rewards in the form of points or shares, which contribute to an increasing equity stake in the website or its parent company.This type of system blends traditional customer loyalty programs with elements of equity participation, providing users not only with immediate rewards but also with long-term potential benefits tied to the company's performance. By incentivizing active participation in the platform, these websites promote user engagement while aligning customer interests with the business's growth. Customers benefit from both the rewards earned for their actions and the potential appreciation of their shares, fostering a deeper connection to the platform and encouraging repeat interactions.
In this way, share rewards websites create a mutually beneficial ecosystem where customers are more than just users—they become part-owners with a vested interest in the success of the business.