Cash v. Non-Cash Rewards
Which rewards create the most motivation in an incentive program?
One of the most baffling contradictions in incentive marketing is found in the debate over the effectiveness of cash as a reward. For years, business mangers and incentive industry experts have seen, in real-world practice, that tangible rewards (non-cash – merchandise, travel, exclusive privileges) consistently prove themselves as more effective at capturing and holding the interest of people, generating excitement and motivation, and driving program results towards business objectives. But if you were to survey a random group of people, asking if they would prefer cash or a non-cash reward, the resulting answer would unequivocally be – cash.
It’s an important issue - the selection of rewards offered in an incentive program can be a critical driver of its eventual success. So, what rewards are going to generate the excitement needed to launch a program successfully and then keep participants motivated and actively participating months or years from now?
Recent Research Sheds New
Light on the Cash v. Non-Cash Controversy
Recent academic research on the psychology of decision making may be bringing
some clarity to this often murky issue. A study conducted by at Wichita State
University (and set for publication in the Journal of Economic Psychology, under
the auspices of the International Association for Research in Economic Psychology
) revealed that when given a choice between cash or a cruise or HDTV worth the
same amount people pick will pick cash 63% of the time.
When the same research team asked people to rate how happy or satisfied they would be to get either the cash, the TV or the cruise as a bonus (with no choice or comparison being made) the HDTV and cruise consistently outscored cash. The hypothesis of the scientists was that people were more excited by and would actually enjoy the non-cash rewards more because of the affective (fun, emotional) properties they possess. But when given a choice between a tangible reward and cash, the utility value of cash would lead many to make a more practical, less satisfying decision.
Evidence from Industry Practices
That said, do non-cash rewards generate more excitement, motivation and higher
performance than cash? Goodyear tire ran an A/B test during a 6 month sales
incentive program run in 900 company owned stores – half of the stores
were offered a cash incentive for every 12 tires they sold, the other half a
collection of merchandise items worth the same amount. At the end of 6 months
the non-cash group outpaced the cash group by 46%. The ROI for the non-cash
program was 31%…the cash program ROI was –20%. Needless to say,
Goodyear is firmly committed to non-cash incentive programs.
This is consistent with what we’ve seen at Incentive Solutions in over 30 years of incentive marketing – that offering non-cash rewards will make your program more motivating, cost effective and successful. Our RewardTrax® platform-supported programs offer a diverse selection of non-cash rewards to participants and the motivation.
Below is a summary of widely-held observations on the advantages that non-cash rewards hold over cash as a reward:
- Cash has little emotional value
and no upside. A dollar is a dollar. Transferability is its most exciting
attribute.
- The affective, emotional elements of non-cash rewards afford them higher perceived value, aspirational qualities and a greater capacity to motivate.
- Cash has no lasting effect. It gets psychologically mixed in with income, spent on bills (or other forgotten necessities), and almost immediately loses its association with the sponsor of the award and/or the achievement that earned the award.
- Luxury, non-cash rewards bypass justification or practicality, which can turn them into high value, guilt-free indulgences…thus coveted and very memorable.
- It is more interesting and acceptable to show off, discuss and acknowledge non-cash rewards, providing positive social reinforcement and the pride of trophy value to the recipient.
- Merchandise rewards are visible and create a lasting association with
the sponsor of the award and reinforcement of the achievement that earned
the award.
- Travel awards are persist in the form of positive memorable experiences, which form a lasting link to the sponsor of the award and/or the accomplishment that earned the award
- Cash tends to become considered an entitlement; non-cash rewards will
always be seen as something extra and specifically earned for a particular
achievement
Non-cash rewards are often enjoyed by family members as well, which elevates interest and motivation in the program
If you’d like to read a more detailed study of the psychology underlying cash and non-cash rewards, visit the Incentive Research Foundation and download “The Benefits of Tangible Non-Monetary Incentives”. www.theirf.org
