The Incentive Pay Competitive Advantage

by: Mark Herbert March 16, 2021

Big differences in your channel marketing and sales strategies can come from small channel partner actions. For example, they could supply additional contact information or submit warranty registrations and invoices. Even a little extra interaction with your website can reveal important customer information. Incentive rewards can facilitate these actions, increasing your channel data and accelerating your channel sales and marketing initiatives. This results in a competitive advantage as well as improved customer relationships. To take it even farther, you can strategically design your rewards payout system to make your incentive program even more effective. Here’s how you can achieve the incentive pay competitive advantage:

Deliver incentive rewards immediately.

Behavioral studies indicate that instant rewards have a greater impact on work-related behaviors than delayed rewards. Instant rewards even have the potential to increase the positivity associated with an activity, motivating recipients to continue the activity even after the reward’s removal.

Instant reward payout not only increases a reward’s effectiveness, it can potentially make your finance/accounting department happy. When reward costs pay for themselves instantly, incentive program expenses are more predictable and easier to budget for.

You can speed up the delivery of rewards by using mobile incentive technology, allowing participants to engage with the program at any time, wherever they are, from their smartphones. Additionally, using claims verification features allows you to instantly verify invoices, receipts, and other sales claims documentation submitted directly to the incentive program. This technology erases the time between action and reward, giving you the incentive pay competitive advantage of immediacy.

Develop a segmented incentive payout structure.

Segmenting your incentive program audience into smaller groups with similar performance levels can improve the cost-effectiveness of your rewards. Using channel management software, you can group channel partners by region, company, department, or revenue-generation, then run separate sales promotions simultaneously. These promotions can feature different products, different qualifying rules, and different reward payout structures. You can invest more in your top-performing channel partners, for example, by offering them larger rewards.

A strategic reward payout structure doesn’t mean leaving mid- or low-performing channel partners out of the fun. You can still offer them recurring chances to earn smaller rewards, which still have appeal, especially in reward points systems where the points can be accumulated. And keep in mind that online incentive technology is flexible, allowing you to shift funds where they produce the best results.

Use an incentive program billing model that suits your business.

To maintain control of your incentive program payout structure and budgeting, you can work with an incentive provider who offers multiple billing models. You might use a redemption-based billing model, for example, in which you don’t pay for the reward points you distribute until participants spend them on items in your reward catalog. This way, you only pay for rewards spent, and you’re more likely to earn ROI on programs with low reward redemption rates. It’s harder to budget ahead of time for these billing models, though, and it may be necessary to set point expiration rules.

Other billing models allow you to pay for rewards when they are issued to participants, or use a subscription model. Every billing model has pros and cons you should consider. You can pair your billing model with other, complementary strategies such as setting reward point expiration rules to encourage reward redemption. Billing and cost flexibility is one of the best ways to achieve an incentive pay competitive advantage, so work with an incentive company who allows you agility in this area.

Use non-cash incentive rewards.

Cash bonuses and cash-based rewards like debit and gift cards can be very motivating. Money-based reward systems have a caveat, however: used by themselves, they decrease in cost-effectiveness over time. There are two reasons for this:

  1. Cash-based rewards don’t have an emotional impact.

    You can deliver cash rewards in ways that enhance their memorability and association with positive emotions but, for the most part, intangible rewards have a stronger and longer impact.

  2. Cash rewards morph into entitlements.

    Over time, the line between cash rewards and salary disappears. Program participants spend their rewards on things like utilities and groceries. You’ll have to “dress up” cash rewards in increasingly exciting ways in order to distinguish them from tangible rewards.

These two factors result in cash rewards costing up to three times as much as non-cash rewards! To maintain an incentive program that gains effectiveness over time and makes the most out of an incentive pay competitive advantage, use non-cash rewards.

Be simple and consistent while leaving room for surprise.

You should provide a degree of consistency in your rewards payout. The basic, broad categories of reward-earning efforts should not change. No one wants to celebrate an upsell, something that’s earned them rewards for months, only to find that the program rules have drastically changed and upsells no longer earn them anything. Without some regularity, participants are more likely to forget about your program or, worse, have a bad experience and turn to a brand who offers a better one.

At the same time, psychological experiments have shown that unexpected and surprise rewards are very motivating. To be more effective, you have to break up the monotony of the reward-earning experience. Run different sales promotions. Offer “flash” promotions where participants can earn 2X and 3X bonus points.

Balancing consistency and surprise in an incentive program can be tricky. There are no hard and fast rules for how to deliver rewards. By measuring performance, listening to your participants and being willing to experiment, you can find the payout strategy that works for your particular product lines and audiences.

The incentive pay competitive advantage is one of many strategies you can use to make your incentive program more effective, exciting, and cost-efficient. Your program can and should grow with your company over time, so don’t be afraid to try new things!


About Mark Herbert

Mark Herbert is President and CEO of Incentive Solutions. He has more than 30 years of experience overseeing business operations within the incentives industry, helping companies increase channel sales, build customer loyalty, motivate employees, and grow their business.