Archive for the 'Merchandise Awards' Category
The machinations of how the incentive industry has been hiding the price of awards in points based systems is made somewhat transparent by reviewing this article from Fox Business online. While the article is specifically about the value of points in a Bank of America’s World Point program when redeemed for gift cards, this information can be used as the basis to determine value of points in any type of points based incentive or employee recognition system.
For years the incentive industry did a magnificent job of hiding the value of an award in these points systems. By adjusting the cost of the point from the supplier incentive company to the corporation implementing the incentive program, you could easily hide the “price” of the award. In past years it was not uncommon for incentive companies to change the cost of these points simply to camouflage the value. We’ve seen them range from 1 cent to ½ cent to 1/32 cent to a dollar and every number in between. Then all the incentive company had to do was provide “excellent service” to deliver these awards and everyone was seemingly happy.
But then gift cards arrived on the scene! And oh how the incentive industry fought their introduction, knowing that it would be transparent what a $50 gift card should be worth in points. By simply dividing the value of the card by the number of points needed to redeem for it, the cost or value of the point was apparent. If you had merchandise included as an offering in a program the same calculation holds true. It was then that folks started to see that the TV that looked so good in the incentive catalog had a point cost of twice or more what you could purchase the same TV for at Best Buy.
It is no wonder that the growth of gift cards in the incentive industry has been exponential since inception. Today they represent by some research over 90% of all incentive expenditures. And, when gift cards are available as an option along with merchandise in an incentive or loyalty program, the redemption of the points for gift cards vs the merchandise can easily exceed 95%.
During that time the AwardofChoice card has had significant growth as well. It is the only gift card system that offers a $ for $ value, no fees, no markups, no hidden costs. If you had a $50 AwardofChoice card in your loyalty program and the cost of the point was the traditional $0.005 ea. you would only need 5000 points to get an AwardofChoice card. It is without a doubt the best value in the incentive and employee recognition industry today.
The September issue of Incentive Magazine reports on the 11th Annual incentive industry roundtable on several topics relevant to the incentive industry.
The roundtable is composed of “some of the top thinkers in the incentive business.” They meet usually in a nice resort or hotel (the resort & hotel industry is part of the incentive industry) and discuss many issues, usually including in part the state of the industry overall as well as specific awards within the industry. Awards like individual travel and group travel, advertising and specialty items, merchandise and gift cards. As these products compete with each other for corporate budgets, we enjoy reading the different opinions depending on their point of view. If you were a client in the room, you could leave with a lot of confusion over what award you should use for your incentive budget.
As we are of course bias toward gift cards, it was fun this year to compare the views of a couple of the “top thinkers”, one the head of award merchandise fulfillment company, the other the CEO of a national gift card incentive supplier.
Let’s take a look at their opinions. Mind you they are talking about the same industry at the same time and they both count as customers many of the top Fortune 500.
“We are seeing a leveling off of traditional gift cards as a reward option because …the gift card economics are inferior to other reward options…gift cards have an inferior trophy value, and the introduction and development of digital media.”
Gift Card CEO
“Our clients continue to invest in four major areas…home improvement, electronics, experiential (I’m going to do something for me (spa, cooking classes etc.) and family dining, Gift Cards give ultimate choice and the latest research by the Incentive Research Federation shows the gift cards are preferred five times more than cash, and five times more than merchandise. I’m not trying to talk negatively about merchandise but when we offer merchandise and gift cards, we always get at least 90% of the spend on gift cards.”
Now, suppose you are a client trying to make up your mind between using merchandise or gift cards as the award in your incentive or recognition program and which one would make the most sense to offer?
As long as there are incentive salespeople being paid five or even ten times more in commission to sell merchandise over gift cards, this argument will continue. Frankly we don’t really have a bias; we think you should use them both as an option. Our research over the last ten years shows that we will receive over 90% of the business anyway.
There’s no doubt that the electronic options available for gift cards will make them more and more popular as an employee award. Gift cards have grown to become the #1 incentive and recognition award in only a few short years. Now with the ability to issue and redeem gift cards from your mobile phone or other electronic devices, gift cards will only grow in popularity.
Consider this article from Bankrate.com stating that big named retailers and a major credit card issuer have recently rolled out e-gift cards and it won’t be long before most retailers will have this option. According to Rebekka Rea, Executive Director of the Retail Gift Card Association
“It’s definitely something that if retailers don’t have now, they are behind.”
While new technology will continue to help in the growth of e-cards, this market is still small and makes up less than 5% of the close to $100 billion in gift cards purchased last year. No one thinks that the traditional plastic cards will be disappearing any time soon, or ever. There’s something to be said for the use of the old plastic especially in the desire to give or reward something that is tangible. But as the newer generations who live in the digital, texting and IPad world become the heart of working class America, it’s only time before this type of award system takes over the old world of the pewter trophies, the diamond watches and the silver bowls. Those items may still be in recognition and reward programs, but the channel to acquire them is changing dramatically. I would be concerned if I were in the traditional merchandise award business where winners are forced to go to a website to pick from a rather limited list of items. That won’t be their world.
We are often asked by prospective customers why we feel that gift cards make the best employee awards. The simple reasons are that they provide the best value and choice than any other merchandise award, mainly because with gift cards you can get just about any kind of merchandise available in the incentive industry, but your choices of just the right one will be dramatically greater, and the cost will be dramatically less.
In our daily surfing of the net on the subject of awards we come across many articles, this one, giving us another reason why gift cards make great awards, caught our eye. It relates a new shopping event for the after holiday season designed to entice those who received gift cards for Christmas to come in and spend them on a certain weekend…the GCW or Gift Card Weekend Sale. Many partner companies have used this concept to drive incremental sales in January. The gift card recipients can redeem their gift cards from participating retail partners and receive extra value through special deals posted on the GCW website that will be offered that weekend only.
As a very large percent of the incentive and recognition awards budgets are paid out to participants at the end of the year, having sales like the GCW actually increases the value of the award to the participant. If they earned a $100 gift card, it could be worth $125 to $150 on these sales.
For years, the traditional merchandise award companies have used “sale” pricing on a few of their items to entice participant redemption, unfortunately most of the awards in the typical incentive catalogs are so overpriced that even by offering a discount the prices are still quite high compared to the sales that a gift card holder can take advantage of.
If you want to give your participants the items they really want, let them have the gift card that they want. Let they choose from over 500 of the most popular gift cards in the country by giving them the Award of Choice card.
There is some interesting data that has come out of the 2011 gift card survey of subscribers to Incentive magazine.
First, the number of responses from large budget incentive users has nearly doubled over 2010 figures. Traditionally companies with these large programs who have used other forms of awards for their programs now seem to be embracing gift cards as their award of choice. One reason we believe is the value and choice given by gift cards that was not readily apparent in the traditional merchandise awards. This trend has been increasing for several years, but 2011 seemed to be a peak. According to the survey:
“Of special note to gift card suppliers are the survey responses that place more value on gift cards than merchandise – gift cards are overwhelmingly seen as a more influential incentive or reward than other options. Since 57 % of respondents said their budgets were untouched for 2001, the outlook for gift card suppliers is even brighter this year.”
A significant survey question was:
How gift cards compared to traditional merchandise awards?
- 59.6 % said more effective
- 27.6% said equally effective
- 5.7% said less effective
- 7% didn’t use merchandise.
These types of responses would have been unheard of twenty years ago. Traditional merchandise awards had been the backbone of the incentive awards industry because they drove all the profit. There was only a small handful of suppliers selling gift cards and only to a limited market. Today gift cards are very well accepted as an award that will drive performance. They no longer have that “impersonal” label that was given to them by all the traditional merchandise suppliers when faced with them as competition.