Archive for the 'sales incentives' Category
What Incentive or Recognition Award to Use?
Author: Ley
Whether it’s old age setting in or just a little nostalgia, I often find myself thinking back to my early days in the industry and contemplating how things have or haven’t changed. I see articles written on subjects that aren’t really different from what was said many years ago. It’s almost as if we just dust off old philosophies and restate them in today’s terms and for today’s audience. One thing’s for certain, the philosophy of why and how to motivate performance hasn’t changed much. The tenets and rules we used in the 60’s and 70’s are just as valid today as they were then…and in some cases even more so. Have generational changes brought us back to the future? Read the rest of this entry »
read comments (1)
It is a well known fact that the merchandise awards offered by incentive award suppliers are priced higher than the average retail price for that same award. Comparisons of these prices to retail are rarely offered by the merchandise award vendor, so it is left up to the client to determine if these high prices are worth the services offered. We offer the following to assist you in your buying decision of merchandise awards.
What is Retail?
Today’s consumers are the most price conscience of any consumers in history. There is an unending array of communications available on the web and through social networking for an individual to almost instantly determine the fair price of anything.
Incentive companies will use what they call MRP or Manufactured Recommended Price as their definition of retail and then add fees. MRP always contain the highest margins possible for the retailers. However, because of the law, the manufacturers cannot impede a retailer from selling their product below that price. So what is retail? It is what the item sells for in the marketplace. And free market fluctuation is what our economy is all about. Retail is whatever a consumer is willing to pay. And no one really pays retail anymore!
An incentive company needs to establish their pricing usually on an annual basis, but retailers change pricing as often as they need to depending on market conditions. Prices change monthly, weekly, daily, or even hourly. Would your participants be better off receiving an award item of merchandise priced in January, or shopping for that same item (with most likely hundreds more to choose from) at sales throughout the year and especially at the holiday season? Or would your participant rather have the latest hi-tech in demand item priced as it first appeared on the market, or six months later when competition has had a chance to catch up and force lower pricing? Retail pricing is fluid and is constantly changing; the incentive award pricing by comparison is hopelessly archaic. Paying MRP retail is bad enough, paying 50% more than retail is ridiculous!
In addition, the majority of merchandise sold by manufacturers to retailers is at a price that is consistently lower then the same price of the merchandise sold through independent distribution to the incentive industry. Why? Because the Wal-Mart’s, Best Buys, Home Depots etc buy more of any given brand on a daily basis than the incentive industry does in a year. The combination of these simple facts, and the need of the incentive companies to compensate sales organizations the high commissions necessary to sell their product, all add up prices that are easily 50% or more higher than retail.
Value of the Web – Do the Simple Math
Virtually all incentive merchandise pricing schemes were developed prior to the web. Without it, comparing pricing was at best done casually or not at all. Without comparisons to retail to keep the incentive industry honest, they were free to establish any pricing they could get away with. It was (and often is) not unusual to see merchandise award items priced at 35% to 150% more than retail. See for yourself! Take any ten items from your award program, determine exactly what you pay for it, then go on the net and plug them into Amazon and see what they sell for. If not Amazon, use the other companies who have online services such as eBay, Wal-Mart, Best Buy, Home Depot, Overstock.com, Costco, Sam’s and scores of others.
What’s a Competitive Price?
To the merchandise suppliers, the definition of competitive pricing is comparing their pricing to other merchandise suppliers. They will do all they can to not have to compete with retail pricing as the competition, because they can’t. Does that mean that you should pay exorbitant pricing for award merchandise? No, you always have the option of alternative award systems such as gift cards.
When you do the comparison you will find that you are probably paying on average 35% more for the item when you buy it from the merchandise award companies. Don’t be surprised if you see items priced much higher than that. If you don’t, just stop here, either your supplier is being honest with you about giving you competitive prices, or you have already negotiated some great discounts. But be careful, you’ll need to make sure that you compare more than just a couple items as the merchandise companies are aware of this type of comparison shopping and often “seed” specially priced items to give the illusion of low pricing.
If You Can’t Find the Item
If can’t find an item you’re trying to compare, what should you do? First, you should ask yourself the question, “If it can’t be found in the largest retailers in the world, is it something that participants even really want to begin with? Second, if you do think they really want it, and still can’t find it, it is often because the incentive award industry uses promotional items manufactured specifically for the incentive industry instead of the same items sold at retail. This ploy is used so you can’t make a comparison and is often used by manufacturers of items that have so many variables and ways to change a basic product that they can hide the price. These are also the types of items that contain the highest margins of profit for the manufacturer and the incentive houses. They include items such as jewelry, gift ware, clocks and watches, and leather goods bags and luggage. It is not surprising that these items can make up 70-80% of all items in an award selection. Is that because that’s what people want, or because they carry the high margins that the supplier wants?
When Shipping and Handling is Included
Merchandise award vendors often point to shipping handling as a reason why their pricing varies from retail. But frankly shipping and handling are not pass through charges and often become a source of profit. Example, an average for actual shipping and handling in the industry is 6%, while the normal S&H charge included in a merchandise price is 10%. The vendor makes an additional 4%.
When Sales Tax is Included
Sales tax can also be a source of profit for the merchandise supplier. Many incentive merchandise vendors only pay the sales tax of those states where they have a physical presence (office, paid employees, etc.) They charge sales tax for everything sold on a flat rate (say 7.5%) but only pay that tax in some states. The client is never reimbursed for this overcharge when taxes are not paid.
When you use award options like gift cards, the sales tax is paid by the participant at actual, and doesn’t reduce the value of the award as it does when packed into the price of merchandise award.
Income Tax Liability
When you are grossing up for income taxes, or sending the participant a 1099 for the merchandise awards earned, the effect of the high merchandise pricing is particularly unfair. If you find that your merchandise awards are appreciably higher than retail, you compound the tax consequence by that same amount.
Bottom Line….”Caveat Emptor” or let the buyer beware.
Award Merchandise prices, on the average, are and have always been
substantially higher than retail.
If you’re getting that kind of service and value from your award vendor, wonderful.
The Value of Online Incentive Programs
Author: Ley
The Employee Performance Improvement Puzzle
Author: Ley
If you Google “Improve Employee Performance” you will find hundreds of thousands of interesting approaches and options. Everyone seems to have an answer…from training to better communications, research, consulting, new appraisal software, different measurement, 10 step management guides, performance assessments or surveys and reviews, etc..
While most companies that provide these various solutions have valid methods of improving performance, rarely do you see any of them recommend that you close the loop of performance improvement by rewarding your employees for results. Award programs just seem to be born out of trial and error, the natural progression after other solutions haven’t produced the desired result. Most companies think they know all the pieces of the employee performance improvement puzzle. They’ve spent millions on the separate pieces but have they determined the best way to group the pieces to affect the best result?
Award Systems Can Drive Performance
Employee engagement is the big challenge today. Corporations have fewer dollars to spend and are constantly striving to improve performance. Over the last few years, there have been many articles written on employee recognition as a viable way to improve performance. Studies have shown that recognition is a key element in employee satisfaction, and employee satisfaction is a key element in employee performance. Satisfied employees drive customer satisfaction and improved bottom line results. If it’s that simple, why don’t more companies include award systems to motivate and recognize their employees for improved performance?
Other studies have stated that when incentive/awards programs are implemented correctly, individual performance improves by 22%. They also found that when there was both an individual as well as a team component that individual performance improves by 27% and team performance improves by 45%! Of course the essential point here is “implemented correctly.”
Do Recognition Programs Motivate the Majority?
Do employee recognition programs really drive the performance of the majority of your employees? Or do they merely recognize and reward those employees who work above and beyond the norm? If you want improved performance should you structure a simple recognition program that allows peers and front line managers to say thanks with a periodic reward? Or should you design a program that has real objectives, communications, measurement and feedback mechanisms with an appropriate award system to drive the performance?
What Incentive Award Company to Use?
The results of the above study did not surprise some of us in the incentive industry. The full service performance improvement incentive companies have seen these outcomes for years. In fact they have seen results far greater than these. If you could search through the archives of successful incentive companies you would find literally hundreds of unbelievably successful programs. Unfortunately for a myriad of reasons, not the least of which are proprietary information and confidentiality, these findings rarely reach the eyes of people in their own companies, much less the industry in general. And that’s a shame.
Your Own the Tools
The tools to change employee behavior and improve performance are already in your hands. It is often not much more complex than telling your employees what you want them to do, teaching them how to do it, measuring their performance, telling them how they did and then positively reinforcing them for their results. If you want to look to the incentive industry for the expertise to help you construct and implement a program that will drive results, not just recognize the performance of a few, seek out the professionals who have done this for years. If done correctly you will drive the results you want.
Everyone has an opinion on what the incentive rewards industry is all about. Clients have their own understanding and bias and award salespeople are knowledgeable of their own deliverable but typically not much else. If a company wants to design a program to produce incremental results and and improve the performance in sales, non-sales activity, or any corporate goal, they will historically use a program that they’ve heard of, have used in the past, or one that is brought to them by a vendor who may or may not have asked enough questions or done sufficient research to even make a recommendation in the first place.
Our last post spoke to the fact that probably 2/3 ‘s of all incentive program either do not produce results or only marginally. The first reason this happens is because they use the wrong type programs in the first place. There are some fundamental differences between various types of incentive progams. They are not interchangeable and will produce different results depending on how they are administer. There are certainly several different forms of awards to use and the wrong award combined with the wrong design can mean you spend a lot of money with minimal or negative results.
Following is a list of the different types of award programs and how they differ from each other. Read the rest of this entry »