Designed to bolster sales and productivity, incentive programs may be even more crucial for the bottom line during economic hard times. However, as companies grapple with budgetary and perception concerns, many incentive programs, particularly those involving travel and meetings, are being scaled back—to the point where some in the industry fear they are losing their power to motivate.
To get a handle on how incentive buyers are reacting to today’s economic challenges, Meetings West spoke with several of the industry’s most seasoned veterans: Mary MacGregor, vice president-account development for BCD Meetings and Incentives in Minneapolis; Rhonda Brewer, vice present of operations for Maritz Travel in Fenton, Mo.; Nola Conway, president of CTP/LMS in Culver City, Calif.; Andjela Kessler, president of Incentive & Meetings Inc. in Atlanta; and Bob Dawson, CITE, president of The Business Group Inc. in Woodland, Calif., and author of Discover the Secret of Incentive ROI Success.
What with the economy and perception issues, are companies cutting back on incentive programs?
Dawson: The biggest hit I have been hearing from incentive planners is in the group travel area. Companies see that as a high-profile incentive and they are trying to stay below the radar. In place of this I am seeing individual incentive travel, merchandise and gift cards. For those companies still doing group travel, many inclusions of the past—lavish final night dinners, optional tours and sometimes even golf/spa—are out as included features.
Kessler: Even companies who are in a position to pay for incentives are dealing with the image issue. Companies who do choose to go all out will get better value now, but because of the image problems, they won’t do it. I have a client who chose a four-star hotel even though a five-star hotel was offering much more in the way of amenities. We’re seeing this with companies in all industries, and not just with those who are receiving federal bailout money.
MacGregor: Customers in the financial services sector are very conscious of the AIG Effect, but, in general, most of our customers believe it is precisely in times of economic challenges that you need to do everything possible to retain and attract top performers. The programs are designed to ensure possible outcomes for key stakeholders. Some customers say, now more than ever, we need networking to reinforce our products and brand—and to be prepared for the competition once the economy revives.
As a measure of cost management, we’ve seen some shorter programs and fewer participants. But this is not a unilateral trend. We have some customers who have increased the size of their programs.
Is it a mistake to cut back on incentive travel programs now?
Dawson: Big mistake. This is not the time to punish your top performers. Now, having said that, if the trips of the past were planned around spending budget dollars, that is one thing. If the company has been planning using a true incentive ROI (return on investment) and showing a business case for their program, then there is no reason to hide.
Conway: Now is the time to step up efforts and come up with new ideas. Some of our clients are following the Kellogg’s example. During the Great Depression, Kellogg’s stepped up their spend on promotion and introduced Rice Krispies. Post cut back. Guess who came out the winner when the Depression ended?
Kessler: Two years from now, the companies on top will be those who did not skimp on their incentive programs. We’re seeing a big shift toward domestic destinations. In my opinion, this makes the incentive less effective. In my experience, the more exotic and rare the destination, the more of a motivating factor you have. Incentives are being destroyed.
Are incentive buyers taking advantage of the good deals out there?
MacGregor: They are well aware that it’s a buyer’s market and they are really shopping. They are bidding more on destinations and properties, and want to drive the best deal they can. There are opportunities with some of the higher-end resort properties. Some are taking advantage of this.
Conway: We’re taking advantage of the great deals on room rates and concessions—and locking these discounts in for 2010.
What about site selection?
MacGregor: We are seeing more customers looking to stay in North America. They are still using resorts, but want to drive the best value they can. Some customers are doing several regional programs, instead of one big event. They are still drawn to the traditional incentive regions of the country—the Southeast and the Southwest are big, as is the Caribbean.
We’re seeing a lot more interest in all-inclusive properties, which are seen as good value. The same with cruises.
Brewer: In some cases, we’re seeing a shift from resorts to city locations—both for budgetary and perception reasons. And customers want ease of access, with less flight time.
How are the economy and/or perception issues affecting content?
Conway: We have two clients now who are planning to do community outreach team building in the destinations where they will have their programs. One of the activities involves building bikes that will go to a local school. Team-building activities like these help offset negative perception issues.
There is always a meetings component within the program these days, as well as opportunities to have face-to-face talks about current challenges and how to overcome them. Keynote speakers who can address those concerns are in demand.
MacGregor: Customers are incorporating business-related events into their overall incentive programs—networking, reinforcement of the brand, team building, product training. There’s often a CSR (corporate social responsibility) element that reinforces the company’s give-back policy.
If ROI is more important than ever, how can companies achieve it?
Dawson: A review of all incremental revenue and all—not just incentive program, but all—incremental costs must be done before committing to the program. All areas of the company need to be consulted about the potential impact on their employees and budgets before committing to the program. Once this process is complete, tie the incremental revenue and expenses to key financial indicators on both the balance sheet and income statement of the company.
That will help you to see if this program can actually produce a true bottom line net profit as well as whether or not it will have any impact on the cash position of the company. Once you are convinced that you have a solid investment, the rules structure needs to be written to ensure you can achieve the financial objectives you have set. Once the program is set to launch, a monthly review of your financials, rules and communications plan must take place and you need to be able to adjust to any changes—and they will occur—that are happening as a result of your incentive program.
Brewer: Programs have always been tied to ROI, but now, from a measurement perspective, it’s more about return on objective. You have to have a starting point and you need to ask your attendees what they are looking to accomplish after the event. And then you can poll them after the fact. What were they able to accomplish?
Kessler: With ROI, the most important thing is to define the strategy and the objectives before you get into the trip. If you don’t do it before, you won’t know the objectives and what you want to measure. That’s where companies make the mistake. You can’t definite ROI after the fact.
