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News Analysis: The Potential Impact of Covid-19 on Rewards, Recognition, Loyalty and Gifting

RRN’s sister media platform ESM at EnterpriseEngagement.org published an article on the potential impact of Covid-19 on business in general. (See ESM: The Potential Impact of Covid-19 on Business.) This article focuses more specifically on the impact of the crisis on the incentive, rewards, recognition, loyalty and gifting business. 
 
By Bruce Bolger 
 
Having worked for or owned media properties related to the rewards, recognition, loyalty, travel, and gifting businesses since 1987, I have seen how the business performed during the 1987 stock market crash, the dot-com boom and bust, the 9/11 attack and the subsequent wars, and the Great Recession. The good news is that this is a highly resilient business with sectors that will prosper, and others that will suffer for years. Here are some predictions and observations.
 
Greater appreciation for the importance of people is on the way. The good news for the profession and for those solution providers who can rise to the occasion, CEOs and organizations will be more hard-pressed than ever to engage key customers, employees, distribution partners, suppliers, and communities, and will be receptive to more strategic, systematic, and measurable ways to engage all their stakeholders in the mission of the organization through these difficult times. The companies that will thrive after this calamity will be the companies that cared. 
 
An unequal opportunity downturn. While the Great Recession directly affected almost every sector, this recession will have winners, in fact potentially big winners. People who retain their jobs will likely have more discretionary income, because they no longer have daily commuting costs and because energy prices have plummeted, and many have the possibility of getting cash from the government with no need to pay taxes until summer. Industries that likely will prosper in this climate include some health care and pharmaceutical firms; makers of packaged goods, essential foods, such as chicken, and specialty foods for treats; wines and liquors; streaming entertainment and online gaming, including more live streaming events and concerts; social media; online learning and self-improvement; home delivery of any kind permitted; pet adoption and care; print and audio books; home appliances, personal comforts; self-improvement and home office products and services; outdoor and indoor exercise equipment; toys, hobbies and games; flowers, plants, and gardening; business and home security, guns, and even potentially such indulgences as makeup and personal care products. 
 
In the business-to-business world, winners will include the industries serving the markets above, plus trucking and logistics; online media, marketplaces, and learning; communications and engagement technologies; computer and related technology; telecommunications, and analytics to drive better decision-making during difficult times. Many businesses might have short-term labor shortages, as it takes time for people who have lost jobs in one sector to make a quick shift into another.
 
Master fulfillment companies. In the short term, the companies that fulfill the merchandise and gift cards for the nation’s incentive, recognition, loyalty programs will likely experience an uptick in redemptions, as more people settle in at home and look for simple pleasures, such as redeeming their points for items to enliven their lives. (This, of course, is subject to state regulations, which might in some cases close down warehouses considered non-essential.) Over time, however, that business is vulnerable as organizations pull the plug on many of the sales, dealer, loyalty, and employee programs that ran year after year with no results that anyone bothered to measure. 
 
Surprise-and-delight gifting and corporate amenities. In the short-term at least, we are likely to see an increase in surprise-and-delight gifting for customers, employees, distribution partners and even vendors who step up during these difficult times. Appreciation will become a key currency. Live event gifting will be replaced to some extent at least by virtual event gifting. Corporate amenities for the home, such as laptops, video cams, computer cases, and other useful accessories will sell briskly as it becomes clear that people may be working at home, at least in shifts, for months to come, if not more. Even after the pandemic recedes, there may be restrictions on how many people can go to work or occupy entertainment spaces for months or more.
 
Those companies set up to support these services will do better than those focused on traditional incentive programs in the short-term, at least. 
 
A big shakeup coming in incentive, recognition, and loyalty programs. RRN has warned for years about the prevalence of poorly designed and ineffectively measured incentive, recognition, and loyalty programs, and once again the chickens will come home to roost. Based on the last great recession, many of these programs will either be shut down or get completely revamped. The managers who routinely repeat programs year after year will see many of them go away if they don’t have metrics to back up their relevance or efficacy, even in industries that are thriving right now. This is no climate for “bright shiny objects” or doing “what’s always been done.”
 
Secondary or tertiary activities will get hit hard. Marketing activities, such as PR,  trade shows, media, and other marketing that are not deemed necessary to doing business will be sidelined in favor of services and online and virtual platforms that support commerce, information-sharing, and relationship-building in a more measurable way. The same goes for human resources activities without a strategic role. 
 
Less reliance on national trade shows and event travel for some years to come. The love of travel and getting face-to-face at events led to a total revival of these activities within several years after 9/11 and the 2008 crash, and that is likely to occur again. However, given that this threat could last for several years, it’s likely that companies will focus on more regional events for a while once it is considered safe to travel again. Companies will also be more careful about showing off at trade shows with elaborate exhibits that have never been proven to improve event ROI. Lower key will be the new normal for a while.
 
More individual incentive travel and regional trips. For the same reasons, organizations will be careful about investing too much in national or international group incentive trips that must be planned well in advance. There will be more emphasis on regional travel awards and events that can be more easily changed. International incentive travel and motivational events may be hit hard for several years; individual incentive travel will come back before group travel. 
 
Promotional products and live event gifting will take a beating for at least 18 months. With the event marketing business all but on hold for now and with poor prospects for a fast recovery, the promotional products and brands that have emphasized event marketing will have to refocus their business or risk going under. Also, the wanton distribution of giveaway items that often go unused may be frowned upon in a climate when frugality is more in vogue. Anyone with a business that doesn’t have to rely on the national or international travel or hospitality sector would do well to permanently diversify or be prepared for periodic and difficult-to-predict crises. 
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